TaxTMI 
TaxTMI 
2020 (10) TMI 135
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....tances of the case and in law, the lower authorities have erred and were not justified in rejecting the claim of appellant that the compensation of Rs. 297.47 crores was a Capital Receipt, not eligible to tax, being a voluntary & gratuitous action on behalf of Government of India, meant only to discharge the loan liability, which inter alia is capital in nature and thus such discharge of loan shall have same colour and nature as a loan liability. 3. On facts & circumstances of the case, the lower authorities have erred and were not justified in rejecting the claim of appellant that the aforesaid compensation of Rs. 297.47 crores by way of RBI bonds directly issued by RBI to Banks towards discharge of loan liability of the appellant, as Capital receipt, if at all considered as Income, to be being against 'Sterlised assets' and does not form part of business income. 4. On facts & circumstances of the case, the lower authorities have erred and were not justified in rejecting the alternative claim of the aforesaid compensation of Rs. 297.47 crores by way of RBI bonds directly issued by RBI to Banks towards discharge of loan liability of the appellant, if at all considered as 'Incom....
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....d to have accrued during the relevant previous year in accordance with the appellant's accounting policy & the generally accepted accounting practices. 2. On facts & circumstances of the case, the lower authorities have erred and were not justified in treating a part of compensation for loss, towards Retention Money of Karkh project and Ashter'89 Project in Iraq, amounting in aggregate to Rs. 19,98,66,841/- as business income instead of Capital Receipt, not eligible to tax, as per provisions of the Income Tax Act, 1961 3. On facts & circumstances of the case, the lower authorities have erred and were not justified in rejecting the alternative claim in respect of part of compensation received towards Retention Money of Karkh project and Ashter'89 Project in Iraq, if at all considered as 'Income', to be chargeable under the head 'Capital Gains'. Relief 220(7): 4. The lower authorities have erred and were not justified in refusing the benefit of section 220(7) of the Act on the interest of Rs. 8,21,49,466/- included in the total income, but which is prohibited for remittance by virtue of UN embargo, which was made along with the return as well as during the assessment proceedings....
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....T. (A) has erred in deleting the addition of Rs. 24,33,055/- made on account of Employees Contribution to PF U/s 43 B". 5. On the facts and circumstances of the case as well as in law Ld. C.I.T. (A) has erred in deleting the addition of Rs. 27,52,297/- made on account of prior period expenses". 6. On the facts and circumstances of the case as well as in law Ld. C.I.T. (A) has erred in deleting the addition of Rs. 21,000/- made on account of contribution to political party". The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 3. Firstly we are taking up facts of A.Y. 1995-96: A.Y.1995-96 3.1 The assessee company is engaged in the business of civil engineering construction. During the year under consideration, the assessee company filed return of income on 30.11.1995 declaring a loss of Rs. 117,31,50,063/-. The assessee-company was entitled to certain dues from the Government of Iraq on account of contracts executed which were deferred from payment under Deferred payment Agreement (DPA) between the Governments of Iraq and India from 01.01.1983 as well as i....
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....ment of Iraq, but is only a financial assistance from the Government of India and is capital receipt. The Assessing Officer observed that the assessee has been paid the said sum of Rs. 297.46 crores on account of deferred contract receipt which are pure business receipts. The Assessing Officer further noted that the Government of India has through CBDT issued Circular No.711 dated 24.07.1995 whereby the value of the bonds received as a deemed receipt of convertible of foreign exchange for the purpose of taxable income and grant of deduction is in respect to foreign projects u/s 80HHB of the Act. Apparently the Government of India has the intention of treating the value of receipts from execution of foreign projects. Accordingly, the receipt of Rs. 297.46 crores was treated as business receipts from execution of foreign projects by the Assessing Officer. The expenditure related to the foreign projects of the assessee were allowed as expenditure in the earlier years under the changed method of accounting adopted by the assessee from A.Y. 1984-85 onwards. Thus, the whole receipt of Rs. 297.46 crores was taxed as profits from execution of foreign project by the Assessing Officer. The ....
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....at the CIT(A) held that a debt has been created in favour of the assessee. This is enforceable right of the assessee and therefore, he has right to receive the income. The assessee also follows the mercantile system of accounting. For more than 15 years, the said facility provided to assessee has not been returned to the Government of India. Plus the assessee laid a claim of deduction u/s 80HHB. The CIT(A) further held that CBDT has given deep thinking to the entire matter and has even allowed the benefit of Section 80HHB to those project exporters. In other words, the CBDT also construes the same as income eligible for taxation and the consequent deduction under Section 80HHB. Thus, the CIT(A) finally held that the contention of assessee as to the receipt of bonds was not an income and therefore, not taxable is based on an incorrect appreciation of facts and law. Thus, the CIT(A) held that the receipt cannot even be taxed as capital in nature. The Ld. AR relied upon the following decisions: i) Universal Radiators vs. CIT 201 ITR 800 ii) CIT vs. Xylon Holdings Pvt. Ltd. (Bom HC) iii) UCO Bank vs. CIT (SC) iv) ACIT vs. Arvind Construction Co. Pvt. Ltd. (Del. Tri.) 6. The Ld....
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....alue dated 01.04.1994. Thus, the Assessee company's dues receivable from Iraq under the DPA amounting to USD 110,269,316/- equivalent to Rs. 346,24,78,123/- were settled by Govt. of India during the A.Y. 1995-96. This amount was credited in the books of account of the assessee company and included an amount of Rs. 297,46,41,205/- which was credited to the P&L account for the year ending 31.03.1995 as income of the Company under the head 'compensation from the Government of India/ECGC in settlement of deferral dues from Iraq'. However, in his computation for purpose of 'computation of taxable income', the assessee company reduced the amount from its taxable income. By this act, the assessee company wrongly did not treat the deferred dues received from Iraq as taxable income. This claim of exemption has been wrongly made and does not fall within the ambit of any provision of the Income Tax Act. The issue has been discussed at length by the Assessing Officer. 6.2 The Ld. DR submitted that the Assessing Officer observed that the assessee has been paid the said sum of Rs. 297.46 cr on account of deferred contract receipts which are pure business receipts. As per CBDT circular No 711 d....
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....he investment in the compensation bonds would not be considered as an eligible investment by the lending banks and the project exporters eligible to receive the compensation. As per letter of DS Govt. of India dated 11.03.1994, to enable ECGC to settle the claims they would issue bond for the amount of the claims under Deferred Payment Agreement. The bond will be guaranteed by the Govt. of India and redeemed over a period of time and will carry on-going interest of 12% per annum. RBI would also issue bonds as an agent of Govt. of India in favour of banks for the unadjusted loan amount in EXIM bank's book payable over a period the RBI would also issue similar bonds to exporters who have no loans to repay. Government would also settle the claims under guarantees issued to banks. As regards to letter of SBI dated 15.05.1995, settlement of Iraqi outstanding dues was through ECGC/RBI. As regards to letter of ECGC dated 16.03.1995, in terms of covers issued by the corporation and the MOU dated 20.10.1993 following claims are payable to the assessee's company: * As the Govt. of India have finalized these issues only now, the Corporation has commenced the process of settling the dues fro....
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....- ii) The dues so received treated as receipt in foreign exchange for the purpose of Section 80HHB and claim allowed by Revenue iii) Bridge loans given for fulfillment of contracts by Govt. of India to assessee company yet to be repaid. The CIT(A) concluded that this facility given for more than 15 years. iv) Bonds in the nature of interest bearing bonds carrying interest of 12.08% issued to Assessee Company against outstanding dues. v) Variation in foreign exchange value of Rs. 211.06 crore claimed by assessee company and allowed. The assessee company has thus claimed and been given all benefits by the Govt. of India and benefits allowable under the Income Tax Act but when it comes to payment of taxes, the assessee company claims the contract receipts are not exigible to tax. The assessee company has received deferred dues for contract work done in Iraq during the A.Y. 1995-96 in the form of cash and interest bearing bonds. These receipts are in the form of taxable receipts as they have been received in lieu of contract work done in Iraq in the form of cash and bonds. The assessee concern has changed its method of accounting to cash receipts to take cognizance of such rec....
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....ived by the assessee. Retention money is an amount held back from a payment made under a construction contract. It is generally held to ensure that a contractor performs all of its obligations under the contract, and is then released subsequently on practical completion of the contract. On the other hand, the amount received by the assessee is its business dues which the Govt. of Iraq unable to pay and were consequently arranged to be paid by the Govt. of India through issue of bonds. Circular 711 of 1995 also clearly indicates the intent of the legislature in respect of the treatment of proceeds of projects executed in Iraq, and covered by RBI/ECGC bonds. 7. We have heard both the parties and perused all the relevant material available on record. The Government of India granted settlement of such dues from Iraq Government by issuance of bond on assignment of their dues from the Government of Iraq to Government of India. The bonds issued were handed over to the Exim Bank and SBI for being adjusted towards the foreign exchange loans due to them from the Indian Contractors working in Iraq. The bonds were issued directly to the banks and not to the assessee in respect of the loan tak....
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....alent in money of the goods lost by the assessee which it was prevented from using. The excess arose on such payment in respect of goods in which the assessee did not carry on any business, due to fortuitous circumstances of devaluation of currency, but not due to any business or trading activity, the amount could not be brought to tax. Thus, the Hon'ble Apex Court answered the question whether the excess amount paid to the assessee due to fluctuation in exchange rate was taxable either because the payment being related to trading activity it could not be excluded under Section 10(3) of the Act, even if it was casual and non-recurring in nature or it was stock-in-trade and therefore, taxable as revenue receipt or in any case the compensation for the loss of goods could not be deemed anything but profit. This question was answered in affirmative i.e. in favour of the assessee. The Hon'ble Delhi High Court decision in case of CIT vs. M/s Arvind Cosnruction Co. Ltd. (ITA No. 1388/2006 order dated 04.12.2007), there were two questions of law: i) Whether interest earned by the assessee on RBI Bonds is the income derived by it from the business of industrial undertaking so as to be eli....
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....Appellate proceedings. Before us as well the assessee could not demonstrate the same as to how the expenditure was booked in present assessment year. Therefore, Ground No. 5 of the assessee's appeal is dismissed. 9. As regards to Ground Nos. 6 & 7, the CIT(A) relied upon the decision of the Hon'ble Delhi High Court in case of CIT vs. Shri Ram Honda Power Equip (2007) 289 ITR 475 (Del), held that the interest on fixed deposits with the bank is Income from other sources instead of Business income. After hearing both the parties, it can be seen that the interest was received on the fixed deposits with the bank and thus it cannot be termed as business income. Ground No. 6 and 7 of the assessee's appeal is allowed. 10. As regards to Ground No. 8, the CIT(A) held that no evidence was produced to suggest that the expenses pertain to transit accommodation and mess located in remote areas where the benefit of hotel was unavailable. Thus, the CIT(A) followed the Apex Court decision in case of Britannia India Ltd. vs. CIT (2005) 278 ITR 546 (SC) and upheld the addition. After hearing both the parties it can be seen that the CIT(A) was rightly confirmed this addition as there was no eviden....
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....eceipt, accounted on receipt basis, not exigible to tax, being in the nature of compensation of capital nature and against forced abandoned capital assets due to war. The assessee also submitted as alternative plea that though there was no transfer of assets and thus there cannot be any capital gains tax, but if at all the same is considered to be taxable, the income should be computed as long term capital gains u/s 50B. The Assessing Officer treated a part of the said receipt as business income and a part as short term capital gains u/s 50 of the Act. Further, the returned total income included a sum of Rs. 8,21,49,466/- on account of interest accrued on sums receivables from Iraq in terms of deferred payment agreement between Govt. of Iraq & Govt. of India. In the return of income, assessee claimed benefit of Section 220(7) of the Act and requested for deferment of the payment of tax, till the said sum is actually realized. Since the said sum is not repatriable by virtue of an agreement between the Govt. of India and Govt. of Iraq in 1983, as well as UN Trade Embargo in 1991, the case is fully covered under Section 220(7). This stand of the assessee has already been accepted by ....
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....o longer recoverable: 1. Retention money recoverable in Iraq Accounted as income in the past Rs. 8,34,23,525/- 2. Contract dues recoverable in Iraq also accounted as income in the past Rs. 1,33,81,216/- Rs. 9,68,04,741/- 3. Current assets in Iraq Rs. 3,19,67,866/- 4. Fixed assets (Inventories) in Iraq with a wdv of Rs. under Company's Act. The company has not been claiming depreciation on these Assets since 1991-92 onwards. Rs. 2,11,68,472/- Rs. 5,31,36,338/- The WDV under IT Act is much higher Rs. 14,99,41,079/- The net sum of Rs. 5,99,58,523/- (Rs. 20,98,99,602/- less Rs. 14,99,41,079/-) has been credited to the Profit & Loss account. Since, the sum of Rs. 20,98,99,602/- (net of the legal fees) received by the company from UN is not connected with any business done by it with UN, it is not a business receipt. The amounts of contract dues and retention money aggregating to Rs. 9,68,04,741/- accounted as income in the past/earlier years, which has been written off are allowable as bad debts. However, the Fixed Assets & Current Assets amounting to Rs. 5,31,34,338/-written off are not allowable as expenses. The Ld. AR submitted in the ....
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....rising to 2nd August, 1990 are to be excluded from the jurisdiction of the Commission and such dues are to be addressed through normal mechanism. In the case of the assessee company, Commission recommended following compensation: S.No. Particulars Amount awarded by UNCC 1 Retention Money of Karkh Project US $ 3841142 2 Ashtar - 89 Project Work Completed US $ 592271 3 Loss of Property and Equipment US $ 11583862.91 Total US $ 16017275.91 Amounts received by the assessee company as follows: 1st Installment US $ 25,000.00 Rs. 10,89,500/- F.Y. 2000-01 2nd Installment US $ 49,75,000.00 Rs. 23,21,33,002/- F.Y. 2000-01 3rd Installment US $ 1,10,17,275.91 Rs. 52,86,08,899/- F.Y. 2001-02 Total US $ 1,60,17,275.91 Rs. 76,18,31,401/- The UNCC recommended compensation amounting to US $ 16017275.91 in case of the assessee company in its report for covering three types of claims as mentioned above. The first installment was received by the assessee company on 10.04.2000. The 2nd and 3rd installment were received by the assessee company on 8.1.2001 and on 27.12.2001. The assessee company accounted for the compensation received in the first....
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.... the aforesaid amount of US $ 3.84 mn. Equivalent to INR 83.42 mn. At exchange rate prevalent in the year of accrual, is already accounted for as income by the assessee. The surplus of Rs. 8,82,73,132/- (INR 182696656 - INR 83423524), broadly represent exchange difference on retention money shown as receivables. The retention money represent contract receipt as per discussion on UNCC in para 193. Retention money was already accounted for as contract receipt in the year of accrual. Further such retention money was to be released by the client on issuance of final certificate and the lapse of the maintenance period. Since consequent to war, these conditions could not be fulfilled, UNCC considered such retention money to be compensable. UNCC has considered retention money as compensable and as directly relatable to Iraq's illegal invasion of Kuwait, because the conditions attached to release of the same by client could not be fulfilled consequent to such Iraq's illegal action. The retention money as appearing in its balance sheets were its capital asset as held in R C Cooper's case. However, as the assessee is concerned said amount was already shown as income by the assessee in the ye....
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.... the business of the assessee company. The source is linked to the performance of work on Ashtar-89 project in Iraq and the payment of retention money withheld by the clients in Iraq as per the contract agreement. Both represented the contract receipts taxable in the hands of the assessee company. Further, even if there is an element of foreign exchange fluctuation in the proceeds received by the assessee company on account of its business, the same is taxable as revenue receipt. The claim of the assessee that the receipt is not taxable as the recommending body, i.e., UNCC was not under any obligation to do so, and hence the amount so recommended and paid is not taxable is not tenable. Here the payments were made out of the funds created vide UN resolution No. 687 for compensating the various parties affected by the invasion of Kuwait by Iraq. From the reports of the UNCC, it is clear that the Committee received the claims of all the affected parties of war with all the documentary evidence and arguments. The UNCC also called for the arguments and comments of Iraqi authorities on the claims made by the parties. After considering the arguments and counter arguments of both the par....
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....as claimed depreciation on the block of assets taken over by the Iraqi authorities upto 31.03.1992. In the A.Y. 93-94, the assessee company has reduced the value of block of assets pertaining to the projects taken over by the Iraqi authorities. The block of assets of these projects has been taken at nil thereafter and no depreciation was claimed by the assessee company. Any consideration, compensation or claims received by the assessee in excess of the w.d.v. of the block of assets against sale, extinguishment, relinquishment or acquisition of the block of assets is to be treated as short term capital gain in the hands of the assessee as per the provisions of Sec. 50 & 50A of Income Tax Act, 1961. As the total block of assets of the project has been reduced to Nil, in view of relinquishment/extinguishment of the assets, the compensation received in excess of w.d.v. of the block of assets, i.e., (Rs. 1,23,60,483/-) is being treated as short term capital gain in the hands of the assessee company for the year under consideration. Short term capital gain is being worked out as under: Compensation received by the assessee company Rs. 55,09,63,271/- Against the assets Less: ....
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..... As regards to employer's contribution to the P.F., from perusal of the Tax Audit Report and Annexure - 12 annexed with it, it has been found that the assessee company has deposited employer's contribution to the P.F. after the due date mentioned in schedule amounting to Rs. 24,33,055/-. Month-wise detail with the date of deposit of the contribution is as under: S.No. Month Amount of Contribution Actual date of deposit 1 April, 2000 261,885 30.05.2000 2 June, 2000 260,556 02.09.2000 3 July, 2000 248,707 02.09.2000 4 August, 2000 233,030 13.10.2000 5 October, 2000 237,139 24.11.2000 6 November, 2000 251,536 22.03.2001 7 December, 2000 237,943 22.03.2001 8 January, 2001 252,747 22.03.2001 10 March, 2001 444,916 11.07.2001 11 4,596 08.06.2001 Total 2,433,055 Expense claimed by the assessee company for the employer's contribution to the P.F. is not allowable as per the provisions of Sec 43B if the same is deposited after the due date mentioned in the respective statute. 26. Auditor in the Tax Audit Report pointed out that the assessee company has claimed deduction of expenditure pertaining to prior period in the P....
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....ing Officer observed that the proceeding u/s 220(7) are different from the assessment proceeding to decide the matter in view of the provisions laid down in the Income Tax Act. Thus, the total income was assessed at Rs. 51,94,31,415/- by the Assessing Officer vide order dated 19.03.2004. 29. The Ld. AR further submitted that the issues concerning the assessee's appeal in relation to the chargeability of compensation are summarized as follows: a. The Assessing Officer has treated the sum of Rs. 52.86 crores received on 27.12.2001 (in addition to Rs. 23.32 crores physically received during the relevant previous year) as income accruing to the assessee during the previous year relevant to AY 2001-02, as against the accounting policy of the company to account for such contingent & uncertain revenues on cash system of accounting and which was actually & physically received in the subsequent year. b. The entire amount of compensation, irrespective of components comprised in the aggregate sum, of Rs. 76.18 crores (including Rs. 23.32 crores on receipt basis during the relevant year) is a capital receipt, not exigible to tax under the Act. c. Amount of compensation on account of ret....
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....by Iraq, the same shall be made good by ECGC. Therefore, upon default by Iraq, assessee as well other contractors working in Iraq approached ECGC for settlement of their claim. Considering the enormity of the claims and quantum of amount due from Govt. of Iraq, ECGC was finding itself not in a position to honor its policy due to inadequate financial resources. After deliberations and recommendations of special task force, a Deferred payment agreement was entered unilaterally between Govt. of India & Govt. of Iraq, whereby foreign currency dues were deferred to be payable in installments w.e.f. 1.1.1983, against the supply of crude oil to the Govt. of India, as against the initial cash contract of the assessee. In view of such DPAs, entered with a validity of one year, FC (Foreign Currency i.e. US $) dues were deferred and LC (Local Currency i.e. Iraqi Dinars) dues were continued to be paid by Govt. of Iraq. As per terms of the DPA, assessee was entitled to interest on its receivables at LIBOR rate and the said DPA's were made on year to year basis till 1990. There was no DPA agreement or renewal thereafter till date due to UN embargo. However, assessee continued to account for int....
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....sh system envisages accounting of revenue, when the same is actually/physically or constructively realized. It is also settled principle of accountancy to recognize revenues adopting prudence & conservative approach. It was the policy of the company, as disclosed in the note 2(iv) of schedule L to the audited balance sheet. Same was the policy accepted by the Tribunal in 1984-85. UNCC in its recommendation of compensation has taken the date of loss to be the basis of exchange rate for granting compensation. And such date of loss was taken as 31 January 1991. The compensation from UNCC is honorary, compassionate & gratuitous without any contractual obligation or agreement or insurance by UN with the assessee. The meaning of accrual envisages 'arising of an enforceable right in consideration of the performance.' Since the compensation from UN is gratuitous, the same cannot be deemed to have accrued unless realized, inspite of a resolution being passed by it, (which itself is an internal affair & its constituents member countries) and is always be subjected to review under the ever changing world socio-political scenario. For arguments, even if accrual system is to be adopted, the sam....
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.... Apex Court in case of Universal Radiators vs. CIT (1993) 68 Taxman 45/201 (SC) wherein it is held that devaluation of rupee giving rise to gain is only fortuitous windfall which is not taxable. Compensation against an asset, even if stock in trade, which was sterilized does not result in profit from business. The Ld. AR further submitted that compensation is only meant to re-pool up for the losses/ damages suffered and injury caused, incidental expenses incurred or to be suffered or sustained. The Hon'ble Supreme Court and Hon'ble High Courts unanimously held that any compensation for loss or destruction of a capital asset or an amount received on loss of source of profit is a capital receipt, outside the preview of the taxation. a) compensation is a well known expression in law and therefore the word compensation must be given its normal and natural meaning - SRY Sivaram Prasad Bahadur vs. CIT (1971) 82 ITR 527 (SC); Raja Shri VVRK Yachendra Kumaraja vs. ITO (1971) 82 ITR 527 (SC) b) Compensation received for sterilization, destruction or loss, total or partial, of a capital asset would be a capital receipt. - CIT vs. Bombay Burmah Trading Corp. (1986) 161 ITR 386 (SC) c) ....
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....Capital Gains and shall be deemed to be the income of the previous year in which the transfer took place. As mentioned earlier that at the onset of Bombing of Baghdad in January' 1991, Iraqi authorities ordered CCL to abandon the projects, leave its equipments behind and depart from Iraq via an overland route to Jordan. As a result company left its equipments & property in Iraq, which are not under the possession of Iraq authorities. In such situation, due to circumstances beyond the control of the assessee, forced abandonment resulting from war does not amount to Transfer. a) There can be no 'transfer' effected when asset stands destroyed either by fire or by sinking in the sea as in the present case. - C. Leo Machode vs. CIT (1988) 172 ITR 744 (Mad.) b) approved in Vania Silk Mills (P) Ltd. vs. CIT (1991) 191 ITR 647 (SC); c) CIT vs. Hade Navigation (P) Ltd. (1999) 239 ITR 726 (Bom); d) Merybong & Kyel Industries Ltd. vs. CIT (1997) 224 ITR 589 (SC) e) For the transaction to amount to transfer within the meaning of Section 2(47) minimum requirements are that there has to be agreement between parties, signed by parties, it should be in writing, it should pertain to transf....
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....ranted for loss, damage & injury caused and not for loss of profit. The compensation in relation to retention money and Ashter 89 project were already accounted for as income on accrual basis. ix) The gain is only fortuitous windfall due to devaluation which does not involve any trading activity. 30. The Ld. DR submitted that the compensation received by the assessee in this year is from the United Nations Compensation Commission (UNCC). However, the nature of the compensation essentially is the same as that received in A.Y. 1995-96 from Govt. of India and therefore the same arguments as given in the paras for 1995-96 would apply. As regards to the other grounds, the Ld. DR relied upon the Assessment Order and the order of the CIT(A). 31. We have heard both the parties and perused all the relevant material available on record. The Assessing Officer observed that the compensation is received by the assessee company on account of the amount due to the assessee company on performance of the project in Iraq and the retention money withheld in Iraq for non completion of the contractual obligation. The obligation of payment was of Iraqi Authorities which were met through UNCC. Even ....
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....ar 1990. The assessee company treated the said sum as capital receipt, accounted on receipt basis, not exigible to tax, being in the nature of compensation of capital nature and against forced abandoned capital assets due to war. The returned total income included a sum of Rs. 8,21,49,466/- on account of interest accrued on sums receivables from Iraq in terms of deferred payment agreement between Govt. of Iraq & Govt. of India. Thus, the treatment given by the assessee company is just and proper. From the point of view of the commercial aspect of the receipt it can be seen that the assessee received the amount from the United Nations Compensation Commission and not from the Government of Iraq. From the perusal of the records it can be seen that the compensation is not coming under the purview of the business income as there was no business during the period. Thus, compensation received in lieu of the losses of the contract which was supposed to be executed in the year 1991 will not form the receipt of revenue in nature, but capital in nature. Therefore, Ground No. 1 to 3 of the assessee's appeal are allowed. 32. As regards Ground No. 4 to 6, relating to benefit of Section 220(7) ....