TaxTMI 
TaxTMI 
2022 (4) TMI 902
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.... by the Developer vide its letter dated 24.01.2014, since the Assessee has not actually forfeited the said amount. 3. The Ld.CIT(A) has erred in NOT accepting the Assessee's contention that the amount of Rs. 7.00 Crores is a Capital Receipt in the nature of liquidated damages not exigible to tax. 4. The Ld.CIT (A) is not correct while basing her conclusion on the relationship of the Assessee with the Chairman of the Developer Company. Though the Chairman is the brother of the Assessee, there are other major shareholder in the developer company namely Reliance Group, Mr. Shanmugam and Mr. Gigi George, the Managing Director of the developer company, who are NOT related to the Assessee. 5. The Ld.CIT (A) erred in NOT accepting the Assessee's contention that the amount of Rs. 15.00, of which Rs. 7 Crore is a part, is being a refundable security deposit is only a liability and NOT an income in the hands of the Assessee. 6. The Ld.CIT (A) erred in NOT considering the judgment of Supreme Court in the case of Excel Industries, relief upon by the Assessee, for the proposition that income can be said to have accrued to an Assessee, only when the other party accepts it as ....
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.... there should have first bene a capital asset u/s.2(14) and there should have been transfer u/s.2(47) of the I.T. Act. In the instant case, the capital asset did not come into existence at all in the first place. 2.6 The learned CIT(A) has erred in not appreciating that when the said income is not chargeable under capital gains, the same is to be chargeable u/s.56 as 'Other Sources'. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored." 2. Brief facts of the case are that the assessee filed her return of income for the assessment year 2011-12 on 16.12.2011 admitting a total income of Rs..87,57,270/- and the same was processed under section 143(1) of the Income Tax Act, 1961 ["Act" in short]. Subsequently, the case was taken up for scrutiny under CASS and notice under section 143(2) of the Act was issued and after following due procedure, the Assessing Officer has completed the assessment u under section 143(3) of the Act dated 13.03.2014. In the assessment order, the Assessing Officer has noted that the assessee has paid a sum of Rs..8....
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....e contends that the investment has been made keeping in view of her association with her brother (being the Chairman of the developercompany) and on keeping in view of this only the vendor had committed to deliver a property that could fetch Rs..12.5 lakhs as Rental Income that too with a tenant of her choice. Accordingly, the assessee was directly or indirectly in full know-how of the builder and stated investment is being in lump sum in lieu of the purchase of the entire floor on its completion. ii. In the absence of builder's failure to complete the construction, apparently the assessee had not taken any further legal steps to enforce/secure her interest for the investment made in the company. In view of this assessee's contention that she was not able to contact neither her brother (being the chairman of M/s KGS Developers Ltd.) nor the company to secure her interest is devoid of merits and is apparently a false stretched co-relation of subsequent facts. iii. Further assessee's presumption to extend similar time still further is not based on any verifiable submissions. Similarly assessee's presumption of intrinsic value and consequent presumption of holdin....
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....o the returned income. On appeal, after considering the submissions of the assessee, various case law, the ld. CIT(A) has directed the Assessing Officer to bring to tax, the long term capital gains computed by treating Rs..15 crores as 'Sale Consideration and Rs..8 crores as 'Cost of acquisition' [modified vide corrigendum dated 18.02.2016]. 3. Against the appellate order, both the Revenue and the assessee are in appeal before the Tribunal. By referring to the grounds of appeal, the ld. DR has submitted that the said transaction of the assessee was purely forfeited security deposit in the nature of revenue receipt and did not come under the extinguishment or relinquishment envisaged by section 2( 47) of the Act. It was also submitted that for tax to be chargeable under section 45 of the Act on capital gains, there should have been first a capital asset under section 2(14) of the Act and there should have been transfer under section 2(47) of the Act. In the instant case, the capital asset did not come into existence at all in the first place and therefore, there can be no capital gains that have accrued. When the said income is not chargeable under capital gains, the same is to be ....
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....dingly, the amount of Rs..7 crores was brought to tax in the assessment year 2011-12. For the sake of convenience, the conclusions of the Assessing Officer are reproduced as under: "17.0 In the instant case the assessee received Rs. 7,00,00,000/- (Rupees Seven Crores only) as compensation against the investment on a proposed project. Accordingly the same is akin to income under the head "Other Sources" as per the provisions of the I. T. Act. 17.1 The forfeiture clause of the agreement has resulted in earning other income by the assessee in the form of compensation for the original investment made with the company as discussed supra, in detail. The assessee's contention to consider it as capital receipt/advance as against the forfeiture clause is not based on any provision of I. T. Act. Moreover there has been neither any capital asset nor any transfer of such asset. 17.2 The payment made by the assessee is having a mere character of a deposit / an advance (a current asset), in return of which the assessee got Rs. 7,00,00,000/- (Rupees Seven Crores only) in addition hence it cannot be considered for taxation under the head "income from Capital Gains" as therefore the sam....
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....ny on or before 31.3.2011 and upon failure to deliver/register the same the said security deposit shall stand forfeited by the company and all their liabilities shall end with that. It was also stated that "Upon completion of either of the transactions detailed above, it is mutually agreed between us that our company has discharged our commitment in full and either party shall have NO claim whatsoever." 5.2 Based on the above facts on record, the Assessing Officer found that it was evident that the offer vide letter dated 01.04.2010 (termed by the company itself as 'our final offer for amicable and full & final settlement') was made to the assessee. Only upon the acceptance of the said offer by the assessee, the payment was made. It is also evident that since neither the proposed/similar property was identified by the company nor had the assessee has identified/chosen a property of similar nature, the security deposit as on 31.03.2011, the last date mentioned therein, stands 'forfeited'(SIC) and as on 31.03.2011, since there was no further alteration/modification/communication of the terms clearly agreed upon by both parties, (vide agreement dated 01.04.2010), ....
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....arter Mr. K. Kumaran was supposed to come for negotiating table. To my surprise, I was informed Kgeyes transformed into KGS Developers Ltd.(KGS) and that change in constitution, share-holding including 100 per cent subsidiary of Mr. Anil Ambani group called Adlabs, Mumbai. Till date, I don't have or provided with supporting AoA and Balance Sheet; statutory details confirming the shareholding details by KGS. Therefore, in view of the change in the management, as informed to me, I was more concerned to document to secure my investment and more so, to get the property for which I paid 100 per cent in advance. Further follow-up resulted in they making a settlement letter dt. 01.04.2010 offering to place Rs. 15 crores as "Refundable Security Deposit" and agreeing on specific performance of delivering the property booked for or similar property together with a tenant acceptable to me and fetching Rs. 12.5 lakhs per month. It was agreed to complete the above specific performance on or before 30.6.2014 and failing which the said Refundable Deposit will be forfeited by KGS in my favour. It is to be noted on the date of special offer, i.e. 01.04.2010, they have not even started the found....
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..... Further, the assessee also mentions that the date for 'specific performance' has been stated as 31.2.2011, which was clarified as typographical error and would be replaced subsequently "In my own anxiety to secure my investment, I believed KGS, wherein my brother Mr. K. Kumaran continue to be a Chairman, signed letter in good faith that they would send amendment to replacement of the appropriate portion and took the Rs.. 15 crores. The revenue generated out of this Rs.. 15 crores are offered in my IT return and tax paid." This action of the assessee, in actually 'receiving' the Rs. 15 crores and offering the revenue there from to tax in her IT return, has brought the whole matter to a final conclusion. 5.5 After carefully going through the appellate order, on merits, considering the entire facts and circumstances of the case, prima facie, the assessee has advanced 100% of the cost price of the property of construction of 35,000 sq.ft. IT park project, we find that the ld. CIT(A) has correctly held that the amount of Rs..7 crores (the receipt of Rs..15 crores Less Rs..8 crores paid by the assessee to the developer) was liable to tax as Long Term Capital Gains in t....