2025 (10) TMI 345

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....of the Income-tax Act, 1961 (hereinafter "the Act") on 31.12.2018. 2. The effective ground of appeal of assessee is against confirming the compensation received on relinquishment of right to acquire the property by cancelling the earlier purchase agreement as business income against the capital gain shown by the assessee. 3. The brief facts of the case are that the assessee has entered into agreement for purchase of a land admeasuring 1 acre and 14 guntas at Yashwanthapura, Bangalore with M/s. Hind Mercantile Corporation Ltd., on 23.02.2006 and paid entire agreed consideration of Rs. 1,87,50,000/-. There were some court cases in the said property and hence, registration was kept pending. Subsequently, the assessee entered into cancell....

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....ernatively held that compensation amount is also assessable as interest which is income under other sources. 4. The Ld. Authorized Representative (A.R) of the assessee has argued that the assessee-company has entered in sale agreement on 23.02.2006 for purchase of property at Yashwanthapura, Bangalore and subsequently requested vendor to cancel the agreement on 24.11.2015 for having waited for 10 years without deriving any benefit due to acquisition proceedings and the legal dispute. The Ld. AR has argued that compensation received is on account of relinquishment of right in the property, which is specifically defined as transfer under section 2(47) of the Act. The Ld. AR argued that compensation has been brought under the business incom....

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....tion for relinquishment of right in a property amounts to a capital receipt as the rights constitute a capital asset u/s. 2(14) of the Act. Similar view has been held by Hon'ble Bombay High Court in the case of CIT v. Vijay Flexible Containers [1990] 186 ITR 693 (Bom). The Hon'ble Kerala High Court in the case of CIT v. Ashoka Marketing Ltd. [1976] 103 ITR 543 has held that compensation for the cancellation of a contractual right to buy a capital asset is a capital gain even if the taxpayer is engaged in a business related to the assets clause. As regard to the arguments of Ld. DR on the entry in the books of account, the Hon'ble Supreme Court in the case of CIT v. Shoorji Vallabhdas and Co. [1962] 46 ITR 144 (SC) has held that taxability o....