BELANI HOUSING DEVELOPMENT LIMITED,KOLKATA V. DCIT, CENTRAL CIRCLE 1(4), KOLKATA

ITSSA 107/KOL/2025

AI Insights

The case revolves around the taxability of a settlement amount received by Belani Housing Development Limited from Saregama India Ltd. The settlement was part of a resolution to withdraw pending litigation and claims related to a failed real estate transaction. The Assessing Officer treated the settlement amount as a capital gain, while the appellant argued it was a capital receipt due to the withdrawal of legal claims. The Tribunal examined various precedents and the nature of the settlement agreement, ultimately deciding in favor of the appellant.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839978 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 10-11-2025
• Other Referred Cases: CIT vs Laxmi Devi Ratani, K.R. Srinath Vs ACIT, Oberoi Hotels (P) Ltd vs. CIT, Saurashtra Cement Ltd vs. CIT, Baroda Cement & Chemicals Limited vs. CIT, Dy.CIT Vs Azimganj Estate Pvt Ltd, Chheda Housing Development Corpn. vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADANAPPA RAGHUVEER
• Assessee Lawyers: AKKAL DUDHWEWALAL
• Keywords: Set aside; Business income; Capital asset; Capital receipt; Capital Gains
• Section: 132; 28; 2(14)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM IT(SS)A 107/KOL/2025 (Assessment Year: 2018-19) Belani Housing Development Limited 9th Floor, 69, India House, Ganesh Chandra Avenue, Kolkata- 700013 (West Bengal) Vs. DCIT, Central Circle 1 (4) Aaykar Bhawan, 110 Shantipally, E.M. Bypass, Kolkata West Bengal, 700107 (Appellant) (Respondent) PAN No. AABCB6728J Assessee by : Shri Akkal Dudhwewalal, FCA Revenue by : Shri Madanappa Raghuveer, CIT DR Date of hearing: 19.01.2026 Date of pronouncement: 27.02.2026 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals)-20, Kolkata (hereinafter referred to as the \"Ld. CIT(A)\"] dated 31.10.2025 for the AY 2018-19. 2. Ground Nos. 1 & 2 raised by the assessee is against the order of ld CIT(A) upholding the taxability of the compensation received from M/s Saregama India Ltd [in short ‘SIL’]. 3. The facts in brief are that a search action u/s 132 of the Act was conducted upon the assessee on 28.08.2018. The assessee has filed Printed from counselvise.com Page | 2 IT(SS)A 107/KOL/2025 A.Y. 2018-19 the return of income for AY 2018-19 on 23.04.2021 declaring total income of Rs.96,46,140/-. The ld. AO in the course of assessment proceedings observed that, the assessee had certain transactions with SIL. It is noted that, the assessee had entered into a cooperation agreement dated 07.04.2004 with three bodies corporate namely, M/s Rixebe Estates & Development Pvt Ltd, M/s Surana Mercantiles Pvt Ltd and M/s Eriabarie Films and Foils Pvt Ltd, in terms of which they had agreed to cooperate between themselves for undertaking real estate project. The ld. AO observed that, the assessee thereafter had entered into an unregistered agreement with SIL on 30.04.2004 in terms of which it had agreed to purchase the factory land of SIL situated at Jessore Road, Kolkata for undertaking real estate project, which was subject to several terms and conditions. Upon being unable to obtain the performance of the agreement, the assessee had referred the matters for arbitration and the Arbitrator issued the award against the assessee by his order dated 03.10.2012 inter alia observing that, the SIL itself did not have any marketable title/right in the impugned land and therefore it could not have legally transferred the land in assessee’s favour. Being aggrieved by the decision of Arbitrator, the assessee filed suits in the Barasat Court. The Ld. District Judge at Barasat vide his interim order dated 07.02.2015 had directed the parties to maintain status quo. During the pendency of this Suit, the Parties had referred the dispute inter se against for arbitration and the Sole Arbitrator again decided the dispute in favour of SIL and against the assessee. The assessee again pursued the suits in the Barasat Court. The ld. AO noted that, during the pendency of these suits, SIL had approached the assessee and other three bodies Printed from counselvise.com Page | 3 IT(SS)A 107/KOL/2025 A.Y. 2018-19 corporate to settle the disputes, which culminated in the Settlement Agreement dated 27.03.2018. 4. According to the ld. AO, the Settlement Agreement resulted in rescindment of the Agreement for Sale dated 30.04.2004 and withdrawal of all suits and litigation for an agreed consideration of Rs.18 crores. The ld. AO observed that, the assessee had claimed the impugned receipt to be in the nature of capital receipt not liable to tax. However, in ld. AO’s view, the impugned receipt resulted in extinguishment of valuable rights which the assessee had acquired under the Agreement for Sale. The ld. AO therefore required the assessee to explain as to why the impugned sum should not be taxed by way of capital gains u/s 45 of the Act. After considering the submissions of the assessee, the ld. AO held that, the terms of settlement made it crystal clear that, what the assessee had parted with was valuable right to specific performance under the Agreement for Sale and therefore there was a clear transfer by extinguishment of rights in the aforesaid property resulting in capital gains. The ld. AO, in support of his conclusion, relied on the decision of Hon’ble Madhya Pradesh High Court in the case of CIT vs Laxmi Devi Ratani (147 Taxman 642) and K.R. Srinath Vs ACIT (141 Taxman 268). The ld. AO accordingly taxed the entire sum of Rs.18 crores by way of capital gains in the hands of the assessee in the assessment framed u/s dated. 5. In the appellate proceedings, though the ld. CIT(A) partly affirmed the order of the ld. AO, but he observed that, the Arbitrator Printed from counselvise.com Page | 4 IT(SS)A 107/KOL/2025 A.Y. 2018-19 in the award dated 18.10.2012 had clearly and categorically held that the assessee’s claim for specific performance of agreement did not exist as SIL did not have any marketable right or title in the property on the date of agreement. The ld. CIT(A) thus held that the payment received was for settlement of claims and thus rightly assessed to tax u/s 45 of the Act. The ld. CIT(A) however observed that the settlement amount of Rs.18 crores was agreed between SIL and the assessee along with the three bodies corporate, who were parties to the Cooperation Agreement dated 07.04.2004. The ld. CIT(A) held that, the assessee’s share in the settlement amount was only Rs.6,58,00,000/- and the balance amount of Rs.11,42,00,000/- was paid to the other three parties and he ,therefore, held that, the amount relating to the other three parties could not have been added in the hands of the assessee. The ld. CIT(A) thus restricted the addition u/s 45 of the Act to the extent of Rs.6,58,00,000/- in the hands of the assessee. At the same time, the ld. CIT(A) retained the balance amount of Rs.11,42,00,000/- on protective basis, until the same gets substantively assessed to tax in the hands of other three parties. 6. Assailing the action of the ld. CIT(A), the ld. AR for the assessee submitted the entire sequence of events, which we shall discuss later and claimed that the impugned settlement receipt was towards withdrawal of pending suits & claims and thus was in the nature of capital receipt not liable to tax. He further contended that, there was no transfer of any right/property involved whatsoever in as much as the settlement agreement resulted only in withdrawal of pending suits Printed from counselvise.com Page | 5 IT(SS)A 107/KOL/2025 A.Y. 2018-19 and that, the Courts have consistently held that any payment made towards ‘right to sue’ is in the nature of capital receipt. The ld. AR took us through several judicial precedents in support of his contentions. The ld. AR further submitted that, the ld. CIT(A) had also erred in assessing the amount of Rs.11,42,00,000/- relating to the other three bodies corporate, who were parties to the settlement agreement, on protective basis in the hands of the assessee. 7. Per contra, the ld. CIT, DR appearing for the Revenue supported the order of the ld. CIT(A). He contended that, the payment was made towards extinguishment of the valuable right which the assessee and the three bodies corporate enjoyed under the Agreement for Sale dated 30.04.2004 and therefore it was rightly taxed by the lower authorities. He thus urged before us not to interfere with the order of the ld. CIT(A). 8. We have heard both the parties and perused the material placed before us. Before we advert to the issue at hand, it is first imperative to cull out the facts relating to this dispute. As noted above, in FY 2004-05, the assessee had entered into an Agreement dated 07.04.2004 with three bodies corporate, namely, M/s Rixebe Estates & Development Private Limited, M/s Surana Mercantiles Private Limited and M/s Eriabarie Films & Foils Private Limited titled as “Co- Operation Agreement”. A perusal of the agreement, which is placed at Pages 48-58 of Paper Book, reveals that, the assessee and these three bodies corporate had agreed to co-operate with each other for undertaking a real estate project on mutually agreed terms. It was Printed from counselvise.com Page | 6 IT(SS)A 107/KOL/2025 A.Y. 2018-19 brought to our notice that, when the cooperation agreement was executed, the assessee was in advanced stage of discussion with SIL for acquiring their factory land situated at 33, Jessore Road, Dum Dum Kolkata-700028. Accordingly, in the said co-operation Agreement, the Parties had mutually agreed that, till the acquisition of the property was complete; the assessee would act as the Lead Member of the Consortium and negotiate the purchase of the land and do all such acts, deeds and things to complete the acquisition of the land from SIL. Thereafter, the assessee had entered into an unregistered Agreement for Sale (‘AFS’) with SIL on 30.04.2004; in terms of which SIL had agreed to transfer the property at Jessore Road, Kolkata for consideration of Rs.16,10,44,466/-, towards which the assessee had paid token advance of Rs.25,00,000/-. However, certain disputes arose between the assessee and SIL, and the assessee sought appointment of Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, who vide his award dated 18.10.2012 dismissed the prayers of assessee for, inter alia (i) specific performance of the AFS; (ii) execution of conveyance at the consideration mentioned in the AFS; and (iii) handing over vacant possession of the premises to assessee. The Arbitrator inter alia observed that SIL itself did not have any marketable right or title in the impugned property and therefore it could not have possibly agreed to transfer the same to the assessee. The Arbitrator has observed that, the impugned property could have been retained by SIL only for ‘factory’ purposes and that the said land vested with the State of West Bengal in accordance with the WB Estate Acquisition Act, 1953. It was further held by the Arbitrator that, Section 14(z) of Printed from counselvise.com Page | 7 IT(SS)A 107/KOL/2025 A.Y. 2018-19 the WB Land & Land Reforms Act, 1955 which allowed disposal of premises was not applicable (conditions applicable are that it should be for revival of factory or payment of employees). The Arbitrator also referred to Notification dated 08.02.2005 issued by the Land Reforms Department that any conveyance of such premises would be void and illegal. Having perused the award of the Arbitrator, we find that, the assessee did not have any right or interest or cause for any specific performance in relation to the property in question. It is further observed that, the assessee being aggrieved by the Arbitrator’s award had filed Suit in Barasat Court registered as Misc. Case No. 601 of 2014, who vide their interim order had directed the parties to maintain status quo, as a consequence of which SIL was refrained from alienating the premises. During the pendency of this suit, again an arbitrator was appointed by the parties to resolve the dispute, who again ordered against the assessee and held that the assessee did not have any right or interest under the AFS. We note that the assessee again instituted suit in the Barasat Court against this decision of the Arbitrator. It was during the pendency of this Suit that SIL had approached the assessee and the three bodies corporate, to resolve the litigation/dispute and agreed to pay a sum of Rs.18 crores in settlement of the same.The terms of settlement are extracted below for the sake of ready reference: “1.2 Terms of Settlement 1.2.1 In consideration of the promises and covenants contained herein, and in consideration of Belani withdrawing all pending cases in all judicial fora, as more particularly specified in Schedule I, by filing validly executed applications and petitions for withdrawing unconditionally all cases/complaints/objections filed against Saregama before the respective fora in terms of the provisions in this Agreement, Saregama hereby agrees to pay the Claim Settlement Amount (as defined below) in the manner set out hereunder. Printed from counselvise.com Page | 8 IT(SS)A 107/KOL/2025 A.Y. 2018-19 1.2.2 The Said Suit and Said Application has been scheduled to be heard before the 1\" ADJ, Barasat Court on 5 May 2018 In further consideration for the settlement and covenants between the Parties, it is hereby agreed between the Parties that the Parties shall take all necessary steps and make best endeavours to bring forward the date of hearing, such that the Said Suit and Said Application may be withdrawn at the earliest. 1.2.3 in further consideration for the settlement and covenants between the Parties, Belani shall, simultaneously with the receipt of the first instalment of the Claim Settlement Amount, execute two sets of the withdrawal applications (in the forms set out in Schedule II to this Agreement) and further execute an irrevocable power of attorney (the \"POA\") in favour of Saregama and/or its nominees (in the format attached as Schedule III to this Agreement) authorising them, jointly and/or severally, to take all necessary steps to withdraw the Said Suit, the Said Application and all other cases referred to in Schedule I to this Agreement. The POA shall be accompanied with 2 nos. of Vakalatnama duly signed by Belani's authorized signatory/(ies) in respect of the Said Suit and Said Application, which Saregama may use in the event the proceedings for withdrawal are not filed as per the terms of this Agreement or inordinate delay is perceived by Saregama during pendency of the proceedings after filing. The originals of the executed withdrawal applications, the original executed POA, along with the original Vakalatnamas, shall be kept in escrow by Khaltan Co. LLP, Advocates and Solicitors located at Emerald House, 18 Old Post Office Street, Kolkata 700001 (the \"Escrow. Agent\"). Belani further agrees that upon Saregama's request, Belani would obtain NoCs from Belani's present Advocate on Record for release of the brief in respect of the Said Suit and Said Application, which Saregama may use in the event the proceedings for withdrawal are not filed as per the terms of this Agreement or inordinate delay is perceived by Saregama during pendency of the proceedings after filing. 1.2.4 A separate escrow agreement setting out the terms and responsibilities of the Escrow Agent shall be executed between the Parties and the Escrow Agent at the time of execution of this Agreement. Subject to the terms of the Escrow Agreement, the Escrow Agent shall release the documents kept in its custody to Saregama, upon the full and final payment by Saregama to Belani in terms of this Agreement. Saregama will arrange for filing of the withdrawal applications through Belani and Belani shall extend all support and cooperation in this regard. In any case, Saregama shall be entitled to use the documents released by the Escrow Agent, including the execution of any further documents pursuant to the PoA for the purposes of withdrawing the Said Suit and the Said Application from any judicial fora. 1.2.5 Saregama hereby agrees to pay Belani, as full and final settlement, an amount of INR 18,00,00,000 (Eighteen Crores) plus GST as applicable (the \"Claim Settlement Amount\") in two instalments, the receipt of which Belani shall agree and acknowledge, in the manner set out below: (a) Saregama shall pay Belani the first instalment of an amount of INR 8,00,00,000 (Eight Crore), plus GST as applicable, simultaneously with the execution of this Agreement and handing over of the POA to the Escrow Agent, and Printed from counselvise.com Page | 9 IT(SS)A 107/KOL/2025 A.Y. 2018-19 (b) Saregama shall pay Belani, the balance of the Claim Settlement Amount, being an amount of INR 10,00,00,000 (Ten Crore) plus GST as applicable, on the date of filing of the applications for withdrawal of the Said Suit and the Said Application or 10 April, 2018, whichever is earlier, such date being referred as \"Due Date\" 1.2.6 Belani and the Confirming Parties confirm that such Claim Settlement Amount will be appropriated amongst themselves in terms of their mutual arrangement towards satisfaction of their inter se claims. 1.2.7 Subject to Clause 1.2.8, this Claim Settlement Amount is Inclusive of any other payment, claim or receivable from Saregama to Belani, including any amount which Saregama is liable to pay to Belani vide any court order or arbitral award. 1.2.8 In the event, Saregama fails to pay the Claim Settlement Amount in accordance with Clause 1.2.5 above, it shall be liable to pay simple interest at the rate of 12% per annum from the Due Date on the outstanding amount, until the date of actual payment (\"Delay Interest\"). Provided that, the provision of paying the Delay Interest shall not be construed as the permission to pay the Claim Settlement. Amount beyond the Due Date.” 9. The relevant Schedule I of the Settlement Agreement in relation to which the settlement amount was agreed to be paid, is as follows:- Schedule I List of Outstanding Litigations 1. Belani Housing Development Limited Vs Saregama India Limited, Misc Case No. 601 of 2014 (earlier numbered as Misc No. 5 of 2013) 2. Belani Housing Development Limited Vs Saregama India Limited, Misc Case No. 40 of 2015 (earlier numbered as Misc No. 36 of 2015) 10. A perusal of the above terms of Settlement reveals that, SIL had agreed to pay the settlement amount in consideration of the assessee withdrawing all pending cases in all judicial forums, more particularly described in Schedule - I to the said agreement and withdrawing unconditionally all cases, complaints and objection filled against M/s Saregama before different judicial forums. We find that the ld. AO had factually erred in observing that the settlement amount was paid for relinquishment of the valuable rights being enjoyed by the assessee under the AFS dated 30.04.2004. Rather, the terms of settlement Printed from counselvise.com Page | 10 IT(SS)A 107/KOL/2025 A.Y. 2018-19 makes it clear that, it was for withdrawal of all pending suits & litigation, which has been elaborately set out in Clause 1.3 – Withdrawal of Proceedings, in the said agreement dated 27.03.2018. Moreover, this observation of the ld. AO is negated by the award declared by the Arbitrator on 18.12.2012 wherein he had clearly stated that the assessee did not possess any valuable right to specific performance under the AFS and that the AFS itself was void ab initio. Also, when the matters were referred for arbitration the second time round, the Arbitrator again dismissed the claim of the assessee. Hence, we find that, at the time when the settlement was agreed upon, the assessee did not have any award or order or decree in its favour which recognized any right or interest or title of specific performance under the AFS. What the assessee enjoyed at that material point of time was only the ‘right to sue’, which, as noted above, was foregone in the settlement agreement dated 27.03.2018. We find that the ld. CIT(A) at Para 5.15 of his appellate order had also inter alia observed that, “… the claim of the appellant for specific performance of agreement dated 30.04.2004 does not exist as the party M/s Saregama India Limited does not have any marketable right/title in the property on the date of agreement of sale. Further, Para J & Para 1.1 of the settlement agreement clearly states that the payment was for settlement of claim.” This finding of the ld. CIT(A) has not been disputed by the Revenue before us. We thus are in agreement with the assessee that, the impugned payment of Rs.18 crores was towards the settlement of pending suits & claims and not towards relinquishment or extinguishment of any rights in the property. Printed from counselvise.com Page | 11 IT(SS)A 107/KOL/2025 A.Y. 2018-19 11. In light of our above observations, we find that the decisions of the Madhya Pradesh High Court in the case of CIT vs Laxmi Devi Ratani (supra) and K.R. Srinath vs ACIT (supra) relied upon by the ld. AO was factually distinguishable. In both these decisions, the question before both the High Courts was whether extinguishment of right to claim specific performance is taxable u/s 2(47) read with Section 2(14) of the Act. In these cases, the assessees had entered into valid agreements for sale and thus obtained a valuable right under the said agreement. Subsequent thereto, the assessee entered into a cancellation agreement with the owner wherein in lieu of giving up the rights in the agreement to sell, that the owner paid consideration to the assessees. On these facts, it was held that the extinguishment of the rights in the agreement resulted in transfer of capital asset which was taxable u/s 45 of the Act. We find that, the facts involved in the case before us is distinguishable as because,the settlement claim of Rs.18 crores was paid for withdrawing all pending cases/complains/suits filed against SIL and not for cancellation of any rights obtained under the AFS. 12. There is merit in the ld. AR’s submission that, the impugned compensation was received by the assessee from SIL towards loss of source of income. It is seen that, the assessee is engaged in the business of real estate and the acquisition of this property would have become a source of recurring income. The assessee however settled the disputes by withdrawing the suits and gave up their claim to the source of income. The ld. AO is found to have disagreed with this contention on the ground that, the assessee had not blocked Printed from counselvise.com Page | 12 IT(SS)A 107/KOL/2025 A.Y. 2018-19 substantial funds for making this acquisition. According to us, this cannot be a decisive factor to ascertain whether there was a loss of source of income to the assessee or not. Moreover, the ld. AR had brought to our notice that, not only had the assessee devoted substantial time and energy for acquiring this source of income but the assessee had also executed a pay order in relation to the consideration payable under the AFS and therefore it cannot be alleged that the assessee did not take steps towards acquisition of this income generating activity. On the given facts, we are in agreement with the assessee that, the payment received from SIL was towards loss of source of income and therefore bore the character of capital receipt. 13. The case of the assessee is supported by the decision of the Hon’ble Supreme Court in the case of Oberoi Hotels (P) Ltd vs. CIT (236 ITR 903). In the decided case the assessee was engaged in the business of operating, managing and administering many hotels belonging to others for a fee. Upon the expiry of the agreement, the assessee had option to ask for renewal of the agreement by mutual agreement. However, if the owner decided to sell/dispose the hotel, then the assessee would have the first right to exercise the option of purchasing the hotel. In relation to one particular hotel, a receiver had been appointed on behalf of the owner who had decided to sell the hotel and the assessee was asked give up all its rights, including right to purchase, etc., in relation to the said hotel for which a settlement agreement was executed and compensation of Rs. 29.48 lakhs was received. The assessee claimed that the settlement amount received Printed from counselvise.com Page | 13 IT(SS)A 107/KOL/2025 A.Y. 2018-19 was capital in nature but the AO taxed the same as revenue receipt. On appeal, the Hon’ble Supreme Court observed that, where a consideration is paid due to which the trading structure of the assessee is impaired, and it results in loss of very source of the assessee’s income, then the payment is in capital field. The relevant findings are noted to be as under:- “6. Applying the aforesaid test laid down by this Court in the present case, in our view, the Tribunal was right in arriving at a conclusion that it was a capital receipt. Reason is that as provided in article XVIII of the first agreement, the assessee was having an option or right or lien, if owner desired to transfer the hotel or lease all or part of the hotel to any other person, the same was required to be offered first to the assessee (operator) or its nominee. This right to exercise its option was given up by a supplementary agreement which was executed in September 1975 between the receiver and the assessee. It was agreed that the receiver would be at liberty to sell or otherwise dispose of the said property at such price and on such terms as he may deem fit and was not under any obligation requiring the purchaser thereof to enter into any agreement with the operator (assessee) for the purpose of operating and managing the hotel or otherwise and in its return, agreed consideration was as stated above in clause X. On the basis of the said agreement, the assessee has received the amount in question. The amount was received because the assessee, had given up its right to purchase and or to operate the property. Further, it is loss of source of income to the assessee and that right is determined for consideration. Obviously, therefore, it is a capital receipt and not a revenue receipt. 7. The learned counsel for the revenue relied upon the decision in the case of CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 148 (SC) and submitted that the assessee had the business of running the hotels in various countries and the amount which is received by him is for the termination of first contract which was executed in 1970 and, therefore, it should be considered his revenue receipt. In that case, the Court was dealing with a trading contract and held that compensation paid in respect of the rights arising under the trading contract would be a revenue receipt and must be referred to the profits which would be made in carrying out of that contract. The Court has also observed : \". . . whether a payment of compensation for termination of an agency is a capital or a revenue receipt, it would have to be considered whether the agency was in the nature of capital asset in the hands of the assessee, or whether it was only part of his stock- in-trade.\" 8. The aforesaid judgment was considered in the case of Kettlewell Bullen & Co. Ltd. v. CIT [1964] 53 ITR 261, wherein the Court has held as under : \"Whether a particular receipt is capital or income from business, has frequently engaged the attention of the courts. It may be broadly stated that what is received for loss of capital is a capital receipt; what is received as profit in a trading transaction is taxable income. But the difficulty arises in ascertaining whether what Printed from counselvise.com Page | 14 IT(SS)A 107/KOL/2025 A.Y. 2018-19 is received in a given case is compensation for loss of a source of income, or profit in a trading transaction. . . .\" (p. 270) 9. After considering various decisions, it was further held as under : \"These cases illustrate the principle that compensation for injury to trading operations, arising from breach contract or in consequence of exercise of sovereign rights, is revenue. These cases must, however, be distinguished from another class of cases where compensation is paid as a solatium for loss of office. Such compensation may be regarded as capital or revenue: it would be regarded as capital, if it is for loss of an asset of enduring value to the assessee, but not where payment is received in settlement of loss in a trading transaction.\" (p. 272) 10. After analysing number of cases, the Court observed that following satisfactory measure of consistency in the principle is disclosed : \". . . Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue : Where by the cancellation of an agency the trading struc- ture of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt.\" (p. 282) 11. The aforesaid principal is relied upon in the case of Karam Chand Thapar & Bros. (P.) Ltd.'s case (supra). Considering the aforesaid principles laid down as per article XVIII of the principal agreement, the amount received by the assessee is for the consideration for giving up his right to purchase and/or to operate the property or for getting it on lease before it is transferred or let out to other persons. It is not for settlement of rights under trading contract but the injury is inflicted on the capital asset of the assessee and giving up the contractual right on the basis of principal agreement has resulted in loss of source of the assessee's income.” 14. The Hon’ble Supreme Court in the case of CIT Vs Saurashtra Cement Ltd (325 ITR 422) was seized with the question as to whether the compensation paid for delay in delivery of the machinery would constitute loss of profit and therefore will be revenue in nature or whether it would tantamount to compensation for sterilization of profit earning source itself and thereby in the nature of capital receipt. Answering the question in favour of the assessee and holding the Printed from counselvise.com Page | 15 IT(SS)A 107/KOL/2025 A.Y. 2018-19 compensation to be capital receipt, the Hon'ble Supreme Court is noted to have observed as under: “11. The question whether a particular receipt is capital or revenue has frequently engaged the attention of the Courts but it has not been possible to lay down any single criterion as decisive in the determination of the question. Time and again, it has been reiterated that answer to the question must ultimately depend on the facts of a particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a conclusion. In Rai Bahadur Jairam Valji's case (supra), it was observed thus : ….. 12. In Kettlewell Bullen & Co. Ltd.'s case (supra), dealing with the question whether compensation received by an agent for premature determination of the contract of agency is a capital or a revenue receipt, echoing the views expressed in Rai Bahadur Jairam Valji's case (supra) and analysing numerous judgments on the point, this Court laid down the following broad principle, which may be taken into account in reaching a decision on the issue : …. 13. We have considered the matter in the light of the afore-noted broad principle. It is clear from clause No. 6 of the agreement dated 1-9-1967, extracted above, that the liquidated damages were to be calculated at 0.5 per cent of the price of the respective machinery and equipment to which the items were delivered late, for each month of delay in delivery completion, without proof of the actual damages the assessee would have suffered on account of the delay. The delay in supply could be of the whole plant or a part thereof but the determination of damages was not based upon the calculation made in respect of loss of profit on account of supply of a particular part of the plant. It is evident that the damages to the assessee was directly and intimately linked with the procurement of a capital asset, i.e., the cement plant, which would obviously lead to delay in coming into existence of the profit-making apparatus, rather than a receipt in the course of profit-earning process. Compensation paid for the delay in procurement of capital asset amounted to sterilization of the capital asset of the assessee as supplier had failed to supply the plant within time as stipulated in the agreement and clause No. 6 thereof came into play. The afore-stated amount received by the assessee towards compensation for sterilization of the profit-earning source, not in the ordinary course of their business, in our opinion, was a capital receipt in the hands of the assessee. We are, therefore, in agreement with the opinion recorded by the High Court on question Nos. (i) and (ii) extracted in Para 1 (supra) and hold that the amount of Rs. 8,50,000 received by the assessee from the suppliers of the plant was in the nature of a capital receipt.” 15. A perusal of the above decision shows that, where the damages to the assessee is linked with the procurement of a capital asset, then such damages is to be treated as amount paid for sterilization of the Printed from counselvise.com Page | 16 IT(SS)A 107/KOL/2025 A.Y. 2018-19 capital asset and not a receipt arising in the ordinary course of business and therefore in the nature of capital receipt.Going back to the facts of the present case, it is observed that the assessee had attempted to acquire land parcels for development of real estate but due to breach of agreement and the land owner not having valid title himself, resulted in failure of acquisition, which was meant to act as an apparatus in the profit earning source of the assessee, viz., its business of real estate. It is noted that the said compensation is not linked to any actual damages incurred by the assessee or to the cost of the asset or is a discount or reimbursement to the assessee and therefore there is force in the claim of the assessee that the settlement amount qualified as capital receipt. 16. It is also seen that, the ld. AO had referred to the amendment brought in Section 28 of the Act by the Finance Act, 2019 whereby clause (e) was inserted in Section 28(ii) wherein it was provided that, any compensation which was due to any person in connection with termination or modification of the terms of contract relating to his business shall be taxed as and by way of business income. We observe that, this provision was made effective and applicable by the Legislature from AY 2019-20 onwards. The ld. AR has rightly contended that, this amendment referred to by the ld. AO, supported the assessee’s case that, prior to AY 2019-20, the compensation received by an assessee towards loss of source of income due to breach of contract was in capital field and that the Legislature had brought the same in the ambit of taxation only from AY 2019-20 and onwards. Printed from counselvise.com Page | 17 IT(SS)A 107/KOL/2025 A.Y. 2018-19 17. Secondly, according to us, the payment made by SIL to the assessee for agreeing to unconditionally withdraw the suit, effectively resulted in extinguishing their ‘right to sue’. It is important to remember that, the judicial forums as well as the arbitrators had at all material times rejected the claim of the assessee and upheld the legal right, title & interest in the impugned property in favour of SIL. At the time when the settlement agreement dated 27.03.2018 was executed, the assessee was left with only the pending suit before the Barasat Court. What the assessee held was only the right to sue SIL at the time when settlement was reached. The outcome of the litigation was unknown and uncertain and there was no surety that the assessee would ultimately succeed. There is force in the Ld. AR’s contention that, SIL entered into settlement agreement not because they recognised that the assessee would be able to secure rights in the impugned property but because the pending suit against them could adversely affected the saleability of their property and their economic interest as well. We find that, the Courts have consistently held that, the ‘right to sue’ is not a property which can be transferred but it is a privilege which is enjoyed in persona and therefore any payment towards the same is not amenable to charge of tax. 18. We rely in this regard on the decision of the Hon’ble Gujarat High Court in the case of Baroda Cement & Chemicals Limited (158 ITR 636). In the decided case, the assessee had entered into a contract with a company for purchase of mill. The vendor however breached the contract. The assessee filed a suit of claim against the vendor who subsequently settled the same for a negotiated compensation. On Printed from counselvise.com Page | 18 IT(SS)A 107/KOL/2025 A.Y. 2018-19 these facts, the High Court observed that, once there is a breach of contract and the other party defaults, the injured party has nothing left in the contract except the right to sue for damages. It was held that, after the amendment of section 6(e) of the Transfer of Property Act, a right to sue, whether arising out of tortuous act or ex-contract, is not transferable. Reason being that right to sue for damages is not an actionable claim or a capital asset and there could be no question of transfer by extinguishment of the assessee's rights therein and hence not liable to capital gains. The relevant findings are noted to be as follows:- “15. It was argued before the High Court that the interim receiver had no locus standi to apply for restoration of the suit because (i) the order of adjudication was not made at the time when the application was filed and the insolvency court had not granted any special power to the interim receiver to prefer such an application, and (ii) the subject-matter of the suit was a mere right to sue for damages which did not vest in the receiver. The first point was rejected as not sound on the ground that once an order of adjudication is passed, it relates back to the date of the insolvency petition under section 28(7) of the Provincial Insolvency Act, 1920, and, therefore, the official receiver's application seeking restoration of the suit was competent. The Court then proceeded to consider whether the subject-matter of the suit vested in the official receiver under section 28 of the said statute. Two questions had to be answered, namely, (i) is the subject-matter of the suit 'property' ? and (ii) is it such property as is exempted by the Code of Civil Procedure or any other enactment from liability to attachment and sale in execution of a decree ? The definition of 'property' in section 2(d) of the Provincial Insolvency Act included 'any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit'. The definition of the word 'property' being inclusive was rightly held to be not exhaustive. The Court then proceeded to consider the different senses in which the word 'property' was used and after quoting from Salmond on Jurisprudence, it held that the word 'property' cannot be confined to material object, it must include rights in and over that object. These jure in re aliena were held to be 'property' of the person owning them, though the material object is owned by another. In that sense 'benefits arising out of a contract' stood included in the term 'property'. The Court then observed : \"The right to claim damages for breach of contract is one of the benefits of a contract.\" The learned Judge then made the following observations in paragraph 14 of the judgment : Printed from counselvise.com Page | 19 IT(SS)A 107/KOL/2025 A.Y. 2018-19 \"... A claim for damages on account of breach of contract is a right arising out of contract and is an obligation qua the person who is guilty of breach and his property. ...\" (p. 436) With respect, this observation does not seem to be consistent with the view of Chagla, CJ., extracted earlier wherein he said that a person who commits a breach of the contract does not incur any pecuniary liability nor can the injured party claim any amount as due to him. Even the Supreme Court in the case of Raman Iron Foundry ( supra) observed : 'the law is well settled that a claim for unliquidated damages does not give right to a debt until the liability is adjudicated and damages assessed. That is so because a breach of contract does not ipso facto confer a right to any sum by way of damages, it merely confers a right to sue but the injured party would be entitled to pecuniary compensation only if it has on account of the breach suffered pecuniary loss and not otherwise. That is why the Supreme Court has said that it is not an actionale claim. 16. The learned Judge of the Allahabad High Court then proceeded to consider the significance of the word 'mere' in section 60(a). Pointing out that all rights are either substantive or procedural and all substan- tive rights are either 'antecedent' or 'remedial', he observed that the right to the delivery of goods under a contract is an 'antecedent right', while a right to damages on breach is a 'remedial right'. An antece- dent right may or may not be a right of property. According to him if the remedial right arises out of an antecedent right which is one of property it is not; a 'mere' right to sue for damages but if the former is not a right of property, the remedial right may be a 'mere' right to sue for damages. In cases where the antecedent right is severed from the remedial right, the latter would again be a 'mere' right to sue for damages. A contract for delivery of goods gives rise to an antecedent as well as a remedial right, the latter right being a benefit of the contract. So, even in cases of non-performance, the contract remains in force till the remedial rights arising therefrom are performed. In other words, according to the learned Judge even in the case of breach, both the antecedent as well as the remedial rights remain alive till the latter is satisfied. On this line of reasoning the learned Judge disapproved the observations of Maclean, CJ., in Abu Mahomed's case (supra) that after the breach nothing remains in a contract but the mere right to sue for damages which is not an actionable claim and is not transferable and observations of Harington, J., that after the breach the contract is 'at an end'. But, with respect to the learned Judge the question of exercise of the remedial right to sue for damages can arise only when the antecedent right is denied and is rendered unenforceable. The view expressed in Abu Mahomed's case (supra) has been approved by the Supreme Court in Raman Iron Foundry's case (supra) wherein their Lordships observed : \"The only right which the party aggrieved by the breach of the contract has is the right to sue for damages.\" The Supreme Court has also approved the view that it is not an actionable claim and, therefore, cannot be transferred. Or the same line of reasoning and for the reason that the case did not arise under the Provincial Insolvency Act, the Allahabad High Court did not approve the decisions which were based on the ratio in Abu Mahomed's case (supra) including the decision of the Bombay High Court in Hirachand's case ( supra). Needless to say that the ratio of Abu Mahomed's case (supra) was later approved by Chagla, CJ., and the Supreme Court in the aforementioned cases without specific reference thereto. With respect, Printed from counselvise.com Page | 20 IT(SS)A 107/KOL/2025 A.Y. 2018-19 therefore, it is not possible to accept the line of reasoning of the learned Judge of the Allahabad High Court. 17. In the case before the Andhra Pradesh High Court, the plaintiff purchased the property from one S who had secured an eviction decree in respect of that property against the defendants. After purchase, the plaintiffs applied for possession and successfully executed the decree. For the period of occupation prior to the date of delivery of possession, the defendants did not make any payment for which the plaintiff made a claim. Several defences were raised but the suit was decreed for Rs. 375 interest and proportionate costs. In appeal the defendants raised a new contention whether transfer of profits in respect of the period prior to the sale was hit by section 6(e). The Full Bench rightly held that it was not hit because what was transferred was not a mere right to sue for mesne profits but all rights in the property, including the right to claim mesne profits for the said period of occupation. This decision, therefore, turns on its own facts and cannot be pressed into service to negative the assessee's contention. 18. In view of the above discussion the assessee's contention that on the breach of the contract and disposal of the machinery to third party it merely had a right to sue for damages which could not be transferred in view of section 6(e) appears to be well founded.” 19. We also refer to the decision of the jurisdictional ITAT, Kolkata in the case of Dy.CIT Vs Azimganj Estate Pvt Ltd (ITA No. 735/Kol/2012) dated 05.09.2014. In this case, the assessee had entered into an MOU with a land owner to develop the said premises. However the assessee & the land owner were not able to obtain necessary sanction & approval for development and/or sale of the said premises rendering the MOU un-enforceable. The land owner moved to the Calcutta High Court which permitted it to sell the property by appointing a receiver. Accordingly the land owner sold the property through the receiver. In the meantime, the assessee appealed against the order of the Single Judge Bench of Calcutta High Court before the Division Bench which set aside the order of the Single Judge. The land owner and the purchaser of the property moved before Supreme Court which granted stay on the order of Division Bench and directed the assessee to not press the land owner to cancel the sale agreement. The said petition & Printed from counselvise.com Page | 21 IT(SS)A 107/KOL/2025 A.Y. 2018-19 litigation continued for 10 years and remained status quo. To put an end to the disputes, the new purchaser and the original land owner entered into a settlement agreement with the assessee to release rights, if any, pertaining to the said premises arising under the MOU for which it agreed to pay settlement compensation to withdraw all the claims & pending suits. Though the assessee claimed the receipt of compensation to be capital in nature, the AO however treated it to be revenue and taxed it as business income of the assessee. On appeal, this Tribunal following the decision of Hon’ble Supreme Court in the case of Oberoi Hotels (P) Ltd vs. CIT (supra) held that, the assessee by giving up its right to purchase the property, resulted in loss of source of income and thus treated the settlement compensation as capital receipt. The relevant findings are noted to be as under:- “6. From the above facts, it emerges that assessee has no right or title or interest in the property as on the date of agreement, by virtue of which, the compensation was received. The assessee could not have acquired the property because there was no order of court for transfer of property in the name of the assessee. Even the MOU/agreement cannot be used for specific performance of contract to purchase the property. The only alternative left with the assessee to sue these above stated parties by virtue of MOU and do assert its claim. Now, the issue is, whether a right to sue is an asset or not, is to be decided in the given facts and circumstances of the case. When a company court approved the sale in favour of Skylark India Ltd. and such sale deed was executed, the assessee was having no right over the property. Section 6 of the Transfer of Property Act, 1882, makes an exception in clear terms that a right to sue is not an asset. This proposition is supported by the decision of Hon'ble Supreme Court in the case of Oberoi Hotels Pvt. Ltd. Vs. CIT (1999) 236 ITR 903 (SC), wherein it is held as under: ….. 7. From the above case law of Hon'ble Supreme Court it is clear that the facts of the present case are directly comparable with the said case. The amount was received because the assessee had given up its right to purchase and/or to operate the property and the said amount was held to be capital receipt and not revenue receipt as held by Hon'ble Supreme Court observing that by giving up its right to purchase and/or to operate the property, injury was M/s. Azimganj Estates Pvt. Ltd. AY 2008- 09 inflicted on the capital asset of the company thereby resulting in loss of source of Printed from counselvise.com Page | 22 IT(SS)A 107/KOL/2025 A.Y. 2018-19 income. In the present case also the assessee has released/discharged qualcomm from the project agreement thereby giving up its right to purchase/acquire the equipment from the said party and this act has certainly inflicted an injury to the capital structure of the assessee company resulting in loss of source of income. According to us, the entire sum of Rs.3.5 crore was, therefore, capital receipt not liable to tax. In view of the above facts and circumstances, we confirm the order of CIT(A) deleting the addition. Appeal of revenue is dismissed.” 20. We find that the case of the assessee is also squarely supported by the decision of the Hon’ble ITAT, Ahmedabad in the case of ITO vs. Ganeshsagar Infrastructure (P.) Ltd (135 taxmann.com 313). In this case also, the assessee had entered into agreements to purchase certain agricultural land parcels with original landowners and paid various amounts as agreed. However, it was later learnt by the assessee, that the original landowners had also sold land parcels in question to family members of one 'G'. In consequence of dispute arising towards rightful ownership of land parcels, the original landowners, original purchasers and assessee went through various levels of litigations before Tribunals, who upheld the claim of the original purchasers to title and ownership with rightful possession of the disputed land. The assessee further carried the dispute by filing Special Civil Application seeking its claim on land parcels. Pending settlement of ongoing dispute in the Court of law, both the original purchasers and assessee referred the matter for arbitration to resolve the disputes outside the Court. The arbitrator eventually passed an arbitration award in pursuance whereof, the original purchasers sold the disputed land to MCPL and out of such sale proceeds, a sum of Rs.70 crores were apportioned to the assessee in consonance with arbitration award, on the condition that, the pending civil suit shall stand withdrawn. The AO treated the compensation to be Printed from counselvise.com Page | 23 IT(SS)A 107/KOL/2025 A.Y. 2018-19 consideration for relinquishment of rights and taxed it by way of long term capital gains. On appeal, this Tribunal upheld the order of Ld. CIT(A) that the consideration was received for release of the assessee’s right to sue and thus could not be taxed. The Hon’ble Tribunal referring to the definition of the expression 'capital asset' set out in Section 2(14) of the Act, held that ‘right to sue’ does not qualify as a capital asset and thus any receipt in relation thereto is not exigible to tax. The relevant findings are as follows:- “16.3 In the instant case, the rights of the assessee arising under the sale agreement with the original landowners were frustrated in view of another sale agreement of the same land parcels in favour of other party. The assessee received certain consideration by way of damages as a culmination of ongoing vexatious dispute towards rightful ownership of land parcels in question. The amount arose to the assessee by virtue of arbitral award adhered to by the parties to the dispute. The assessee has received consideration for its release of right to sue. Despite the definition of expression 'capital asset' in the widest possible term of section 2(14) of the Act, a right to a capital asset must fall within the expression 'property of any kind' and must not fall within the exceptions. Section 6 of Transfer of property Act which uses the same expression 'property of any kind' in the context of transferability makes an exception in the case of a mere right to sue. 16.4 The issue is no longer res integra. There are long line of judicial precedents which echoes the view that the right to receive the compensation for release of right to sue on account of breach of contract for sale of land is not a capital asset and thus not chargeable to tax as capital gains. Support is drawn from CIT v. J. Dalmiya [1985] 20 Taxman 86/[1984] 149 ITR 215 (Delhi); Baroda Cements & Chemicals Ltd. v. CIT [1986] 25 Taxman 324/158 ITR 636 (Guj.); CIT v. Abbasbhoy A. Dehgamwalla [1991] 59 Taxman 498/[1992] 195 ITR 28 (Bom.). 16.5 We also straightway notice that identical issue arose for consideration of the co- ordinate bench in Bhojison Infrastructure (P.) Ltd. v. ITO [2018] 99 taxmann.com 26/173 ITD 436 (Ahd. - Trib.) concerning A.Y. 2008-09 order dated 17-9-2018, which is referred to and relied upon on behalf of the assessee. The co-ordinate bench, after a detailed analysis, opined that mere 'right to sue', while a capital receipt, is not a capital asset under s.2(14) of the Act and thus compensation received on release of right to sue is not a taxable receipt. The relevant operative para of the order is reproduced hereunder for the sake of easy reference: …. 16.6 On perusal of the first appellate order, we find that CIT(A) has analysed the fact situation threadbare and applied the law correctly. The action of the CIT(A) is found to be consistent with the law propounded in the judicial decisions as quoted in the first appellate order as well as in earlier paragraphs. Printed from counselvise.com Page | 24 IT(SS)A 107/KOL/2025 A.Y. 2018-19 16.7 We thus find little merit in the plea raised on behalf of the Revenue. On facts, as rightly stated on behalf of the assessee, the proceedings on challenge for rightful owner of land before the Court of law were continuing and had not come to an end and as a corollary, the right of the assessee to sue the defaulting party was open and subsisting. Pending proceedings before the Court of law, a consensus settlement was arrived by the Arbitral Tribunal which was dutifully acted upon. The character of compensation receipts emanating from such award towards divesting of title of the assessee was admittedly capital in nature arising on account of relinquishment of right to sue as per the averments made by the AO in para 7.7 of the assessment order itself. The compensation received was offshoot of right to sue, an untransferrable right in personam of capital nature. The plea on behalf of Revenue that the assessee had nearly exhausted its right to sue has to be seen from the point of view of litigant. Such issues are vexatious and cannot be straightjacketed till the conclusion of Court proceedings. The parties have among themselves agreed to compensate the assessee for release of right to sue which act cannot be substituted by the opinion of Revenue. The short point thus remains is whether such capital receipt on account of release of right to sue can be bracketed under the expression 'property of any kind' used in s. 2(14) defining capital asset. The issue has been answered in favour of the assessee in the earlier paragraphs. As discussed in preceeding paras in length, such capital receipts towards compensation do not fall within the sweep of expression 'property of any kind' notwithstanding its very wide connotations and consequently such capital receipts (not being capital asset) are not susceptible to capital gain tax having regard to provisions of charging section 45 of the Act. Merely because such right towards compensation surfaced as a result of sale of disputed land would not per se govern its taxability unless such right can be termed as a 'capital asset' which it is not.” 21. The Ld. AR has also rightly relied on the decision of Hon’ble ITAT, Mumbai in the case of Chheda Housing Development Corpn. v. ACIT (110 taxmann.com 56). In the decided case, the assessee was also engaged in business of construction and development. It had entered into a memorandum of understanding (MOU) with one 'M' for developing saleable right of floor surface index on a plot of land. On execution of MOU, assessee paid certain advance to owner of said land. Subsequently, the assessee came to know that owner of said land had already transferred development right to 'S' Ltd, which was a company consisting of family members of landowners. The assessee thereafter filed a civil suit for seeking relief for specific performance of Printed from counselvise.com Page | 25 IT(SS)A 107/KOL/2025 A.Y. 2018-19 MOU and to execute joint development agreement. The assessee also filed criminal complaint against land owner. Later on, the parties settled the dispute with the assessee and paid Rs. 20 crore in settlement thereof. The Revenue had taxed the receipt by way of long term capital gain. On appeal, this Tribunal held that the amount received by assessee was towards extinction of its right to sue the owner, which was not in ordinary course of its business, and thus it was to be construed as capital receipt not liable to tax. The findings relevant to the present case before us, is as follows:- “20. From the contents of clause 5 of the cancellation deed dated 11th September 2011, we have noted that the assessee has not transferred any right in favour of the confirming party (third Party) in respect with regard to the rights, which were sought to be confirmed in MOU dated 24th March and 25th March 2005. In facts all those right were already stand transferred by the owners in favour of M/s Star Habitat Pvt Ltd. The assessee received compensation of Rs. 20 Crore consisting of refund of the amount paid by assessee to the owners in pursuance of the said Development Agreement dated 24th March, 2005 read with supplementary agreement dated 25th March, 2005 along with interest, towards loss of profit/ liquidated damage for loss of opportunity to develop the property and sale of flats in the open market and towards the cost of litigation only. Therefore, in view of the ratio of decisions of Hon'ble Delhi High Court in J Dalmia (supra), Bombay High Court in Abbasbhoy A. Dehgamwalla (supra), Hon'ble Supreme Court in Saurashtra Cement Ltd (supra) and decisions of Mumbai Tribunal in Jackie Shroff (supra) and Ahmedabad Tribunal in Bhojison Infrastructure (P.) Ltd (supra), the amount received by the assessee in excess of advance is on account of compensation for extinction of its right to sue the owner, the receipt is a Capital receipt not chargeable to tax. Since the assessee has not received the amount in excess of advance in the course of his business it must be construed as capital receipt and not business receipt. 21. The case law of Hon'ble Madras High Court in K.R. Srinath (supra) relied by assessing officer is not applicable on the facts of the present case. In K.R. Srinath (supra) it was held that the amount received as consideration for giving up right of specific performance which was acquired under agreement to sale, is liable to capital gain tax. However, in the case in hand the right of assessee was in dispute as the owner of the land has already transferred such right to third party. Rather the original agreement was cancelled. 22. In Tata Services Ltd (supra) the right, title and interest was assigned by the assessee to third party. The right, title and interest of the assessee was not in dispute, however, the assessee in the present case was litigating for creation of his right in the property. Printed from counselvise.com Page | 26 IT(SS)A 107/KOL/2025 A.Y. 2018-19 23. Similarly in Vijay Flexible Containers (supra) the right, title and interest of the assessee were not in dispute. However, the right, title or interest of the assessee was in dispute, the assessee was only entitled for damage and for loss of business. In the result the grounds of appeal raised by the assessee are allowed. 24. In the result, appeal of the assessee is allowed.” 22. We further find that the assessee has also rightly relied on the following decisions wherein the consideration paid for compensation being surrendering the right to sue was held to be capital receipt not liable to tax. - Satyam Food Specialities (P) Ltd (57 taxmann.com 194) (ITAT Jpr.) - ACIT Vs Jackie Shroff (97 taxmann.com 277) (ITAT Mum) - Bhojisan Infrastructure Pvt Ltd vs. ITO (99 taxmann.com 26) (ITAT Ahd) - DCIT Vs Britannia Industries Ltd (ITA No. 1390-92/Kol/17) (ITAT Kol) - Shireen J Dastur Vs ITO (180 taxmann.com 478) (ITAT Mum) 23. For the above reasons and following the decisions (supra), we therefore hold that the settlement amount of Rs.6,58,00,000/- received by the assessee from SIL under the Settlement Agreement dated 27.03.2018 was in the nature of capital receipt not liable to tax. The ld. AO is accordingly directed to delete the same. 24. In so far as the protective addition of Rs.11,42,00,000/- is concerned, it is not in dispute before us that, the aforesaid sum pertained to and belonged to the three bodies corporate, M/s Rixebe Estates & Development Pvt Ltd, M/s Surana Mercantiles Pvt Ltd and Eriabarie Films and Foils Pvt Ltd, who were also parties to the Settlement Agreement. The material placed before us shows that, these three parties had received their respective shares in the settlement amounts and they had accounted the same in their books of accounts as well. On these admitted facts therefore, we see no Printed from counselvise.com Page | 27 IT(SS)A 107/KOL/2025 A.Y. 2018-19 reason for the ld. CIT(A) to protectively assess the sum of Rs.11,42,00,000/- in the hands of the assessee, when the said amount was evidently not received by the assessee nor it did relate to or belong to the assessee. Further, we find that, the ld. CIT(A) had exceeded his jurisdiction to make protective assessment, without the same being preceded by the substantive assessment of these three parties. With these observations, we also vacate the protective addition of Rs.11,42,00,000/- made by the ld. CIT(A) in the hands of the assessee. The Ground Nos. 1 & 2 are allowed. 25. In the result, the appeal of the assessee is allowed. Order pronounced on 27.02.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 27.02.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "