AI Insights
The case involves an appeal by Shri Sukhwant Singh against the order of the Commissioner of Income Tax (Appeals) concerning the assessment year 2012-13. The primary issues in the appeal were the disallowance of interest expenditure under section 36(1)(iii) and the addition of income from the differential amount received from a property transaction. The Tribunal examined whether the interest on a loan provided to M/s City Beautiful Engineering Company Pvt Ltd was rightly disallowed and whether the income from the cancellation of a property purchase agreement should be treated as income from other sources or capital gains. The Tribunal found that the loan was interest-bearing and required the Assessing Officer to determine the appropriate interest rate. It also ruled that the income from the property transaction should be treated as capital gains.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 127562 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 5 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-08-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
Not Allotted
Next Hearing Date
16-05-2023
Assessment Year
2012-2013
Appeal Filed On
24-02-2019
Judgement Text
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “एस.एम.सी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH ी व म संह यादव, लेखा सद%य BEFORE: SHRI. VIKRAM SINGH YADAV, AM ITA No. 197/Chd/2019 Assessment Year : 2012-13 Shri Sukhwant Singh House No. 160, Sector-9 Chandigarh The ITO Ward-4(1) Chandigarh PAN NO: AMVPS7107H Appellant Respondent ! " Assessee by : Shri Parikshit Aggarwal, CA # ! " Revenue by : Shri Akashdeep, JCIT, Sr. Dr $ % ! & Date of Hearing : 17/05/2023 '()* ! & Date of Pronouncement : 04/08/2023 आदेश/Order PER VIKRAM SINGH YADAV, AM This is an appeal filed by the Assessee against the order of the Ld. Commissioner of Income Tax, (Appeals)-1, Chandigarh [hereinafter referred to as ‘CIT(A)’] passed under section 250(6) of the Income Tax Act, 1961 (in short ‘the Act’) dt. 04/12/2018 pertaining to A.Y. 2012-13 wherein the assessee has taken the following revised grounds of appeal: 1. “That on the facts, circumstances and legal position of the case, the Worthy CIT(A) in Appeal No. 61/14-15/A.Y. 2012-13 has erred in passing that order in contravention of the provisions of S. 250(6) of the Income Tax Act, 1961. 2. That on law, facts and circumstances of the case, the Worthy CIT (A) has erred in confirming the action of the Ld. AO in disallowing the interest expenditure of Rs. 9,09,340/- u/s 36(l)(iii) on account of interest not having been received from M/ s Citi Beautiful Engg. Co. 2 3. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the action of the Ld. AO in making addition of Rs. 14,00,000/- on account of differential of the amount paid as biana for purchase of property and its receipt back from the seller as 'Income from Other Sources' even when the same was in the nature of LTCG and declared correctly as such by the appellant. 4. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.” 2. Ground no. 2 relates to disallowance of Rs. 9,09,340/- under section 36(1)(iii). In this regard, the ld AR submitted that the assessee is engaged in the business of money lending. He has booked interest income of Rs. 27,88,828/- by credit to his P&L A/c for the financial year relevant to impugned assessment year. It was submitted that the ld CIT(A) has recorded perverse facts in the order, at page 13 para 5.2, wherein he looked into the interest income declared by the assessee in computation of income under the head “income from other sources” and declared that the assessee is not into money lending business. 3. It was further submitted that the Ld. AO has made disallowance u/s 36(l)(iii) by applying the decision in Abhishek Industries 286 ITR Page 1(P&H HC). This was despite the fact the advance in question was not given interest free. But the interest has not been booked since the borrower was not just paying the interest but had almost turned bad qua even the principal amount as he was not paying back even a single penny. 4. It was further submitted that the ld CIT(A), by comparing the directorship of Acme Builders Pvt Ltd (ABPL) and the borrower City Beautiful Engineering Company Pvt Ltd (CBECPL) had wrongly held that ABPL and CBECPL are related parties and when assessee is one of the directors in ABPL and CBECPL is also related party of assessee and therefore, he held that there was no question of bad debt of advance given to a related party. The CIT(A) confused himself in reading the name of Mohinder Pal Singh Chawla and Mohinder Pal Singh Grewal in both companies and by mistake understood them to be same person 3 even when they are different persons with different names. Further, the confirmation given by CBECPL also categorically confirms that it is in no way related to the assessee. 5. It was submitted that the disallowance u/s 36(l)(iii) was wrongly made and wrongly confirmed due to following reasons. It was not a case of interest free advance. Therefore, the decision in Abhishek Industries (supra) has been wrongly applied by the Ld. AO. When a debt has turned bad in the case of a money lender, there is no illegality in not booking interest thereon and booking of the same at the time of receipt is an accepted method. The assessee did receive some interest of Rs. 5,71,001/- during AY 2015-16 which has been offered to tax in the ITR of AY 2015-16 (PB Pg 26). For this proposition, reliance was placed on the decisions in case of CIT vs Ferozepur Finance Pvt Ltd 124 ITR 619 (P&H HC), CIT vs Eicher Ltd 320 ITR 410 (Del. HC), CIT vs Excel Industries Ltd 358 ITR 295 (SC) and Bechtel International Inc vs DDIT (Mum ITAT). 6. It was submitted that the CIT(A) has wrongly observed that the assessee in not into money-lending business and the borrower is related to the assessee. It was further submitted that the assessee owned interest free funds in the form of proprietor capital exceeded the relevant advance of Rs. 75,77,838/- whereas the capital is Rs. 90,36,439/-. Therefore, disallowance u/s 36(l)(iii) could not have been made. The reliance was placed on the following case laws namely, Bright Enterprises Put Ltd vs CIT 381 ITR 107 (P&H HC), Gurdas Garg vs CIT(A) & Anr 93 CCH 489 (P&H HC) and Torque Pharmaceuticals Pvt Ltd vs Addl. CIT in ITA No. 671/CHD/2011. It was accordingly submitted that the addition so made and confirmed by the ld CIT(A) be directed to be deleted. 7. Per contra, the Ld. DR has relied on the findings of the lower authorities and our reference was drawn to the findings of the Ld. CIT(A) which are contained at para 5.2, 5.2.1 and 5.2.2 of his order which read as under: 4 “5.2 I have perused the order of the Assessing Officer and examined the reply of the assessee. The issue at hand is that appellant had advanced loan of Rs.75,77,838/- to City Beautiful Engineering Company Pvt. Ltd. during the F.Y. 2010- 11. The same amount of Rs.75,77,838/- was outstanding as on 31.03.2014. No interest was charged by the appellant till the end of this financial year. When confronted appellant submitted that the borrower's company is non-cooperative and has defaulted in repayment of interest as well as principal. AO did not buy this argument as the perusal of ledger account of the borrower company submitted by the assessee for F.Y. 2010-11 shows that the assessee himself has not charged any interest from the borrower company during the F.Y.2010-11 and treated it as a cooked up story on the part of the assessee and the assessee has never asked for interest from the borrower company which means that the assessee has advanced 'Interest Free Loan' to M/s City Beautiful Engineering Company Pvt. Ltd. He also did not accept the "Letter Dated NIL" submitted by the appellant from the company i.e. M/s City Beautiful Engineering Company Pvt. Ltd wherein it has been mentioned that it was an interest bearing borrowing. The AO did not accept appellant's plea as appellant is following mercantile accounting so he was required to charge interest on the loan of Rs.75,77,838/-given to M/s City Beautiful Engineering Company Pvt. Ltd during the year under consideration. As the appellant has debited interest payment on the loans taken by him at Rs.37,51,920/- in his profit & loss account and has failed to furnish any plausible explanation for non-charging of interest on the funds given to M/s City Beautiful Engineering Company Pvt. Ltd. for the year under consideration, AO made proportionate disallowance of interest expenditure u/s 36(1)(iii) of the Act amounting to Rs.9,09,340/- (12% of Rs. 75,77,838/-). The appellant has submitted that interest cannot be disallowed on the following grounds that: (i) he was engaged in borrowing and lending of money and this was also reflected in his return and the interest income on the advance was not booked as income on accrual basis as this was a case of a non-cooperative borrower who defaulted in payment of not only the interest but also the timely repayment of principal. The principal amount of loan could be recovered in FY 2014-15 only on which interest of Rs.5,71,001/- was also declared as income for the AY 2015-16 as the borrower had settled the account at that time after lots of efforts by the assessee to recover the stuck principal amount. The said borrower had also deducted TDS of Rs.57,101/- on the interest amount. This also establishes that it was infact an interest bearing loan given by the assessee in the normal course of his money lending business but the interest income was not accounted for as the principal itself got stuck and no interest was being paid by the borrower. No TDS was deducted by the said borrower in FY 2011-12, FY 2012-13 and FY 2013-14, (ii) As per Accounting standard - 9 Revenue arising from the use by others of enterprise resources yielding interest, royalties and dividends should only be recognized when no significant uncertainty as to measurability or collectability exists. Whereas in this case there was significant uncertainty as to the collectability of not only the interest but the principal as well and in such a case the income should not be recognised and even if recognised the same will have to be written off as bad debt, (iii) Only real income can be put to tax and not notional income, (iv) In such a case the interest income if actually received in future can be taxed as per the provisions of section 41 of the Act. As the assessee was carrying on business of money lending he could have shown the interest income and simultaneously claimed the same as bad debt and then offer the interest if received in future to tax u/s 41. Incidentally this has been done in AY 2015-16. 5 5.2.1. A remand report was called for wherein the AO has submitted that the appellant is following mercantile system of accounting and, therefore, the interest received for a loan for AY 2012-13 should have been accounted for the ITR and computation for the same A.Y. and not in the year of actual receipt of interest income i.e. A.Y.2015-16.He has accepted that the assessee has received interest income from M/s Citi Beautiful Engineering Company Pvt. Ltd. during A.Y.2015-16. However, the assessee has furnished no documents, proof or confirmations to support of the fact that the interest income received in A.Y.2015-16 relates to the loan confirmations in support of the fact that the interest income received in A.Y.2015-16 relates to the loan f or' A.Y.2012-13. No confirmation from M/s Citi Beautiful Engineering Company Pvt. Ltd has been submitted either. Therefore, with lack of any information to the contrary, it cannot be assumed that the interest income received and declared by the assessee in A.Y.2015-16 relates to a loan for A.Y.2012-13. On the other hand, appellant has just submitted that AO should have obtained confirmation on his own or can be asked AO to obtain from the borrower. 5.2.2. At the outset computation of total income for AY 2015-16 no where emanates that appellant is in the business of money lending. Under the head income from other sources only three items are there i.e. (i) Interest on securities Rs. 1,08,264/-, (ii) Interest on Refund Rs.27,900/-, and (iii) interest from City Beautiful Engineering Company Pvt Ltd Rs.5,71,001/-. Even in the instatnt year i.e FY 2011- 12, Interest from other parties is just a meagre amount of Rs.1/- Lakh that too does not establishes the claim of the appellant. Now the very loan amounting to Rs.75,77,838/- advanced to the City Beautiful in the FY 2010-11 is disputed by the AO. Interestingly, AR of the appellant on the basis such facts has tried to establish his case that appellant is in the business of carrying money lending that too when no interest has been charged in the FY 2010-11, 2011-12, 2012-13 and 2013-14.Just stating in the column in the Computation of total income that appellant is money lender is not sufficient if it is not corroborated with any material evidence or facts. One more interesting fact is that in the City Beautiful Engineering Company Pvt Ltd (CBECPL) the Directors of this company are Mohinder Pal Singh Chawla, AshuDahuja, RanjeevDahuja, Anil Verma and the Directors of Acme Builders Private Limited (ABPL) are Harsh Kohli, JogeshKohli, Sukhwant Singh, Ashveen Singh Oberoi and Mohinder Paul Singh Grewal. ln fact both these companies are group" companies. This is also an undisputed fact that the appellant is earning gross salary from M/s Acme Builders Private Limited at Rs.42,00,000/-. There is one confirmation from the CBECPL dated "NIL" that it has received Rs.75,77,838/- on 31.12.2010 which was interest bearing but happily they had not paid/credited any interest and appellant is not related to directors/shareholders. No evidence of TDS deducted by the CBECPL has been produced. No confirmation from the CBECPL has been produced by the appellant especially when both the companies are group companies. Heavy onus is casted on the appellant to prove his case. In the light of these facts and circumstances, AO has rightly concluded that Rs.75,77,838/- has been provided to the CBECPL free of interest. Appellant is not at all in the business of money lending. Merely cooking up evidence of receipt of meager interest of Rs.5,71,001/- in AY 2015-16 and Rs.1 lakh in AY 2012-13 does not give colour to the advance as interest bearing when there is no evidence of non-cooperation from CBECPL has been filed by the appellant that too when he got the chance to file it as an additional evidence. Interestingly, appellant has not taken any legal recourse to recover the principal 6 amount since 2010. He is happily rejoicing receipt of just a meager amount of Rs.5,71,001/- where as he should have earned at least Rs.37 lacs for four clear years. He can pay interest to the tune of Rs.37,51,920/- in his profit & loss account during the year but will sit in idle not to recover principal amount and interest thereon. This behavior of the appellant is against the human probabilities. This behavior is certainly not of a typical money lender in India. Reliance is placed on Sumati Dayal vs. Commissioner of lncome tax [1995] 80 TAXMAN 89 (SC). In the light of these facts, the attempt of the appellant to build his case by placing reliance on various case laws miserably failed. The Ground of Appeal No.2 is dismissed.” 8. I have heard the rival contentions and purused the material available on record. Firstly, I find that the amount advanced by way of loan of Rs 75,77,838/- by the assessee to M/s City Beautiful Engineering Company Pvt limited was an interest bearing loan as evidenced from the confirmation filed by M/s City Beautiful Engineering Company Pvt limited, the fact that interest amounting to Rs 571,001/- has been paid on 31/03/2015, the fact that the TDS @ 194A has been deducted thereon, the fact that the interest and TDS thereon is reflected in Form 26AS of the assessee for the financial year 2014-15 relevant to assessment year 2015-16 and the fact that there is no other loan transaction with M/s City Beautiful Engineering Company Pvt limited which is on record. 9. Having said that, the question that arises for consideration is where the assessee was following mercantile system of accounting, why it has not accounted for such interest accrual in his profit/loss account and offered the same to tax for the financial year 2011-12 relevant to impugned assessment year 2012-13. The explanation which has been submitted by the assessee is that it is a case of non-cooperative borrower who had defaulted in payment of not only the interest but also the timely repayment of principal, that the debt had turned bad and with lot of efforts, the principal Rs 75,77,838/- and the interest of Rs 571,001/- has been recovered during the financial year 2014-15 relevant to assessment year 2015-16. In this regard, it is noted that the loan was advanced in financial 2010-11 and the year under consideration is financial year 2011-12, 7 therefore, the case of the assessee is that in the second year itself, the loan has become bad. However, there is nothing on record to substantiate said claim and the explanation so offered by the assessee. The explanation in absence of any corroborative evidence/documentation which can provide beyond reasonable doubt that during the financial year 2011-12, the debt has become bad will remain mere an unsubstantiated claim or an assertion on part of the assessee. Infact, if we look at the confirmation so filed by M/s City Beautiful Engineering Company Pvt limited, it states that “It is hereby confirmed that an amount of Rs 75,77,838/- was due to Mr Sukhwant Singh Ahluwalia resident of 205, Sector 36-A, Chandigarh as on 31 March 2012. The said amount was received on 31 December 2010 vide cheque no. 401687. This was an interest bearing borrowing, however, no interest has been paid/credited on the said dues” The said confirmation infact shows not just the existence of the loan transaction entered into by the borrower company with the assessee but also an affirmation by the borrower company that the amount of loan is payable by them to the assessee as on the close of the financial year 2011-12. It nowhere reflects or makes any statement which in any way reflect that the loan transaction has become bad as on 31/03/2012. The fact that the interest has not been paid as so stated therein doesn’t lead to any conclusion that the loan transaction itself has become bad. Therefore, in absence of any other document on record, this confirmation by M/s City Beautiful Engineering Company Pvt limited supports the case of the Revenue more than the assessee. In light of aforesaid, where the assessee was admittedly following mercantile system of accounting and is in the money lending business, he was required to account for such interest accrual in his profit/loss account and offered the same to tax for the financial year 2011-12 relevant to impugned assessment year 2012- 13. 8 10. In terms of rate of interest, there is nothing on record in terms of agreed upon rate of interest between the parties, therefore, being a case of unsecured loan, the matter is set-aside to the file of the AO for the limited purposes of determining the appropriate rate of interest on the unsecured loan as prevailing in the relevant point in time and bringing the same to tax. The assessee is at liberty to provide relevant information/documentation to assist the AO in determining the appropriate rate of interest. 11. In the result, the ground of appeal is disposed off in light of aforesaid directions. 12. Ground no. 3 relates to treating the gain from sale of capital asset as income from other sources. In this regard, the ld AR submitted that the assessee entered into an agreement to purchase a property in 2005 and paid consideration of Rs. 14 Lacs. The seller could not transfer this property to the assessee and after persistent and consistent meetings, the seller refunded back Rs. 28 Lacs to the assessee in 2012 (in the year in question) on cancellation of the original agreement. In his ITR, the assessee treated the above transaction of entering into an agreement in 2005 for purchase of a property as amounting to a capital asset in the nature of right to own a capital asset and therefore, considered the payment of Rs. 14 Lacs at that time as cost of acquisition of that capital asset. The amount of Rs. 28 Lacs realised in 2012 at the time of cancellation of the agreement was considered by the assessee as the sale consideration of that capital asset. On this transaction, assessee applied the provisions of Section 45 for computing the capital gains and thereafter for computing the indexed cost of acquisition, the statutory and automatic benefit of indexation u/s 48 was claimed. With this exercise, the COA of Rs. 14 Lacs became indexed cost of Rs. 22,11,268/- and after reducing this from sale consideration of Rs. 28 Lacs, the resultant LTCG of Rs. 5,88,732/-was declared by the assessee in his ITR. 9 13. It was submitted that the AO accepted the sale consideration of Rs. 28 Lacs and also accepted the purchase value of Rs. 14 Lacs but assessed the differential of Rs. 14 Lacs straight-away as income from other sources. For this, he held that when the title of seller was in itself defective due to which the assessee could not purchase the property in 7 years, therefore, assessee did not acquire any right to capital asset and hence, the differential is to be assessed as income from other sources. 14. It was submitted that the ld CIT(A) upheld the action of the Ld. AO and also added that when the original agreement as well as its cancellation is unregistered, the same is invalid and therefore, they are sham documents and hence, the Ld. AO rightly assessed the differential as income from other sources. 15. It was submitted that the above addition made by AO and confirmed by ld. CIT(A) deserves to be reversed due to following counts. It was submitted that the assessee entered into agreement to purchase the property. By entering into this agreement and by paying the token money of Rs. 14 Lacs, the assessee did acquire right to own an asset. This right to own an asset, which too is transferrable, is a capital asset u/s 2(14). Further, the defect in the title of the seller at the time of entering into the sale agreement cannot have any impact on the right acquired by the assessee since the seller would have cleared such defect subsequently but before the due date of execution of the sale deed. Further, the assessee was not even aware of this defect at the time of entering into the agreement and therefore, he bonafidely acquired the right. The subsequent discovery or coming to the knowledge of the assessee about defect in the title of seller can not dilute the already acquired right and in-fact, assessee kept on insisting the seller to clear his defect in the title. It was not a case where the seller did not have any title at all. It was a case of defect in title which was discovered much later to the execution of the agreement and even that defect was curable but without curing such defect, the sale deed could 10 not have been executed in favour of the assessee. Therefore, assessee did acquire right to own an asset by entering into the purchase agreement and by paying the advance of Rs. 14 Lacs in 2005. For this proposition, reliance was placed on the following decisions namely, Sanjeev Lai etc. vs CIT 365 ITR 389 (SC), J.K. Kashyap vs ACIT 76 CCH 375 (Del HC), CIT vs Vijay Flexible Containers 186 ITR 693 (Bom HC) and K.R. Srinath vs ACIT 20 CCH 289 (Chen Trib) 16. It was further submitted that the contention of the CIT(A) that since the agreement of 2005 and its cancellation in 2012 are both unregistered, they are invalid, it is most respectfully submitted that this contention is not correct appreciation of law. For this proposition, reliance was placed on the decision in case of Ram Kishan and Anr vs Bijender Mann Alias Vijender Mann RSA No. 4946 of 2011 (P&H HC) wherein it was held that “a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement; the proviso to Section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract." 17. Per contra, the Ld. DR has relied on the findings of the lower authorites and our reference was drawn to the findings of the Ld. CIT(A) which are contained at para 6.2 which read as under: “6.2 I have perused the order of the Assessing Officer and examined the reply of the assesse. The appellant has shown 'Long Term Capital Gain' of Rs.5,88,732/- on account of relinquishment of right to acquire a property and receipt of Rs.28/- Lacs against Rs.14/-Lacs paid by him as Biana for a property at Kharar as per Agreement to Sell dated 11.07.2005. AO has treated this agreement as "Sham Agreement" as appellant has himself accepted vide reply dated 10.10.2014 that "the seller was unable to transfer the property in the name of the assessee due to 11 some defect in the title." AO concluded that it was never possible for the appellant to transfer the property in his name and he could not sell the property to anybody else as claimed by him hence he has never acquired any right in the property by virtue of the 'Agreement to Sell' entered into. The contention of the assessee that he could sell his property to somebody else has also not found favour with the AO because the property was never transferred in his name. AO also did not buy appellant's contention that he could even get the sale effected through court of law as he has himself pointed out that there was some defect in the title of the property. AO also distinguished the case laws relied upon by the appellant i.e.'Simka Hotels and Resorts vs. DCIT where the property in question was allotted in the name of petitioner whereas in the case of assessee, the property in question was never transferred in the name of the assessee. He also distinguished the facts in the case of 'J.K. Kashyap vs. ACIT (2008) 302 ITR 255 as the assessee has never acquired any right in the property, so question of relinquishing his rights in the property does not arise. Therefore, he treated the excess receipt of Rs. 14,00,000/- (Rs. 28 lacs-Rs.14 lacs) as 'Income from Other Sources'. I find strength in the findings of the Assessing Officer. On perusal of "Agreement to Sell" dated 11.07.2005, it is found that this agreement is an unregistered document which must have been registered as per Registration Act for a Land, price of which was fixed at Rs.4,50,00,000/-. Various terms and conditions for payment were laid down. At page 2 para 2 of the agreement, it is categorically mentioned that "..that the said property is free from all sorts of encumbrances i.e. sale...they are competent to sell this land." When at the outset, it was clear that the land was free from any encumbrances, then it is make belief story that "the seller was unable to transfer the property in the name of the assessee due to some defect in the title." After a span of about seven years suddenly a "Compromise Agreement" was signed on 12.02.2012. This agreement is too not registered document as per law. AO's non submission of any comment in the remand report does not change the colour of these agreements and can not be treated as acceptance. Appellant has never taken any legal recourse against the seller to enforce the said agreement to sell, also strengthens the AO's findings. When, the very agreement is treated as a Sham Agreement, all the case laws relied by the appellant do not help him. AO's action is confirmed. The Ground of Appeal is dismissed 18. I have heard the rival contentions and purused the material available on record and in particular, the agreement to sell dated 11/007/2005 for sale of 6 acres of land situated at Kharar and compromise agreement dated 12/02/2012 between the assessee and Rev Joseph William, power of attorney holder on behalf of United Church of North India. As per the contents of the compromise agreement, in view of the fact that the seller is unable to get the sale deed of said land executed in favour of the assessee, both the parties have decided to settle their dispute without recourse to litigation and for that purposes, have 12 decided to abandon their respective claims under the agreement to sell and in particular, the assessee shall forgo his right to get the land registered in his name and for the purposes, shall be entitled to a payment of Rs 28 lacs and consequently, the original agreement to sell dated 11/07/2005 shall become null and void and none of the parties will be entitled to any further claim thereunder. I therefore agree that the amount so received by the assessee is towards relinquishment of his rights to get the property registered in his name acquired originally in terms of the agreement to sell and the same will qualify as property of any kind and thus, a capital asset. Where such an asset is transferred by way of relinquishment, the compensation for such relinquishment so received is chargeable to tax under the head “Capital gains” and the amount initially paid shall be treated as cost of acquisition for acquiring such rights. The decisions of the Hon’ble Bombay High Court in case of CIT vs Vijay Flexible Containers (supra) and of the Coordinate Chennai Benches in case of K.R. Srinath vs ACIT (supra) support the case of the assessee. Therefore, the income has been rightly offered to tax under the head “Capital gains” and the same cannot be brought to tax under the head “Income from other sources”. Thus, the ground of appeal is allowed. In the result, the appeal of the assessee is partly allowed for statistical purposes. (Order pronounced in the open Court on 04/08/2023 ) Sd/- व म संह यादव (VIKRAM SINGH YADAV) लेखा सद%य / ACCOUNTANT MEMBER AG Date: 04/08/2023 13 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File
Other Referred Cases
Abhishek Industries vs. CIT, CIT vs. Ferozepur Finance Pvt Ltd, CIT vs. Eicher Ltd, CIT vs. Excel Industries Ltd, Bechtel International Inc vs. DDIT, Bright Enterprises Pvt Ltd vs. CIT, Gurdas Garg vs. CIT(A) & Anr, Torque Pharmaceuticals Pvt Ltd vs. Addl. CIT, Sumati Dayal vs. Commissioner of Income tax, Sanjeev Lai etc. vs CIT, J.K. Kashyap vs ACIT, CIT vs Vijay Flexible Containers, K.R. Srinath vs ACIT, Ram Kishan and Anr vs Bijender Mann Alias Vijender Mann
Laws Referred To
Income Tax Act, 1961
1:1 Consultation on Salary Structuring
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1:1 Consultation on Legal Requirements
₹1
1:1 Consultation on Tax Litigation
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Startup Valuation Certificate
₹0
Memorandum Amendment Resolution
₹0
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