Indian Sulphacid Industries Limited, New Delhi V. DCIT,Circle, Kurukshetra

ITA 296/CHANDI/2020

AI Insights

The case involves Indian Sulphacid Industries Limited, which appealed against the order of the CIT(A), Karnal, which upheld the Assessing Officer's decision treating a settlement amount of Rs. 1,95,33,960 as a revenue receipt taxable under 'Income from Other Sources'. The assessee argued that this amount was a non-taxable capital receipt, received as part of a settlement where they relinquished their rights in a property. The Tribunal is set to decide on the legal characterization of this receipt and its tax implications.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 127881 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-02-2023
• Assessment Year: misc
• Appeal Filed On: 06-07-2020
• Other Referred Cases: National Thermal Power Co Ltd Vs. CIT, Wipro Finance Ltd Vs. CIT, Avery Cycle Industries Ltd Vs. CIT, Chitturi Subbanna Vs. Kudapa Subbanna & Others, CIT Vs. Hazarimal Nagji & Co., Seth Banarsi Das Gupta vs. CIT, CIT Vs. Best & Co. Pvt. Ltd., Gillanders Arbuthnot & Company Ltd., CIT vs. J. Dalma, CIT Vs. Pruthvi Brokers & Shareholders (P) Ltd, CIT Vs. Bhopal Sugar Industries Ltd., Steel Ingots (P) Ltd, CIT Vs. Sam Global Securities Ltd., CIT Vs. Steel Cast Corporation, State of Tamil Nadu Vs. Arulmurugan & Co., Armco Cements Ltd Vs. DCIT, CIT Vs. Nellaiappan, All Cargo Global Logistics Ltd Vs. DCIT, Bector Food Specialties Ltd Vs. JCIT, Hukumchand Mills Ltd Vs. CIT, VMT Spinning Co Ltd. Vs. CIT, CIT Vs. Cellulose Products of India Ltd.
• Laws Referred To: Income Tax Act, ITAT Rules, 1963, Transfer of Property Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Capital receipt; Capital Gains
• Section: 13

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ,च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, “A”, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकरअपीलसं./ITA No.296/CHD/2020 नधा रण वष / Assessment Year :2 0 1 6 - 1 7 Indian Sulphacid Industries Limited, 110, Daryaganj, Ground Floor, Near Gurudwara, New Delhi 110002 बनाम The DCIT, Circle Kurukshetra थायीलेखासं./PAN NO: AAACI3718E अपीलाथ /Appellant यथ /Respondent नधा रतीक ओरसे/Assessee by : Sh.Pariskhit Aggarwal, CA and Sh. Sunny Jain, CA राज वक ओरसे/ Revenue by : Sh. Vivek Nangia, CIT DR स ु नवाईक तार%ख/Date of Hearing : 02.11.2022 उदघोषणाक तार%ख/Date of Pronouncement : 15.12.2022 अंत रम आदेश/ Interim Order Per Vikram Singh Yadav, Accountant Member: This is an ap pea l filed by the assessee against the ord er of Ld. CI T(A), Karnal dated 28.05. 20 20 wher ein the assessee ha s tak en the fo llowing grounds of appeal: 1. “That on law, facts & circumstances of the case, the Ld, AO has erred in holding Rs. 1,95,33,960 as revenue receipt taxable under the head Income from other Sources instead of Capital Receipt taking basis of his own pre- conceived notions and disregarding submissions made by the appellant. 2. That on law, facts & circumstances of the case, the Ld. AO has erred in disallowing cost of improvement of Rs.3,98,85,000/- incurred and paid by the appellant from Long Term Capital Gain which disallowance made was without understanding complete facts of the case, based on his own whims and fences, pre-conceived notions and by disregarding submissions made before him. ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 2 Each ground of appeal is independent of the other ground. The appellant craves leave to add, alter, amend or vary the aforesaid grounds of appeal at or before the time of hearing." 2. Duri ng the co ur se of heari ng, the Ld. AR so ug ht permission to r aise following a dditional gro unds of a pp eal und er Rule 11 o f the ITAT Rules, 1963: “1. That on law, facts and circumstances of the case, the Worthy CIT(A) has grossly erred in upholding the action of the Ld. AO wherein he had held that the consideration (settlement amount) of Rs. 1,95,33,960/- is a taxable receipt even when it was a non taxable capital receipt” 2. That on law, facts and circumstances of the case, the declaration of consideration (settlement amount) of Rs. 1,95,33,960/- as a taxable LTCG by the appellant suo-moto in the ITR even when it was a capital receipt could not have been brought to tax by the Ld. AO and confirmed by Worthy CIT(A) and the same deserved to be held as non-taxable capital receipt." 3. In thi s r egard, it was submitted by the ld AR tha t the assessee had let out its pro p erty to vario us tenants. The assessee ha s si nce settled the litigation with its tena nts. The matter was earl ier ongoi ng before the Ho n'ble Delhi High Co urt in some ca ses a nd befor e the Ho n'ble trial cour t in some other ca ses of the sam e tena nt gro up. As part of the settl ement, the assessee r ecei ved cer tain amo unt from the ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 3 tena nts a nd the asses see r el eas ed all his rights in the property/ litigation. 4. It was s ubmitted that the q uestio n invol ved in the present appeal is abo ut the taxatio n of the settlement amount received by the a ssessee from its tenants a nd in this regard, it wa s submitted tha t: a. In the ITR fil ed by the a ssessee, b efore the Ld. Assessing offic er duri ng as sessment pro ceedi ngs a nd befor e the ld. CIT(A) d uring appellate pro ceeding s, the assessee co ntend ed that the proceeds received are in respect of rights relinq uished in the pro perty a nd hence it is amo unting to LTCG. b. Duri ng assessment, the AO held it to b e extr a amount extrac ted from the te nant and hence it was held that thi s is income fr om other so ur ces. In appeal, the ld. CIT app eal al so up held the a ctio n of the AO. c. In appeal before the Tribunal, a s par t of origina l app eal memo, a ssessee challenge d the actio n of the AO in holdi ng this receiptto b e income from other so urces a nd prayed tha t it may be assessed as LTCG. At the same time, the assessee filed a pplication under Rule 11 wherein it pray ed that if the above r eceip t is held as ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 4 ha ving been received to settle the suit, the sa me is not at all taxa ble and d eser ves to be d eclar ed a s capital receipt. d. It is evide nt from abov e bri ef fa cts itself that to decide the abo ve ref err ed additio nal ground, no new facts are req uired to b e gone into by the Tribunal and the issue raised is purely legal in nature. Ther efor e, this additional gro und des erve s to be a dmitted with by the Tribunal. 5. It was submitted that i n r esp ect of an i ssue fo r which all facts are alr eady o n recor d, no new facts are required tobe gone into and the issue rai sed is p urely leg al in na ture, the said issue d eser ves to b e ad mitted a s a ddi tional gro und for the first time befor e the Tri bunal a nd in sup port, relia nce was plac ed on the following decisions: • Natio nal Therm al Power Co Ltd Vs. CIT [1998] 229 ITR 0383 • Wipro Fina nce ltd Vs. CIT [20 22] 32 6 I TR 1 13 ( SC) • Avery Cycl e I ndustri es Ltd Vs. CIT [2007] 292 ITR 493 (P&H) • Chitturi Subba nna Vs. Kudapa Subba nna & Others [19 64] 1965 AI R 1325 (SC) • CIT Vs. Hazarim al Nagji & Co. [1962] 46 ITR 1168 (Bom.) 6. It was further submitted that in resp ect of a n issue for which all facts are on recor d, the a sses see can raise ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 5 alterna te arguments a nd in support, the relianc e was pla ced on following d ecisions: • CIT Vs. Bara t General Reinsurance Co. Ltd [1 971] 81 ITR 303 (Delhi.) • M/s Ar eva T&D India Ltd Vs. CIT, Tax Ca se Appeal No. 673 of 2018(Mad .) • Pap payammai Vs. Palanisamy Sellammal (Died) and Or s. [2005] AIR 2005 Mad 431 (Ma d.) • CIT Vs. Ram Sa nehi Gia n Chand [1972] 86 I TR 724 (P&H) • CIT Vs. Mo ha n Engineeri ng Co. [1985] 1 51 I TR 5 71 (Pat.) 7. It was further sub mitted that in respect of an issue for which all fa cts are o n record, a n assessee can raise new plea which wa s no t r aised before any of the lower a uthorities a nd in suppor t, reliance was pla ced on following d ecisions: • CIT Vs. S.Nellia ppan [196 7] 6 6 ITR 722 (SC) • All Cargo Glob al Logistics Ltd Vs. DCIT [201 2] 16 ITR (Trib.) 380 (ITAT Mum.) • Bector Food Specialties L td Vs. JCIT [2 019] ITA No. 396/Chd/ 2013 ( ITAT Chandigar h) • Huk umchand Mi lls Ltd Vs. CI T [1967] 63 I TR 2 32 (SC) • VMT Spi nning Co Ltd. Vs. CIT [20 16] 389 ITR 326 (P&H) • CIT Vs. Cellulo se Prod ucts of India Ltd.[ 19 84] 1 51 ITR 499 (Guj.) 8. It was further sub mitted that in respect of an issue for which all facts a re on record, a n assesse e ca n make claim of deductio n/ exemption for first time even befor e the Tribunal: • CIT Vs. Pruthvi Brokers & Sharehold er s (P) Ltd [2012] 34 9 ITR 336 (Mum.) • CIT Vs. Bho pal Sugar Ind ustries Ltd. [1998] 233 ITR 42 9 ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 6 • Steel Ingots (P) Ltd [1996] 135 CTR 379 (M.P.) • CIT Vs. Sam Global Sec urities Ltd. [20 13] ITA 214/201 3 (Del.) 9. It was fur ther submi tted that to decide a n issue judi cio usly, i n resp ect of whi ch all facts are o n recor d, i t is duty of the Tri bunal to deal with all angles / ta ngents o n that issue and in suppor t, relia nce wa s place d on following decisio ns: • CIT Vs. Steel Ca st Corporatio n [19 77] 107 ITR 683(Guj.) • State of Tamil Nadue Vs. Arulmuruga n & Co. [2982] 51 STC 381 (Mad.) • Armco Cem ents Ltd Vs. DCIT [20 15] 373 ITR 14 6 (Mad.) 10. In light of aforesaid submi ssions and legal pro positio ns so laid down by the Co ur ts, it was submitted that the additional ground raised by the a ssesse e m ay please be admitted. 11. Per co ntr a, the L d. CI T/DR veheme ntly conte sted raising of a dditional gro und of app eal by the a ssessee a nd submi tted as under:- i) The a ssessee ha s so ug ht to c ha nge the chara cter of receipt which i s not p ermissible. Befor e the AO and first appella te a uthority, the asses see has maintained that he is the o wner of the plot which wa s sold and ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 7 ther efore the receip t was tax able und er the hea d capi tal gai ns. Now with alter na te plea, the assessee ha s claimed tha t such r eceipt is no t taxable a nd it was o nly right to sue w hich wa s surr endered. This in effect amo unts to asse ssee admitti ng that he was not the owner of said plot. The assesse e is esto pped from taki ng two contradictory stand s sim ultaneo usl y. He ca nnot pl ead o wner of plot a nd not owner of plot at same tim e. ii) It is not a claim which as sessee is entitled to as per direct legal provisio ns either b y operation of I ncome Tax Act or by any Apex co ur t decisio n. I t is not a claim whi ch a ssessee ina dvertently o verlooked while filing of Return. The Return of inco me wa s filed by assessee vocif er ously claiming tha t he is the owner of said plots. It is a claim whic h is inco nsistent with the original claim and the assessee needs to drop one of the two diametrically oppo site claims. More over it was never raised before a ny income tax authori ty a nd does not emerge from the Retur n of Incom e. iii) In the case of Wipro Finance r elied upon by L d. AR, no obje ction by the D epar tmental Represe ntative record ed expressly by Ho n'ble I TAT weighed hea vily on the mind a nd influenced the decisio n of Hon'ble ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 8 Apex Co ur t (par a 1 0 of the or der cited supra). In the insta nt ap peal, that is not the ca se. iv) In all these cas es, the additio nal ground repla ced or sub stituted the original ground. I n the instant ca se the ass essee s eeks sim ulta neo us op eratio n of both grounds which are contradictory and inco nsistent, which is neither permi ssible nor possible. v) The asses see's contention that new ground which cha nges the entire chara cter of r eceipt a nd is directly related to ownership rights o f assessee will not req uire ad ditio nal evidence or f acts i s not sup ported or proven by AR with any ta ngible arguments . The authorities need to exami ne the owner ship rights of assessee with entir ely different per specti ve now and assessee cannot remain co nf used with his ow n rights and has to clarify beforehand hi s sta nd in uneq uivo cal terms before the authorities as to whether he is owner of said plots or not before seeking a ny r elief. 12. In view of abov e, it was submitted that the a dditio nal grounds of app eal so sought to be raised by the assessee sho uld not be a dmitte d. 13. In rejoinder, the ld AR submitted as under: ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 9 i) The Revenue is contending that the a ssesse e is seeking to cha nge the char acter of receip t which in their opinion is not p ermis sible. In this rega rd, first of all, the assessee ha s never so ug ht to cha nge the char acter of receipt. The assessee has declar ed the rel evant receipt a s taxable under the head capital gains. It is the Ld. AO as well as the ld CIT(A) who held it to be receiv ed for surrender of right to sue. I n co unter to that contention of the Departm ent, a s an officer of the Co urt, to as sist the Ho n'ble Bench, we have bee n co ntendi ng that if the rel eva nt r eceipt is held a s havi ng be en recei ved for surrender of right to s ue, the same ca nnot automa tically b e tax ed as i ncome from other so urces and would rather be a capital receip t not taxable. At the same tim e, fo r dispensatio n of justic e, it i s necessary to a rrive a t the right taxatio n a nd no t wha t the asse ssee has offer ed it in the ITR. Thi s principl e ha s been enshrined in Ar ticle 265 of our Co nstitutio n whi ch lays d own that 'no tax can be levied witho ut a uthority of law'. Therefore, if the relevant transa ctio n is pro ceed s of sale of pro perty or is r ecei ved of surrend er of right to sue, it is a necessary to decide the rig ht taxa tion ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 10 for this transaction. It i s o nly in this per spective that we ha ve been arg uing thi s ground. Fur ther, the rig ht to make an alter na te pray er is an inher ent rig ht of the a ppella nt i n a pp eal b efor e the Tribunal. The co ntention of the Revenue that we have admitted that we were not the owner of the said plot is to tally and str ongly denied. We are not taki ng contra dictory stand s b ut arc o nly laying the correc t facts b efore the Trib unal and to pro vi de assistance to arrive at the rig ht tax atio n on the transa ction in q uestion. ii. As regards the contentio n that we need to drop one of the two diametri cally oppo site claims, we again reiterate that we are o nly making alternate pra yer befor e this Tri bunal and are o nl y laying the corr ect facts b efore the Trib unal o n the issue in q uestion. We hav e already filed copies of number of judgm ents from vario us Courts of the country which ha ve lai d down that a claim no t mad e bef ore the lower a uthor ities can be made for the first ti me befor e the Tri bunal. ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 11 iii) The contention of the Revenue that the de cision of the Ho n'ble Supreme Co urt in Wi pro Finance ca nnot be r elied upon si nce in that case no objectio n given by the DR wa s expr essly r ecord ed by the Tribunal and it weig hed hea vily on the mi nd and i nfluence d the decisio n of Hon'ble Apex co urt, it is most resp ectfully submitted that o n a rea ding of this decisio n, tho ug h this fact has been r ecord ed in the or der but the decision is not at all based on thi s fa ct b ut is rather ba sed o n principles alr ea dy laid down in num ber of earlier decisio ns holding that a claim mad e for the 1st time before the Tribunal can be entertained. iv) The raising of additional gro und do es no t bar the making of alternate claim and hence this co ntentio n of the Revenue d eser ves to be rejected. v) For decidi ng the is sue as to whether the transa ction i n questio n is re alisatio n of sale of property or r ecei pt of amo unt for surr ender of rig ht to sue, in the pr esent case, no new facts are req uired to b e g one into. It is o n the ba sis of same set of facts and docume nts al ready o n re cord of both the lower authorities tha t this que stio n ca n ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 12 be d ecid ed. H ence, thi s co ntention of the Revenue also deserves to be r ejected. In view of abov e, it was submitted that the a dditional ground deserves to b e admitte d. 14. We ha ve heard the ri val contentio ns and p ur used the material availab le on record. It is noticed tha t duri ng the co urse of assessment proceed ings, the Assessing offic er noti ced that the a ssess ee has r ecei ved an amo unt of Rs 1,95,3 3, 96 0/- from mem ber s of the Bhandari Family in co nne ctio n with transfer of immovable proper ty a nd after perusal of the r eturn of inco me where the said sum has b een shown under the head “long ter m capital gai ns”, settlement agreement and o ther do cuments furnished by the assessee, a show ca use wa s issued by the As sessing officer as to why the said receip ts s ho uld not b e treated as revenue re ceipts. Thereafter, after taking into co nsideration the submissions of the a ssesse e and at the same time, not agre eing with the same that the said sum wa s received from the Bha ndari family in co nnec tion with plots sold earlier and was a capital receipt liable to be tax ed under the head “long term capital gains”, the AO held the r eceipt as revenue receip t a nd bro ught the sa me to tax under the head “Inco me from other So ur ces”. ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 13 15. On a ppeal, the ld CIT(A) has r ecor ded his finding s in para 3.2 of the i mp ugned ord er as under: 3.2 Findings The facts related to this ground reveal that the assessee has received 3 compensation of Rs, 1,95,33,960/- during the year from various parties termed as Bhandari Group. The assessee submitted that it had transferred some of its properties under long term lease with unconditional rights way back in 1985, and possession was delivered to them. Then, in 2008, the assessee filed suits against the lessees and against these suits, an out of court settlement deed was prepared with these plot owners and the assessee received a compensation of- Rs. 1,95,33,960/- which was claimed as Capita! Gain in its return. However, the Assessing Officer (A.O.) treated this amount as revenue profit in his assessment order. An examination of the assessee's submissions reveals that it has not submitted any detail regarding the position of capita! gains on property transferred in 1985, nor has the position of the land in the books of the assessee been given. Admittedly, no cost has been claimed against the amount so received and, therefore, no cost pertaining to the asset has been carried by it in its books. The assessee cfasmed that since tne amount so received from the 'Bhandari Group' was in lieu of surrender of its right to file suit which was qua the property it had previously transferred under long cerm lease dead, it is taxable as capital gains and submitted various case laws on the same. This argument is not accepted, as there has been no transfer of capital asset since the right to sue is not a transferable right. Thus the amount received is under a compromise or amicable settlement, which is in the nature of profit and should to be assessed as revenue receipts only and not capital received. This view is bolstered by the decision of the Apex Court in the case of Seth Banarsi Das Gupta vs. CIT (1987) 166 ITR 783 and in the case of CIT Vs. Best & Co. Pvt. Ltd. 60 ITR 11 (SC), wherein it was held that where compensation is received for loss of an enduring asset, it would be a capita! receipt but where it is received in the ordinary course of business, it shall be a revenue receipt. It was also held that no injury had been caused to the capital structure of the assessee and, therefore, the receipt was revenue in nature. The question here is whether the receipt is on capital account or revenue account. In the case of Gillanders Arbuthnot & Company Ltd. (1964) 53 ITR 283 (SC), the facts were that Gillanders Arbuthnot & Company was the sole selling agent and distributor in India of explosives manufactured by Imperial Chemical Industries (Export Ltd.), the latter being the principal company. The agency agreement was terminable at the option of the principal company. In May, 1945, the principal company wanted to set up its own organisation for distribution of its products and intimated the assessee about its intention to cancel the agreement after two or three years. Thereafter, a date was fixed for termination, i.e., 01.04.1948. The principal company wanted to compensate the said agent company. Consequently, three different amounts were paid to the said company in the years ending on 31.03.1949, 31.03.1950 and 31.03.1951. These amounts were included in the profit and loss account as commission received. But, during the course of assessment proceedings, it was claimed that the amounts were in the nature of compensation received on termination of the agency and, therefore, not includaole in the total income, being receipts of capita! nature. It was ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 14 claimed that the said agent company had employed expert officers who were accustomed to handle explosives and cancellation of the agency seriously affected the organisation. The assessee was undoubtedly dealing in several inflammable substances such as petroleum, kerosene oil etc. It was found that 80% of the staff attached to the magazine section was maintained at the expense of the principal company; out of which the services of five officers were taken over by the principal company and six were retained by the agency company. There is no doubt that one of the agencies was lost and there was temporary dislocation in the organisation of the business. However, there was nothing on record to show that the agency could not repair tre dislocation. Therefore, the Hon'ble Apex Court concurred with the High Court in its finding that the termination of the agency did not affect profit making structure of the appellant company nor did it involve loss of a trading asset of enduring nature. In the case of CIT vs. Best & Co. Pvt. Ltd. (supra), the aforesaid case was followed and it was held that compensation received towards loss of agency was 3 revenue receipt as the loss of agency was a normal trading loss. In the case of CIT Vs. J. Dalma (1984) 149 ITR 215, a property was under construction of which M/s Satish Kumar Sood & Sons were the owners. They entered into an agreement to sell the property to Sh Krishan Prashad on 29.11.1966 for a consideration of Rs. 4,95,000/-. A sum of Rs. 20,000/- was received in cash as earnest money. The construction was completed in accordance with certain specifications which were annexed to the agreement to sell. Sh. Krishan Prashad could get the property conveyed in his name or in the name(s) of his. nominee(s). The purchaser was entitled to specific performance of the contract through a court of law at the cost of the seller who would also be liable to pay damages in accordance with the prevalent market price. On 26.12.1966, Sh. Krishan Prashad nominated J. Dalmia for purchase of the property, The balance purchase consideration was now to be paid by J. Dalmia to Sh. Krishan Prashad. On 18.04.1967, J. Dalmia sent a notice to the seller regarding obtaining of completion certificate so that the sale deed could be executed in terms of the agreement. When no reply was received, he filed a suit for injunction against the seller to restrain him from selling, alienating or transferring the property in any other manner. Sh. Krishan Prashad was also impleaded as a defendant. In the suit, j. Dalmia agreed to give up his claim of specific performance which relieved the seller from the obligation of not alienating the property. The matter was referred to the arbitrator who awarded a sum of Rs. 1,02,500/- as damages or compensation payable for breach of contract. In the return of income, 1. Dalmia claimed that the amount received by him was a windfall or a casual gain and that it was not a capital gain since there was neither any capita! asset nor relinquishment of right in any asset. The Hon'ble Court referred to Section 5 of the Transfer of Property Act and mentioned that a mere right to sue may or may not be property but it cannot be transferred. No cost could also be attributed to the right. Hence, the sum of Rs. 1,02,500/- received by him was not assessable as capital gains. Therefore, the question was answered in favour of the assessee. In the case of Seth Banarsi Das Gupta(supra), the relevant facts were that the assessee and five brothers were partners in a firm, each having 1/6 th share. Two brothers leased out their shares to the assessee on the basis of an annual payment but the lease was cancelled. These two brothers undertook to pay certain amounts for five years to the assessee. It was mentioned that the amounts were received under a compromise or by way of amicable arrangement. Therefore the receipts were in the nature of profits received by the assessee for the interest held in the business The relevant portion of the judgment reads as under: ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 15 "We have heard learned counsel for the assessee-appellant at length. He has referred to several authorities in support of the assessee's stand of admissibility of the claim' on both scores. According to him, the proper test to be adopted should have been to find out whether the arrangement constituted an apparatus to earn profit; whether the arrangement was one in course of business activity, and whether what was received constituted a part of the circulating capital or was a part of the fixed asset. We have considered the submissions of the learned counsel for the appellant but are not in a position to accept the same. There is hardly any scope to doubt that the benefit of Section 10(2)(vi) of the Act would be admissible only where the assessee is the owner of tne property. It, too, is not admissible in respect of a fractional claim. Similarly, we are of the view, in agreement with the High Court, that the amounts which the assessee received under the compromise or by amicable arrangement was in the nature of profits to be received by the assessee for the interest held in the business and, therefore, constituted taxable income. No other point WHS canvassed before us. This appeal has to fail and is hereby dismissed," The assessee has not shown any ownership of the property qua which the capital gain has been claimed nor is it carrying the same in its balance sheet:; rather the agreement made was m respect of its right to sue which cannot be treated as capital receipts. Therefore, the A.O. has rightly assessed the compensation of Rs. 1,95,33,960/- as revenue profits. This ground of appeal is dismissed.” 16. The l d CIT(A) has accordingly held that the settlement agreement was i n res pect of right to sue a nd the amount so recei ved und er the said agreem ent cannot be tre ated as capi tal recei pts and the AO has rightly assessed the comp ensation a s revenue receipts. 17. In the original ground of appeal befor e us (ground no. 1 of asses see’s appeal), the as sessee has chall enged the a ction of the AO in holding the aforesaid receipts as revenue receipts instea d of capital rec eipts a nd i n the additio nal ground of appea l no.1 so so ug ht to be rai sed, the as sessee ha s c hall eng ed the actio n of the ld CIT(A) in upholding the findings of the AO wher e he ha s held the receipts to be ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 16 taxable re ceipt a s against no n-ta xable capital receipt. I n the additional gro und no. 2 so soug ht to be ra ised by the assessee, it ha s been stated that even w here the assessee ha s shown the co nsi dera tio n as taxable L TCG in the return of income, it c ouldn’t be bro ught to tax by the AO a nd co nfirmed by the ld CIT(A). 18. We therefor e fi nd tha t the dispute is r egard ing the characteriza tion of re ceip ts under the settlement agre ement and whe ther the recei pts under the settlem ent a greement are revenue or capital in natur e. W here it is held to be ca pital in na ture, whether the same wo ul d be lia ble to be taxed und er the head “Capital gains” especi ally guid ed by the fact that the a ssess ee ha s suo-moto offer ed the same in the retur n of inco me und er the head “long term capital gains” or it would be i n natur e of no n-taxa ble ca pital receipt. 19. As far a s characteriza tion of r ecei pts is co nsid ered a nd whether the amount r eceived i s in respect of re linquishment of rights i n the property sold or in res pect of surrender of right to sue and w hether the same qualifies as r evenue or capi tal in natur e, the authori ties below ha ve already given their resp ecti ve findings b ased o n material on record a nd no new facts are required to b e examined or bro ug ht o n record and the a ssessee has alrea dy challe ng ed the said finding s ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 17 befor e us and in the a dditi onal gro und of appeal, the assessee ha s challeng ed the fi nding s of the ld CI T(A) where the amo unt in res pect of surre nder of rig ht to sue ha s been held to be revenue receip t by the ld CIT(A) a s against no n- taxable ca pital receipts as so co ntended by the asses see. The said gro und of app eal a s to whether amo unt in respe ct of surrender of rig ht to sue is r evenue or non-tax able capital receipt has to be decided ta king i nto co nsidera tion the relevant facts al ready on r ecor d and after apply ing the l egal proposition as l aid down by the vario us a uthorities including the o ne r elied upon by the ld CIT(A) a nd therefor e, the assessee ca nnot be precl ude d from raising the same before us where the sa me is clearly emerging from the finding s of the ld CIT(A). 20. Further, the fa ct tha t the assessee ha s suo-mo to offered the r eceipts in the return of income under the head “Lo ng term capital gains” is an undi sputed fac t a nd o nly issue that remains to be examined i s whether the said act o n par t of the as sessee ca n be held against the a ssesse e i n deciding the ultimate taxa bility of the receip t in its hands. We find that the sam e is purely a l egal q uestion and the a ssessee has all the rig hts under the law to raised it by way o f additional ITA No. 296-Chd-2020 - Indian Sulphacid Industries Limited, New Delhi 18 ground of a pp eal befor e the Trib unal a s wha t ca n b e bro ug ht to tax i s the real income i n its hands a nd not o therwise. 21. I n light of aforesaid discus sion and following the dicta laid down by the Hon’ble Supr eme Co urt in ca se of NTP C vs CIT (Supra), the additional grounds of appeal taken by the assessee ar e hereby admitted for adjudic atio n a nd to be heard alo ng with other grounds of app eal on 10/ 01 /202 3. Ordered accordi ngly. Order pro no unced o n 15/12/20 22. Sd/- Sd/- (DIVA SINGH) (VIKRAM SINGH YADAV) Judicial Member Accountant Member Dated : 15.12.2022 “आर.के .” आदेशक त,ल-पअ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकरआय ु /त/ CIT 4. आयकरआय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न2ध, आयकरअपील%यआ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायकपंजीकार/ Assistant Registrar