CHHEDA HOUSING DEVELOPMENT CORPORATION, MUMBAI V. ADDL CIT 32(1), MUMBAI

ITA 86/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5332 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 05-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Wrong claim; Capital receipt
• Section: 2(14)

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 86/MUM/2017 (ASSESSMENT YEAR 2012-13 ) M/S CHHEDA HOUSING DEVELOPMENT CORPORATION 109-111, GOYAL SHOPPING CENTRE, OPP. RAILWAY STATION, BORIVALI (W), MUMBAI-400092 . PAN: AAEFC1484E VS. ADDL. CIT-32(1) 2 ND FLOOR, C-11, PRATYAKSHKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA EAST, MUMBAI-400051. APPELLANT RESPONDE NT APPELLANT BY : DR. K. SHIVARAM WITH SHRI RAHUL K. HAKKANI (AR) RESPONDENT BY : SHRI H.N. SINGH CIT DR WITH SHRI RAJEEV GUBGOTRA (SR.DR) DATE OF HEARING : 05.04.2019 DATE OF PRONOUNCEMEN T : 29.05.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-44 [HEREINAFTER REFERRED AS LD CIT (A)], MUMBAI DATED 29.03.2016 FOR ASSESSMENT YEAR 2012-13. THE A SSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE COMPENSA TION OF RS. 20,00,00,000 RECEIVED BY THE APPELLANT FIRM, AS A C APITAL ASSET AND LEVYING LONG TERM CAPITAL GAINS OF RS. 15,76,13,391. THE LD . CIT(A) HAD ERRONEOUSLY CONFIRMED THE FINDINGS OF THE LD.AO AND JUMBLED UP THE CHRONOLOGY OF EVENTS PRESENTED BY THE APPELLANT FIR M AND COMPLETELY DISREGARDED THAT ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 2 (A.) THE SAID COMPENSATION WAS RECEIVED BY THE APPE LLANT FIRM FOR CRIMINAL BREACH OF CONTRACT; AND (B.) DUE TO THE FRAUDULENT DEVELOPMENT AGREEMENT, T HE APPELLANT FIRM NEVER RECEIVED ANY RIGHT TO CLAIM SPECIFIC PERFORMANCE AN D CONSEQUENTLY THERE WAS NO TRANSFER OF CAPITAL ASSET AS ENVISAGED IN SECTIO N 2(14) OF THE INCOME-TAX ACT, 1961. 2. THE LD. CIT(A) HAD CONFIRMED THE VIEW OF LD.AO THAT THE APPELLANT FIRM EVEN AFTER PAYING AN ADVANCE TAX OF RS. 3 CRORES, H AD SHOWN NIL INCOME AS A PRETENSE FOR MAKING FALSE CLAIMS FOR THE PURPOSE OF EVADING TAX. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF FINANCING, CONSTRUCTI ON AND DEVELOPMENT. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR 2012-13 ON 31.07.2012 DECLARING NIL INCOME AND CLAIMED THE REF UND OF TAX RS. 3 CRORE ALREADY PAID IN ADVANCE. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDING, THE ASS ESSING OFFICER NOTED THAT ASSESSEE HAS RECEIVED RS. 20 CRORE AS COMPENSA TION, WHICH IS INCLUSIVE OF ADVANCE OF RS.2.50 CRORE PAID BY ASSES SEE. THE ASSESSEE CLAIMED THE RECEIPT OF RS. 20 CRORE AS CAPITAL RECE IPT NOT CHARGEABLE TO TAX. THE ASSESSEE RECEIVED THE SAID COMPENSATION UN DER AGREEMENT FOR RELINQUISHING HIS RIGHT TO SUE IN A DEVELOPMENT AGR EEMENT DATED 20.04.2004. THE ASSESSING OFFICER TREATED THE RECEI PT OF RS. 20 CRORE AS INCOME AND TAXED THE SAME AS LONG TERM CAPITAL GAIN (LTCG). ON APPEAL BEFORE THE LD. CIT (A), THE ACTION OF ASSESS ING OFFICER WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT (A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 3 3. WE HAVE HEARD THE SUBMISSION OF BOTH THE PARTIES AN D HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO DELIB ERATED ON VARIOUS CASE LAW RELIED BY LOWER AUTHORITIES AS WELL AS BY REPRE SENTATIVE OF THE PARTIES. THOUGH, THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, HOWEVER, IN OUR CONSIDERED VIEW, THE CORE ISSUE INVOLVED IN THI S CASE WHETHER THE RECEIPT OF COMPENSATION IS A CAPITAL RECEIPT WITHI N THE MEANING OF SECTION 2(47) OF THE ACT OR CAPITAL GAIN AND LIAB LE TO TAX AS LONG TERM CAPITAL GAIN (LTCG). THE LD. AUTHORIZED REPRESENTA TIVE (AR) OF THE ASSESSEE SUBMITS THAT ASSESSEE IS A PARTNERSHIP FIR M ENGAGED IN THE BUSINESS OF FINANCING, CONSTRUCTION AND DEVELOPMENT . DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CO NSIDERATION, THE ASSESSEE-FIRM WAS IN RECEIPT OF RS. 20 CRORE BY WAY OF COMPENSATION IN LIEU OF SURRENDER OF RIGHT SUE. BASED ON THE RECEIP T OF COMPENSATION, THE ASSESSEE DEPOSITED A SUM OF RS. 3 CRORE AS ADVANCE TAX UNDER THE BELIEF THAT THE SAID RECEIPT MAY BE TAXABLE. HOWEVER, WHIL E FILING THE RETURN OF INCOME, THE ASSESSEE WAS ADVISED THAT SAID RECEIPT IS NOT TAXABLE; CONSEQUENTLY, THE ASSESSEE FILED ITS RETURN DECLARI NG NIL INCOME AND CLAIMED REFUND OF ADVANCE TAX PAID ALREADY PAID. 4. THE LD. AR OF THE ASSESSEE SUBMITS THAT THERE ARE C ERTAIN IMPORTANT FACTS AND EVENTS WHICH ARE NECESSARY FOR APPRECIATION OF FACTS AS TO HOW THE ASSESSEE RECEIVED A COMPENSATION OF RS. 20 CRORE. T HE ASSESSEE ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU) ON 20.04.2 005 WITH ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 4 MOHAMMED HUSAIN MERCHANT FOR DEVELOPING SALEABLE RI GHT OF FLOOR SURFACE INDEX (FSI) OF 8,00,000/- SQ. FT. ON A PLOT OF LAND SITUATED IN VILLAGE-BOISER, KANDIVALI (E), TALUKA-BORIVALI IN S UB-DISTRICT OF BANDRA. ON EXECUTION OF MOU THE ASSESSEE PAID ADVANCE OF RS . 3.00 CRORE TO THE OWNER OF THE SAID LAND. THE OWNER OF THE LAND CLAIM ED THAT THE LAND IS FREE FROM ENCUMBRANCES AND HAVING MARKETABLE TITLE AND HAVE SHOWN CERTIFICATE DATED 16.03.2004 THAT THE LAND IS FREE FROM ALL ENCUMBRANCES. IN THE MOU IT WAS AGREED THAT THE PARTIES SHALL EXE CUTE JOINT DEVELOPMENT AGREEMENT. FURTHER A SUPPLEMENTARY AGRE EMENT WAS EXECUTED ON 24.03.2005 BY ASSESSEE AND WHEREIN BESI DES THE EARLIER CONDITIONS, IT WAS AGREED THAT THE ASSESSEE WOULD P AY ADDITIONAL AS SUM OF RS. 3.35 CRORE TO THE LANDOWNER ON ACCOUNT OF CO NSIDERATION OF DEVELOPMENT RIGHT OF 2,00,000 SQ FT FSI. AS PER THE CONDITIONS OF THE MOU AND SUPPLEMENTARY AGREEMENT THE OWNER OF THE LA ND WAS REQUIRED TO OBTAINED COMMENCEMENT CERTIFICATE FROM LOCAL AUT HORITIES, HOWEVER, THE SAME WAS NOT PROVIDED TO THE ASSESSEE. LATER ON THE ASSESSEE CAME TO KNOW THAT THE OWNER OF SAID LAND ALREADY TRANSFE RRED THE DEVELOPMENT RIGHT OF ENTIRE 8,00,000 SQ. FT. TO M/S STAR HABITA T PVT. LTD. M/S STAR HABITAT PVT LTD WAS COMPANY OF FAMILY MEMBERS OF TH E LAND OWNERS. THE LAND OWNER MOHAMMED HUSAIN MERCHANT NOT DISCLOSED T HESE FACTS TO THE ASSESSEE WHILE EXECUTING MOU THAT THE DEVELOPMENT R IGHT HAS ALREADY TRANSFERRED TO M/S STAR HABITAT. AFTER A PROLONG NE GOTIATIONS THE OWNERS ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 5 OF SAID LAND FAILED TO EXECUTE JOINT DEVELOPMENT AG REEMENT ON ONE PRETEXT OF THE OTHER. ON 17.05.2005 THE ASSESSEE IS SUED A LEGAL NOTICE TO THE OWNER OF THE LAND THAT SOME EXCAVATION WORK WAS BEING CARRIED OUT ON THE LAND WHICH WAS THE SUBJECT MATTER OF MOU WIT H ASSESSEE. THE OWNER ON THE RECEIPT OF THE LEGAL NOTICE DENIED THE EXISTENCE OF THE MOU AND CLAIMED THAT AMOUNT OF RS. 2.50 CRORE WAS RECEI VED BY THEM FOR WORKING CAPITAL FOR BUSINESS PURPOSE. THE OWNER OF THE LAND MOHAMMED HUSAIN MERCHANT FOR FIRST TIME DISCLOSED THAT MUCH BEFORE THE EXECUTION OF MOU, THE LAND WAS TRANSFERRED TO M/S STAR HABITA T, WHEREIN HIS SON IS DIRECTOR. THE ASSESSEE IMMEDIATELY FILED A CIVIL S UIT NO. 1796 OF 2005 BEFORE HIGH COURT OF BOMBAY FOR SEEKING THE RELIEF FOR SPECIFIC PERFORMANCE OF THE MOU AND TO EXECUTE THE JOINT DEV ELOPMENT AGREEMENT, SEEKING THE DECLARATION THAT THE AGREEME NT DATED 22/01/2004 EXECUTED IN BETWEEN LAND OWNER AND M/S STAR HABITAT IS NOT BINDING ON THE ASSESSEE AND IN ALTERNATIVE THE ASSESSEE CLAIME D DAMAGE FOR BREACH OF CONTRACT. THE ASSESSEE ALSO FILED CRIMINAL COMPLAIN T AGAINST THE LAND OWNER, CO-OWNER TANVEER MERCHANT AND THEIR ADVOCATE SHARAD DAMODAR CHITNIS. ON THE COMPLAIN OF THE ASSESSEE A FIRST IN FORMATION REPORT (FIR) WAS REGISTERED AGAINST THE OWNER, HIS SON TAN VEER AND THEIR ADVOCATE, UNDER SECTION 406/420/34 OF INDIAN PENAL CODE (IPC). THE ASSESSEE ALSO FILED A CRIMINAL COMPLAINT BEFORE MET ROPOLITAN MAGISTRATE BORIWALI. ON THE CRIMINAL COMPLAINTS FILED BY THE A SSESSEE THE LAND ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 6 OWNER MOHAMMAD MERCHANT, CO-OWNER TANVEER MERCHANT AND THEIR ADVOCATE SHARAD DAMODAR CHITNIS WAS ARRESTED ON 04. 04.2006. IN FACT A FRAUD WAS COMMITTED WITH THE ASSESSEE BY MAKING CON SPIRACY BY LAND OWNER, HIS SON AND THEIR ADVOCATE, WHO WERE ARRESTE D BY THE POLICE. 5. THE LITIGATION IN VARIOUS LEGAL FORUMS INCLUDING BE FORE BOMBAY HIGH COURT CONTINUED FROM 2005 TILL 2011, WHEN ONE OF T HE WELL WISHER NAMELY PRASHANT JASWANT PAREKH, DIRECTOR OF M/S KAS HTAMANUP DEVELOPERS AND A COMMON FRIENDS OF THE PARTIES TO THE MOU INTERVENE AND PERSUADED BOTH THE PARTY TO SETTLE THE DISPUTE. AFTER A PROLONG DISCUSSIONS THE ASSESSEE AND THE OWNERS OF THE LAND AGREED TO CANCEL THE DEVELOPMENT AGREEMENT DATED 24.03.2005 AND THE SUPP LEMENTARY AGREEMENT DATED 25.03.2005 AND THEREFORE, DEED OF C ANCELLATION WAS EXECUTED ON 10.09.2011. THE CANCELLATION DEED WAS A LSO SIGNED ON BEHALF OF M/S KASHTAMANUP DEVELOPERS AS A CONFIRMING PARTY . IN THE CANCELLATION DEED THE ASSESSEE AGREED THE ASSESSEE AGREED TO WITHDRAW THE CRIMINAL COMPLAINT PENDING BEFORE METROPOLITAN MAGISTRATE AND THE CIVIL SUIT PENDING BEFORE HIGH COURT. THE OWNER AND THE OTHER CO- OWNERS ALSO AGREED TO WITHDRAW ALL ALLEGATIONS AND COUNTER ALLEGATION OR CLAIM AGAINST EACH OTHER. THE ASSESSEE ALSO AGREED FOR NOT TO CREATE ANY THIRD PARTY RIGHT, TITLE OR INTEREST IN RESPECT OF THE RIGHT CREATED UNDER MOU. ON EXECUTION OF CANCELLATION DEED DATED 10.09. 2011 THE ASSESSEE WAS PAID RS. 20 CRORE BY CONFIRMING PARTY ON ACCOUN T OF REFUND OF THE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 7 ADVANCE WITH INTEREST, LOSS OF PROFIT, LIQUIDATED D AMAGE AND LOSS OF OPPORTUNITY TO DEVELOP HIS OWN PROPERTY AND COST OF LITIGATION. 6. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITS THAT TH E LOWER AUTHORITIES FAILED TO APPRECIATE THAT THE RIGHT TITLE AND INTER EST IN THE PROPERTY IN RESPECT OF WHICH ARE DEVELOPMENT AGREEMENT WAS EXEC UTED WAS IN DISPUTE, THE SAID PROPERTY WAS TRANSFERRED BY THE O WNERS TO THIRD PARTY PRIOR TO ENTERING INTO AGREEMENT WITH THE ASSESSEE. IN FACT, THE OWNERS AT THE TIME OF EXECUTING THE MOU HAVE NO RIGHT TO DO S O AS THEY HAVE ALREADY TRANSFERRED THE LAND TO M/S STAR HABITAT PR IVATE LTD. THE MOU WAS VOID -AB-INITIO, THE ASSESSEE HAD NEVER GOT RIG HT TO CLAIM SPECIFIC PERFORMANCE. BY ENTERING INTO DEED OF CANCELLATION, THE ASSESSEE SURRENDERED HIS RIGHT TO SUE AGAINST THE OWNER AS W ELL AS THE PERSONS WHO ENTERED IN AGREEMENT WITH THE OWNER. THERE WAS NO A SSIGNMENT OF SAID RIGHT TO THIRD PARTY BY ASSESSEE WHICH IS CLEAR FRO M THE FACT THAT ORIGINAL MOU WAS CANCELLED AND THIRD-PARTY HAD TO DEAL INDEP ENDENTLY WITH THE OWNER AS PER CANCELLATION DEED. THE PROPERTY / ASS ET WAS NEVER TRANSFERRED TO THE ASSESSEE. THEREFORE, THE COMPENS ATION RECEIVED BY ASSESSEE UNDER THE DEED OF CANCELLATION WAS IN RESP ECT OF DAMAGES FOR BREACH OF CONTRACT WHICH CANNOT BE TAXED AS CAPITAL GAIN. THE LEARNED AR FURTHER ARGUED THAT RIGHT TO SUE IS A RIGHT IN P ERSONA, WHICH IS NOT ASSIGNABLE AS PER SECTION 6(E) OF TRANSFER OF PROPE RTY ACT, THUS THE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 8 AMOUNT RECEIVED BY WAY OF COMPENSATION IN CANCELLAT ION DEED IS NOT CHARGEABLE TO TAX UNDER SECTION 45 OF INCOME TAX AC T. 7. IN SUPPORT OF HIS SUBMISSION THE LEARNED AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS : (I) BHOJISON INFRASTRUCTURE (P) LTD VS ITO [2018] 99 TA XMANN.COM 26 (AHMEDABAD TRIBUNAL), (II) CADDELL WEAVING MILLS CO. (P) LTD VS CIT 249 ITR 2 65(BOMBAY), (III) CIT VS J DALMIA (149 ITR 215 DELHI), (IV) BHARAT FORGE CO LTD VS CIT (205 ITR 339 BOMBAY), (V) CIT VS ABBASBHOY A DEHGAMWALLA (195 ITR 28 MUMBAI (VI) CIT VS ASOKA MARKETING LTD (164 ITR 664 CALCUTTA) (VII) DCIT VS OGEN SINHGWI (ITA NO.477/M/2011 DATED 01.1 1.2017) (VIII) ACIT VS JACKIE SHROFF (2018) 194 TTJ 760 (MUMBAI) (IX) CIT VS SAURASHTRA CEMENT LTD (325 ITR 422 SC) (X) CIT VS TATA SERVICES LTD (122 ITR 594 BOMBAY) (XI) CIT VS VIJAY FLEXIBLE CONTAINER (186 ITR 693 BOMBAY ) (XII) K.R. SMITH VS ACIT (268ITR 436 MAD), (XIII) CIT VS SMT. LAXMIDEVI RATNI (2008) (296 ITE 363 MP -HC) THE LEARNED AR OF THE ASSESSEE SUBMITS THAT THE CAS E LAWS RELIED BY ASSESSING OFFICER IN TATA SERVICES (SUPRA) AND VIJA Y FLEXIBLE CONTAINERS (SUPRA) ARE NOT APPLICABLE ON THE FACTS OF THE PRES ENT CASE AS THE FACTS OF THESE CASES ARE DIFFERENT. THE LD. AR ALSO FILED TH E COPY OF FOLLOWING DOCUMENTS. (A) COPY OF AGREEMENT EXECUTED BETWEEN MOHAMMAD MERCHAN T AND STAR HABITAT PRIVATE LTD DATED 22 ND OF JANUARY 2004. ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 9 (B) COPY OF MEMORANDUM OF JOINT DEVELOPMENT AGREEMENT B ETWEEN MOHAMMAD MERCHANT AND ASSESSEE DATED 24 TH OF MARCH 2004. (C) COPY OF SUPPLEMENTARY AGREEMENT BETWEEN ASSESSEE AN D MOHAMMED MARCHANT HUSAIN DATED 25 TH MARCH 2005. (D) FIRST INFORMATION REPORT (FIR) UNDER SECTION 406, 402 AND 34 OF INDIAN PENAL CODE DATED 21 AUGUST 2005, (E) COPY FINAL REPORT AND BAIL ORDER DATED 4 TH APRIL 2006, (F) HIGH COURT ORDER GRANTING INJUNCTION IN FAVOUR OF A SSESSEE, (G) COPY OF COMPLAINT FILED BEFORE METROPOLITAN MAGISTR ATE BORIVALI IN CASE NO. PW/853 OF 2006, (H) COPY OF CANCELLATION DATED 10 TH SEPTEMBER 2011 (I) COPY OF CONSENT TERM IN CIVIL SUIT NO. 2180 OF 2004 . 8. ON THE OTHER HAND THE LEARNED AR FOR THE REVENUE SU PPORTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FOR THE REVENUE FURTH ER SUBMITS THAT THE WORD CAPITAL GAIN MEANS PROPERTY OF ANY KIND HELD BY THE ASSESSEE. THE RIGHT TO EXECUTE THE JOINT DEVELOPMENT RIGHT OF IMM OVABLE PROPERTY FALLS WITHIN THE EXPRESSION OF PROPERTY OF ANY KIND AS USED IN SECTION 2(24) AND CONSEQUENTLY IS A CAPITAL ASSET. AND GIVING UP A RIGHT OF SPECIFIC PERFORMANCE AS CLAIMED BY THE ASSESSEE AMOUNTS TO R ELINQUISHMENT OF CAPITAL ASSET. THEREFORE, THERE WAS A TRANSFER OF C APITAL ASSET UNDER THE PROVISION OF THE INCOME TAX ACT. THE LD DR PRAYE D FOR CONFIRMING THE ORDER OF THE LD CIT(A) AND TO DISMISS THE APPEAL OF ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAV E ALSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY THE LOWER AUTHORIZES AN D THE LD. AR FOR THE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 10 ASSESSEE AND THE VARIOUS DOCUMENTARY EVIDENCES FILE D BY THE LD. AR FOR THE ASSESSEE. DURING THE ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE PAID ADVANCE TAX OF RS. 3.00 CRORE DURING THE RELEVANT FINANCIAL YEAR. THE ASSESSEE DISPUTE DEPOSITING ADVANCE TAX F ILE NILL RETURN OF INCOME AND CLAIMED REFUND OF THE ADVANCE TAX. THE R ETURN WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER ISSUED SHOW CAU SE NOTICE TO THE ASSESSEE TO EXPLAIN THE FACTS. THE ASSESSEE FILED I TS WRITTEN SUBMISSIONS DATED 19.11.2013 AND FURTHER ON 13.12.2013. IN THE REPLY THE ASSESSEE EXPLAINED THE FACTS AS EXPLAINED BEFORE US BY LD. A R FOR THE ASSESSEE. THE ASSESSING OFFICER RECORDED THE SUBMISSION OF THE AS SESSEE IN PARA 2.1 OF HIS ORDER, WHICH WE ARE NOT REPEATING HERE FOR THE SAKE OF BREVITY. THE ASSESSEE ALSO RELIED ON VARIOUS CASE LAWS AS RELIED BEFORE US. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSIN G OFFICER HOLDING THAT AFTER PAYMENT OF ADVANCE TAX ON A SUM OF RS. 2 0 CRORE RECEIVED DURING THE FINANCIAL YEAR 2011-12, HOWEVER, AT THE TIME OF FILING RETURN OF INCOME, THE ASSESSEE CLAIMED THAT THE RECEIPT IS NO T TAXABLE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS CO NTESTING BEFORE THE COURT FOR SPECIFIC PERFORMANCE OF MOU, HOWEVER, AT THE TIME OF ASSESSMENT OF INCOME; THE ASSESSEE CAME UP WITH THE ARGUMENT THAT IT NEVER HAD A RIGHT OF PERFORMANCE. THE RELIANCE OF A SSESSEE ON THE PROVISIONS OF SPECIFIC RELIEF ACT IS ALSO OF NO CON SEQUENCE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSE E WAS BECAME AWARE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 11 OF THE ONGOING DISPUTE BETWEEN THE CO-OWNER SOMETIM E DURING THE FINANCIAL YEAR 2004-05, A NEW AGREEMENT WAS EXECUTE D ON 24.03.2005 BY REPRESENTING THE SELLER TO THE ASSESSEE THAT IT WAS NOT POSSIBLE TO TRANSFER THE DEVELOPMENT RIGHT IN RESPECT OF ENTIRE PIECE OF LAND, WHEREIN A DEVELOPMENT RIGHT OF 2,00,000 SQ. FT. WERE SOLD T O THE ASSESSEE FOR A SPECIFIC CONSIDERATION AND AGAINST WHICH A CREDIT O F ADVANCE OF RS. 50,00,000/- ALREADY GIVEN WAS EXTENDED TO THE ASSES SEE. THE ASSESSEE HAS GIVEN ADVANCE OF RS. 2.5 CRORE AGAINST THE PURCHASE OF DEVELOPMENT RIGHT OF 2,00,000 SQ.FT. OF FSI ON THE AFORESAID PI ECE OF LAND. THE ASSESSEE FAILED TO EXPLAIN WHILE THEY ENTERED INTO AGREEMENT ONCE THEY BECAME AWARE OF THE DISPUTE BETWEEN THE CO-OWNERS. ON THE BASIS OF ABOVE REFERRED OBSERVATION, THE ASSESSING OFFICER C ONCLUDED THAT THE TRANSACTION MADE BY ASSESSEE WAS A DEVELOPMENT-CUM- SALE TRANSACTION WHICH INVOLVED TRANSFER OF CAPITAL ASSET AND WAS LI ABLE FOR TAXATION UNDER THE INCOME-TAX ACT. THE CANCELLATION DEED DATED 10. 09.2011 NOWHERE SPEAK OF GIVING UP THE RIGHT TO SHOWN AS CLAIMED BY ASSESSEE. AS PER CANCELLATION DEED, THE COMPENSATION WAS PAID TO THE ASSESSEE FOR LOSS OF PROFIT, LIQUIDATED DAMAGE, FOR LOSS OF OPPORTUNITY, TO DEVELOP THE PROPERTY AND SALE OF FLAT IN OPEN MARKET. THE ASSESSING OFFI CER CONCLUDED THAT BY NO STRETCH OF IMAGINATION CAN ANY PART OF COMPENSAT ION BE CONSIDERED AS LIQUIDATED DAMAGE. THE INITIAL INVESTMENT OF ASSESS EE OF RS. 2.50 CRORE WHOPPED 800%. THE ASSESSING OFFICER ALSO CONCLUDED THAT CONTRACTUAL ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 12 RIGHTS OBTAINED UNDER THE CONTRACT OF SALE ARE A VA LUABLE RIGHT AND CONSIDERED AS PROPERTY. THE CONTRACTUAL RIGHT OF PU RCHASER TO OBTAIN TITLE TO IMMOVABLE PROPERTY OR DEVELOPMENT RIGHT THERE ON FOR A PRICE IS CAPABLE OF SPECIFIC PERFORMANCE. IT IS ALSO ASSIGNA BLE. THEREFORE, A RIGHT TO OBTAIN CONVEYANCE OF IMMOVABLE PROPERTY OR DEVEL OPMENT RIGHT IS CLEARLY PROPERTY AS PRESCRIBED BY SECTION 2(14) O F THE ACT. THE ASSESSING OFFICER FURTHER STRENGTHEN HIS CONCLUSION BY REFERRING THAT EXTINGUISHMENT OF ANY RIGHT, GIVING UP OF A RIGHT O F SPECIFIC PERFORMANCE BY THE ASSESSEE, TO GET DEVELOPMENT RIGHT OF IMMOVA BLE PROPERTY, IN LIEU OF RECEIVING A CONSIDERATION RESULTING IN EXTINGUIS HMENT OF RIGHT IN PROPERTY AND ATTRACT RIGOR OF SECTION 2(14) READ WI TH SECTION 247. THE ASSESSING OFFICER ON THE BASIS OF HIS OBSERVATION A ND CONCLUSION CONCLUDE THAT COMPENSATION/CONSIDERATION RECEIVED I N LIEU OF GIVING UP THE SAID RIGHT, ANY AMOUNT RECEIVED, CONSTITUTES CA PITAL GAIN AND LIABLE TO TAX. THE LD CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER HOLDING THAT THE ASSESSING OFFICER HAS MADE A WATER TIGHT C ASE AGAINST THE ASSESSEE WHICH DOES NOT REQUIRE ANY INTERFERENCE. 10. AS INCOME-TAX ACT DOES NOT DEFINE THE TERM CAPITAL RECEIPT AND REVENUE RECEIPT, THEREFORE, ONE HAS TO BE DEPEND ON THE NATURAL MEANING OF THE TERMS AS WELL AS ON THE PRECEDENT OF THE DECIDED CASES. ACCORDING TO THE OXFORD ENGLISH DICTIONARY , THE WORD CAPITAL MEANS ACCUMULATED WEALTH EMPLOYED REPRODUCTIVELY THE W ORD REVENUE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 13 MEANS THE RETURN YIELD , OR PROFIT OF ANY LANDS, PROPERTY OR OTHER SOURCE OF INCOME, WHICH COMES IN TO ONCE A RETURN FROM PRO PERTY OF POSSESSION; INCOME FROM ANY SOURCE. IT IS SETTLED POSITION TH AT A RECEIPT IN LIEU OF SOURCE OF INCOME IS A CAPITAL RECEIPT, BUT A RECEIP T IN LIEU OF INCOME IS REVENUE RECEIPT. IN OUR VIEW TO DETERMINE WHETHER A RECEIPT IS CAPITAL OR REVENUE IN NATURE, WE HAVE TO GO BY ITS NATURE IN T HE HAND OF THE RECIPIENTS. 11. THE COORDINATE BENCH OF AHMEDABAD TRIBUNAL IN BHOJI SON INFRASTRUCTURE (P) LTD VS ITO (SUPRA), WHILE RELYING ON THE DECISI ON OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF BARODA CEMENT AND CHEMICALS LTD. ( SUPRA ) WHILE DEALING WITH ALMOST ON SIMILAR SET OF FACTS HELD AS UNDER: 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATE RIAL REFERRED TO IN TERMS OF RULE 18(6) OF THE ITAT RULES, 1963 AND ALSO THE CAS E LAWS CITED. THE SUBSTANTIVE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER DAMAGES RECEIVED BY THE ASSESSEE FOR BREACH OF DEVELOPMENT AGREEMENT ARE CAPITAL IN NATURE OR OTHERWISE CHARGEABLE TO TAX. IT IS THE CA SE OF THE ASSESSEE THAT THE COMPENSATION/DAMAGES RECEIVED BY THE ASSESSEE FROM THE PURCHASER ON TRANSFER OF LAND UNDER DEVELOPMENT AGREEMENT IS CAP ITAL IN NATURE. IT IS THE CASE OF THE ASSESSEE THAT THE ONLY RIGHT THAT ACCRU ES TO THE ASSESSEE WHO COMPLAINS OF THE BREACH IS RIGHT TO FILE A SUIT FOR RECOVERY OF DAMAGES FROM THE DEFAULTING PARTY. THE BREACH OF CONTRACT DOES N OT GIVE RISE TO ANY DEBT AND THEREFORE A RIGHT TO RECOVER DAMAGES IS NOT ASSIGNA BLE BECAUSE IT IS NOT A CHOSE-IN-ACTION. FOR ACTIONABLE CLAIM TO BE ASSIGNE D, THERE MUST BE A DEBT IN THE SENSE OF AN EXISTING OBLIGATION TO CONSIDER IT TO BE AN ACTIONABLE CLAIM. IT IS THE CASE OF ASSESSEE THAT THE ASSESSEE HAD A MER E 'RIGHT TO SUE' WHICH IS NEITHER A CAPITAL ASSET WITHIN THE MEANING OF SECTI ON 2(14) OF THE ACT NOR IS ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 14 CAPABLE TO BEING TRANSFERRED AND THEREFORE NOT CHAR GEABLE UNDER S.45 OF THE ACT. 10.1 THE ESSENCE OF LONG LIST OF JUDICIAL PRONOUNCEMENT S CITED ON BEHALF OF ASSESSEE IS THAT SECTION 6 OF THE TRANSFER OF PROPE RTY 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. THE D ECISIONS THEREUNDER MAKE IT ABUNDANTLY CLEAR THAT THE 'RIGHT TO SUE' FOR DAMAGE S IS NOT AN ACTIONABLE CLAIM. IT CANNOT BE ASSIGNED. TRANSFER OF SUCH A RIGHT IS OPPOSED TO PUBLIC POLICY AS IT TANTAMOUNT TO GAMBLING IN LITIGATION. HENCE, SUC H A 'RIGHT TO SUE' DOES NOT CONSTITUTE A 'CAPITAL ASSET' WHICH IN TURN HAS TO B E 'AN INTEREST IN PROPERTY OF ANY KIND'. DESPITE THE DEFINITION OF EXPRESSION 'CA PITAL ASSET' IN THE WIDEST POSSIBLE TERMS IN SECTION 2(14) OF THE ACT, A RIGHT TO A CAPITAL ASSET MUST FALL WITH THE EXPRESSION 'PROPERTY OF ANY KIND' SUBJECT TO CERTAIN EXCLUSIONS. NOTWITHSTANDING WIDEST IMPORT ASSIGNED TO THE TERM 'PROPERTY' WHICH SIGNIFIES EVERY POSSIBLE INTEREST WHICH A PERSON CAN HOLD AND ENJOY, THE 'RIGHT TO SUE' IS A RIGHT IN PERSONAM AND SUCH RIGHT CANNOT CERTAINLY BE TRANSFERRED. IN ORDER TO ATTRACT THE CHARGE OF TAX ON CAPITAL GAINS, THE SINE QUA NON IS THAT THE RECEIPT MUST HAVE ORIGINATED IN A 'TRANSFER' WITHIN THE MEA NING OF SECTION 45 R.W.S. 2(47) OF THE ACT. IN THE ABSENCE OF ITS TRANSFERABI LITY, THE COMPENSATION/DAMAGES RECEIVED BY ASSESSEE IS NOT AS SESSABLE AS CAPITAL GAINS. 10.2 THE CO-ORDINATE BENCH OF ITAT, AHMEDABAD IN THE CA SE OF SHEKHAR G. PATEL DATED 19.03.2014 RELIED UPON ON BEHALF OF THE ASSE SSEE HAS MADE REFERENCE TO HOST OF JUDICIAL PRONOUNCEMENTS INCLUD ING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF BARODA CEMENT AND CHEMICALS LTD. ( SUPRA ) AND CONCLUDED THE ISSUE IN FAVOUR OF ASSESSEE. TH E CO-ORDINATE BENCH HIGHLIGHTED THE RELEVANT PART OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT WHICH IS REPRODUCED HEREUNDER: '18. THE ASSESSEE HAD UNDOUBTEDLY A RIGHT TO SUE M/ S K.C.P. LTD. FOR DAMAGES FOR BREACH OF CONTRACT. INSTEAD OF LITIGATI NG IN A COURT OF LAW, THE PARTIES ARRIVED AT A SETTLEMENT WHERE UNDER COM PENSATION IN THE SUM OF RS.1,40,000 CAME TO BE PAID IN FULL AND FINAL SA TISFACTION TO THE ASSESSEE. COUNSEL FOR THE REVENUE CONTENDS THAT THE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 15 COMPROMISE/ARRANGEMENT RESULTED IN EXTINGUISHMENT O F THE ASSESSEE'S RIGHT TO SUE FOR DAMAGES WITHIN THE MEANING OF S. 2 (47) OF THE ACT. WHILE ACCEPTING THIS CONTENTION THE TRIBUNAL HAS PL ACED RELIANCE ON THE DECISION OF THIS COURT IN CIT V. R.M. AMIN (1971) 82 ITR 194 (GUJ) . IN THAT CASE THIS COURT OBSERVED THAT THE USE OF TH E WORD 'INCLUDE' IN THE DEFINITION OF THE WORD 'TRANSFER' IN S. 2(47) WAS I NTENDED TO ENLARGE THE MEANING OF 'TRANSFER' BEYOND ITS NATURAL IMPORT SO AS TO INCLUDE EXTINGUISHMENT/RELINQUISHMENT OF RIGHTS IN THE CAPI TAL ASSET FOR THE PURPOSE OF S. 45 OF THE ACT. SINCE THE TRANSFER CON TEMPLATED BY S. 45 IS ONE AS A RESULT WHEREOF CONSIDERATION HAS PASSED TO THE ASSESSEE OR HAS ACCRUED TO HIM, EXTINGUISHMENT OF THE RIGHT MUST RE LATE TO THAT 'CAPITAL ASSET', CORPOREAL OR INCORPOREAL. IT IS, THEREFORE OBVIOUS THAT A TRANSFER OF A CAPITAL ASSET IN ORDER TO ATTRACT LIABILITY TO TA X UNDER THE HEAD 'CAPITAL GAINS' MUST BE A 'TRANSFER' AS A RESULT WHEREOF SOM E CONSIDERATION IS RECEIVED BY OR ACCRUES TO THE ASSESSEE. IF THE TRAN SFER DOES NOT YIELD ANY CONSIDERATION, THE COMPUTATION OF PROFITS OR GAINS AS PROVIDED BY S. 48 OF THE ACT WOULD NOT BE POSSIBLE. IF THE TRANSFER T AKES EFFECT ON EXTINGUISHMENT OF A RIGHT IN THE CAPITAL ASSET, THE RE MUST BE RECEIPT OF CONSIDERATION FOR SUCH EXTINGUISHMENT TO ATTRACT LI ABILITY TO TAX. NOW, IN LEGAL PARLANCE, THE TERMS 'CONSIDERATION' AND 'COMP ENSATION' OR 'DAMAGES' HAVE DISTINCT CONNOTATIONS. THE FORMER IN THE CONTE XT OF SS. 45 AND 48 WOULD CONNOTE PAYMENT OF A SUM OF MONEY TO SECURE T RANSFER OF A CAPITAL ASSET; THE LATTER WOULD SUGGEST PAYMENT TO MAKE AMENDS FOR LOSS OR INJURY OCCASIONED ON THE BREACH OF CONTRACT OR T ORT. BOTH SS. 45 AND 48 POSTULATE THE EXISTENCE OF A CAPITAL ASSET AND T HE CONSIDERATION RECEIVED ON TRANSFER THEREOF. BUT, AS DISCUSSED EAR LIER, ONCE THERE IS A BREACH OF CONTRACT BY ONE PARTY AND THE OTHER PARTY DOES NOT KEEP IT ALIVE BUT ACQUIESCES IN THE BREACH AND DECIDES TO R ECEIVE COMPENSATION THEREFORE, THE INJURED PARTY CANNOT HAVE ANY RIGHT IN THE CAPITAL ASSET WHICH COULD BE TRANSFERRED BY EXTINGUISHMENT TO THE DEFAULTER FOR VALUABLE CONSIDERATION. THAT IS BECAUSE A RIGHT TO SUE FOR DAMAGES NOT BEING AN ACTIONABLE CLAIM, A CAPITAL ASSET, THERE C OULD BE NO QUESTION OF TRANSFER BY EXTINGUISHMENT OF THE ASSESSEE'S RIGHTS THEREIN SINCE SUCH A TRANSFER WOULD BE HIT BY S. 6(E) OF THE TRANSFER OF PROPERTY ACT. IN ANY ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 16 VIEW OF THE MATTER, IT IS DIFFICULT TO HOLD THAT TH E SUM OF RS.1,40,000 RECEIVED BY WAY OF COMPENSATION BY THE ASSESSEE WAS CONSIDERATION FOR THE TRANSFER OF A CAPITAL ASSET.' 10.3 THE HON'BLE GUJARAT HIGH COURT IN BARODA CEMENT ( SUPRA ), IN TURN, REFERRED TO THE CONCEPT OF BREACH OF CONTRACT AS DI SCUSSED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF IRON AND HARDWARE (INDIA) CO. V. SHAMLAL & BROS. AIR 1954 BOM 423 AS UNDER (P. 645 OF 158 ITR): '10. CHAGLA, C.J., HAD AN OCCASION TO CONSIDER THIS ASPECT OF THE LAW IN IRON AND HARDWARE (INDIA) CO. V. SHAMLAL & BROS. AIR 1954 BOM 423. THE LEARNED CHIEF JUSTICE OBSERVED AS UNDER (P . 425) : 'IT IS WELL SETTLED THAT WHEN THERE IS A BREACH OF CONTRACT, THE ONLY RIGHT THAT ACCRUES TO THE PERSON WHO COMPLAINS OF THE BRE ACH IS THE RIGHT TO FILE A SUIT FOR RECOVERING DAMAGES. THE BREACH OF C ONTRACT DOES NOT GIVE RISE TO ANY DEBT AND, THEREFORE, IT HAS BEEN HELD T HAT A RIGHT TO RECOVER ASSIGNABLE BECAUSE IT IS NOT A CHOSE-IN-ACTION. AN ACTIONABLE CLAIM CAN BE ASSIGNED, BUT IN ORDER THAT THERE SHOULD BE AN A CTIONABLE CLAIM THERE MUST BE A DEBT IN THE SENSE OF AN EXISTING OBLIGATI ON. BUT INASMUCH AS A BREACH OF CONTRACT DOES NOT RESULT IN ANY EXISTING OBLIGATION ON THE PART OF THE PERSON WHO COMMITS THE BREACH, THE RIGHT TO RECOVER DAMAGES IS NOT AN ACTIONABLE CLAIM AND CANNOT BE ASSIGNED.' PROCEEDING FURTHER, THE LEARNED CHIEF JUSTICE STATE D (P. 425) : 'IN MY OPINION, IT WOULD NOT BE TRUE TO SAY THAT A PERSON WHO COMMITS A BREACH OF THE CONTRACT INCURS ANY PECUNIARY LIABILI TY, NOR WOULD IT BE TRUE TO SAY THAT THE OTHER PARTY TO THE CONTRACT WH O COMPLAINS OF THE BREACH HAS ANY AMOUNT DUE TO HIM FROM THE OTHER PAR TY. AS ALREADY STATED, THE ONLY RIGHT WHICH HE HAS THE RIGHT TO GO TO A COURT OF LAW AND RECOVER DAMAGES. NOW, DAMAGES ARE THE CO MPENSATION WHICH A COURT OF LAW GIVES TO A PARTY FOR THE INJUR Y WHICH HE HAS SUSTAINED. BUT, AND THIS IS MOST IMPORTANT TO NOTE, HE DOES NOT GET DAMAGES OR COMPENSATION BY REASON OF ANY EXISTING O BLIGATION ON THE PART OF THE PERSON WHO HAS COMMITTED THE BREACH. HE GETS COMPENSATION AS A RESULT OF THE FIAT OF THE COURT, THEREFORE, NO PECUNIARY LIABILITY ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 17 ARISES TILL THE COURT HAS DETERMINED THAT THE PARTY COMPLAINING OF THE BREACH IS ENTITLED TO DAMAGES. THEREFORE, WHEN DAMA GES ARE ASSESSED, IT WOULD NOT BE TRUE TO SAY THAT WHAT THE COURT IS DOI NG IS ASCERTAINING A PECUNIARY LIABILITY WHICH ALREADY EXISTS. THE COURT IN THE FIRST PLACE MUST DECIDE THAT THE DEFENDANT IS LIABLE IS LIABLE AND THEN IT PROCEEDS TO ASSESS WHAT THAT LIABILITY IS. BUT TILL THAT DETERM INATION THERE IS NO LIABILITY AT ALL UPON THE DEFENDANT.' IT WOULD APPEAR FROM THE ABOVE OBSERVATIONS THAT ON BREACH OF CONTRACT THE DEFAULTER DOES NOT INCUR ANY PECUNIARY LIABILIT Y NOR DOES THE INJURED PARTY BECOMES ENTITLED TO ANY SPECIFIC AMOUNT, BUT HE ONLY HAS A RIGHT TO SUE AND CLAIM DAMAGES WHICH MAY OR MAY NOT BE DECRE ED IN HIS FAVOUR. HE WILL HAVE TO PROVE (I) THAT THE OPPOSITE PARTY H AD COMMITTED BREACH OF CONTRACT AND (II) THAT HE HAD SUFFERED PECUNIARY LOSS ON ACCOUNT THEREOF. 11. THE ABOVE OBSERVATIONS OF CHAGLA, CJ., WERE QUO TED WITH APPROVAL BY THE SUPREME COURT IN UNION OF INDIA V. RAMAN IRO N FOUNDRY AIR 1974 SC 1265. IN PARA 9 OF THE JUDGMENT, THE SUPREM E COURT CONSIDERED THE CLAIM FOR LIQUIDATED DAMAGES FOR BRE ACH OF CONTRACT BETWEEN THE PARTIES. POINTING OUT THAT SO FAR AS TH E LAW IN INDIA IS CONCERNED, THERE IS NO QUALITATIVE DIFFERENCE IN TH E NATURE OF THE CLAIM, WHETHER IT BE FOR LIQUIDATED DAMAGES OR UNLIQUIDATE D DAMAGES, THE SUPREME COURT PROCEEDED TO STATE THE LAW AS UNDER ( P. 1273): ''WHEN THERE IS A BREACH OF CONTRACT, THE PARTY WHO COMMITS THE BREACH DOES NOT EO INSTANTI INCUR ANY PECUNIARY OBLIGATION , NOR DOES THE PARTY COMPLAINING OF THE BREACH BECOMES ENTITLED TO A DEB T DUE FROM THE OTHER PARTY. THE ONLY RIGHT WHICH THE PARTY AGGRIEVED BY THE BREACH OF THE CONTRACT HAS IS THE RIGHT TO SUE FOR DAMAGES. THAT IS NOT AN ACTIONABLE CLAIM AND THIS POSITION IS MADE AMPLY CLEAR BY THE AMENDMENT IN S. 6(E) OF THE TRANSFER OF PROPERTY ACT, WHICH PROVIDES THA T A MERE RIGHT TO SUE FOR DAMAGES CANNOT BE TRANSFERRED.' QUOTING THE STATEMENT OF LAW ENUNCIATED BY CHAGLA C .J., WHICH IS EXTRACTED EARLIER, THE SUPREME COURT STATED (P. 127 3) : 'THIS STATEMENT IN ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 18 OUR VIEW REPRESENTS THE CORRECT LEGAL POSITION AND HAS OUR FULL CONCURRENCE'. 12. IT WOULD SEEM WELL-SETTLED FROM THE ABOVE DISCU SSION THAT AFTER THERE IS A BREACH OF CONTRACT FOR SALE OF GOODS, NO THING IS LEFT IN THE INJURED PARTY SAVE THE RIGHT TO SUE FOR DAMAGES OR SPECIFIC PERFORMANCE WHICH CANNOT BE TRANSFERRED UNDER S. 6(E) OF THE TR ANSFER OF PROPERTY ACT SINCE IT IS A MERE RIGHT TO SUE AND NOT AN ACTI ONABLE CLAIM.' 10.4 IN VIEW OF THE ABOVE FACTS AND IN THE LIGHT OF PLE THORA OF CASE LAWS RELIED UPON, WE ARE DISPOSED TO HOLD THAT THE RECEIPT TOWA RDS COMPENSATION IN LIEU OF 'RIGHT TO SUE' IS OF CAPITAL NATURE WHICH IS NOT CHARGEABLE TO TAX UNDER S.45 OF THE ACT. 11. AT THIS JUNCTURE, IT MAY BE PERTINENT TO OBSERVE T HAT THE REVENUE HAS INTER ALIA QUESTIONED THE BASIS GIVING RISE TO THE CAUSE OF A CTION FOR CREATION OF 'RIGHT TO SUE'. WE DO NOT SEE ANY PURPORT IN SUCH A SPECT. A DEVELOPMENT AGREEMENT WAS EXECUTED WHICH ENABLED THE ASSESSEE T O UTILIZE THE LAND FOR CONSTRUCTION AND FOR SHARING OF PROFITS. THIS RIGHT /ADVANTAGE ACCRUED TO THE ASSESSEE WAS SOUGHT TO BE TAKEN AWAY FROM THE ASSES SEE BY WAY OF SALE OF LAND. THE PROSPECTIVE PURCHASER AS WELL AS THE DEFA ULTING PARTY (OWNER) PERCEIVED THREAT OF FILING SUIT BY DEVELOPER AND CO NSEQUENTLY PAID DAMAGES/COMPENSATION TO SHUN THE POSSIBLE LEGAL BAT TLE. THE INTRINSIC POINT WITH RESPECT TO ACCRUAL OF 'RIGHT TO SUE' HAS TO BE SEEN IN THE LIGHT OF OVERRIDING CIRCUMSTANCES AS TO HOW THE PARTIES HAVE PERCEIVED THE PRESENCE OF LOOMING LEGAL BATTLE FROM THEIR POINT OF VIEW. I T IS AN ADMITTED POSITION THAT THE DEFAULTING PARTY HAS MADE THE ASSESSEE A C ONFIRMING PARTY IN THE SALE BY VIRTUE OF SUCH DEVELOPMENT AGREEMENT AND A COMPE NSATION WAS PAID TO AVOID LITIGATION. THIS AMPLY SHOWS THE EXISTENCE OF 'RIGHT TO SUE' IN THE PERCEPTION OF THE DEFAULTING PARTY. THUS, THE EXIST ENCE OF 'RIGHT TO SUE' COULD NOT BE BRUSHED ASIDE. 12. WE SHALL NOW ADVERT TO THE CLAIM OF THE REVENUE TH AT AMOUNT RECEIVED TOWARDS RELINQUISHMENT OF SUCH RIGHT IS PURELY A RE VENUE RECEIPT. IN THIS REGARD, WE NOTICE THAT THE COMPENSATION WAS NOT REC EIVED AS A RESULT OF TERMINATION OF ADVANTAGES ASSOCIATED WITH DEVELOPME NT RIGHTS BUT WAS ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 19 CLAIMED TO BE RECEIVED TO RELINQUISH THE RIGHTS OF THE ASSESSEE TO SUE AGAINST THE VENDOR OF THE LAND. THE ASSESSEE HAS RECEIVED T HE COMPENSATION AMOUNT ON SALE OF PROPERTY OCCASIONED DUE TO BREACH OF DEV ELOPMENT AGREEMENT. THE DEVELOPMENT AGREEMENT WAS THUS FRUSTRATED BY SALE O F LAND BY THE OWNER. THE OBSERVATION OF THE CIT(A) THAT ASSESSEE HAD OBTAINE D THE POSSESSION OF THE PROPERTY FROM SELLER IS BELEAGUERED ONE. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE POSSESSION ARE TYPICALLY GIVEN TO A D EVELOPER FOR THE PURPOSES OF DEVELOPMENT. SUCH ACT IS IN THE NATURE OF LICENSE T O DEVELOP THE PROPERTY WHILE THE POSSESSION OF THE PROPERTY CONTINUES TO R EMAIN VESTED WITH THE VENDOR. ON A PLAIN READING, WE OBSERVE THAT CONSIDE RATION RECEIVED FOR RELINQUISHMENT OF 'RIGHT TO SUE' DOES NOT FALL UNDE R THE PROVISIONS OF SECTION 28(VA) OF THE ACT. WE FURTHER FIND FROM THE FACTS O F THE CASE THAT ASSESSEE HAS NOT RECEIVED THIS AMOUNT UNDER AN AGREEMENT FOR NOT CARRYING OUT ACTIVITY IN RELATION TO ANY BUSINESS OR NOT TO SHARE IN KNOW-HO W, PATENT, COPYRIGHT, TRADEMARK, LICENSE ETC . AS SPECIFIED UNDER S.28(VA) OF THE ACT ENACTED FO R ITS TAXABILITY UNDER THE HEAD OF BUSINESS INCOME. CONSE QUENTLY, WE ARE OF THE CONSIDERED VIEW THAT COMPENSATION RECEIVED IN LIEU OF 'RIGHT TO SUE' COULD NOT BE REGARDED AS REVENUE RECEIPT. THEREFORE, WE FIND MERIT IN THE APPEAL OF THE ASSESSEE. 12. THE HONBLE SUPREME COURT IN CIT VS SAURASHTRA CEME NT LTD (SUPRA) WHEREIN THE ASSESSEE WAS ENGAGED IN MANUFACTURE OF CEMENT ENTERED INTO AN AGREEMENT WITH THE SUPPLIER FOR ACQUIRING AN ADDITI ONAL CEMENT PLANT. THE AGREEMENT CONTAINED A CONDITION THAT IN THE EVENT O F DELAY IN SUPPLY OF MACHINERY THE ASSESSEE WOULD BE ELIGIBLE FOR DAMAGE S WITHOUT PROOF OF ACTUAL LOSS OF AN AMOUNT NOT EXCEEDING 5% OF THE TO TAL PRICE OF MACHINERY. THE ASSESSEE RECEIVED LIQUIDATED DAMAGES AS THE SUP PLY WAS DELAYED. THE COURT HELD THAT THE AMOUNT RECEIVED BY WAY OF DAMAG ES WAS DIRECTLY LINKED TO ACQUISITION OF CAPITAL ASSET AND LED TO DELAY IN COMING INTO EXISTENCE OF ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 20 THE PROFIT-MAKING APPARATUS. ACCORDINGLY, IT WAS HE LD THAT THE AMOUNT SO RECEIVED WAS A CAPITAL RECEIPT AND COULD NOT BE TAX ED AS INCOME. THE RELEVANT PART OF THE ORDER IS EXTRACTED BELOW; 11. THE QUESTION WHETHER A PARTICULAR RECEIPT IS CAPIT AL 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 DE TERMINATION 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 : 'THE QUESTION WHETHER A RECEIPT IS CAPITAL OR INCOM E HAS FREQUENTLY COME UP FOR DETERMINATION BEFORE THE COURTS. VARIOUS RUL ES HAVE BEEN ENUNCIATED AS FURNISHING A KEY TO THE SOLUTION OF T HE QUESTION, BUT AS OFTEN OBSERVED BY THE HIGHEST AUTHORITIES, IT IS NOT POSS IBLE TO LAY DOWN ANY SINGLE TEST AS INFALLIBLE OR ANY SINGLE CRITERION A S DECISIVE IN THE DETERMINATION OF THE QUESTION, WHICH MUST ULTIMATEL Y DEPEND ON THE FACTS OF THE PARTICULAR CASE, AND THE AUTHORITIES BEARING ON THE QUESTION ARE VALUABLE ONLY AS INDICATING THE MATTERS THAT HAVE T O BE TAKEN INTO ACCOUNT IN REACHING A DECISION. VIDE VAN DEN BERGHS LTD. V. CLARK [1935] 3 ITR (ENG. CAS.) 17. THAT, HOWEVER, IS NOT TO SAY THAT T HE QUESTION IS ONE OF FACT, FOR, AS OBSERVED IN DAVIES (H.M. INSPECTOR OF TAXES) V. SHELL COMPANY OF CHINA LTD. [1952] 22 ITR (SUPPL.) 1 , 'THESE QUESTIONS BETWEEN CAPITAL AND INCOME, TRADING PROFIT OR NO TR ADING PROFIT, ARE QUESTIONS WHICH, THOUGH THEY MAY DEPEND NO DOUBT TO A VERY GREAT EXTENT ON THE PARTICULAR FACTS OF EACH CASE, DO INVOLVE A CONCLUSION OF LAW TO BE DRAWN FROM THOSE FACTS.' 12. IN KETTLEWELL BULLEN & CO. LTD.'S CASE ( SUPRA ), DEALING WITH THE QUESTION WHETHER COMPENSATION RECEIVED BY AN AGENT FOR PREMA TURE DETERMINATION OF THE CONTRACT OF AGENCY IS A CAPITAL OR A REVENUE RE CEIPT, ECHOING THE VIEWS EXPRESSED IN RAI BAHADUR JAIRAM VALJI'S CASE ( SUPRA ) AND ANALYSING ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 21 NUMEROUS JUDGMENTS ON THE POINT, THIS COURT LAID DO WN THE FOLLOWING BROAD PRINCIPLE, WHICH MAY BE TAKEN INTO ACCOUNT IN REACH ING A DECISION ON THE ISSUE : 'WHERE ON A CONSIDERATION OF THE CIRCUMSTANCES, PAY MENT 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 CONTRAC T BEING A NORMAL INCIDENT OF THE BUSINESS, AND SUCH CANCELLATION LEA VES 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 STRUCTURE OF THE ASSESSEE IS IMPAIRED, OR SUCH CANCELLATION RESULTS IN LOSS OF WHAT MAY BE REGARDED AS THE SOURCE OF THE ASSESSEE'S INCOME, TH E PAYMENT MADE TO COMPENSATE FOR CANCELLATION OF THE AGENCY AGREEMENT IS NORMALLY A CAPITAL RECEIPT.' 13. WE HAVE CONSIDERED THE MATTER IN THE LIGHT OF THE AFORE-NOTED BROAD PRINCIPLE. IT IS CLEAR FROM CLAUSE NO. 6 OF THE AGR EEMENT DATED 1-9-1967, EXTRACTED ABOVE, THAT THE LIQUIDATED DAMAGES WERE T O BE CALCULATED AT 0.5 PER CENT OF THE PRICE OF THE RESPECTIVE MACHINERY AND E QUIPMENT TO WHICH THE ITEMS WERE DELIVERED LATE, FOR EACH MONTH OF DELAY IN DELIVERY COMPLETION, WITHOUT PROOF OF THE ACTUAL DAMAGES THE ASSESSEE WO ULD 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 N OT BASED UPON THE CALCULATION MADE IN RESPECT OF LOSS OF PROFIT ON AC COUNT OF SUPPLY OF A PARTICULAR PART OF THE PLANT. IT IS EVIDENT THAT TH E 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 I N COMING INTO EXISTENCE OF THE PROFIT-MAKING APPARATUS, RATHER THAN A RECEI PT IN THE COURSE OF PROFIT- EARNING PROCESS. COMPENSATION PAID FOR THE DELAY IN PROCUREMENT OF CAPITAL ASSET AMOUNTED TO STERILIZATION OF THE CAPITAL ASSE T OF THE ASSESSEE AS SUPPLIER HAD FAILED TO SUPPLY THE PLANT WITHIN TIME AS STIPU LATED IN THE AGREEMENT AND CLAUSE NO. 6 THEREOF CAME INTO PLAY. THE AFORE-STAT ED AMOUNT RECEIVED BY THE ASSESSEE TOWARDS COMPENSATION FOR STERILIZATION OF THE PROFIT-EARNING SOURCE, NOT IN THE ORDINARY COURSE OF THEIR BUSINESS, IN OU R OPINION, WAS A CAPITAL ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 22 RECEIPT IN THE HANDS OF THE ASSESSEE. WE ARE, THERE FORE, 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 . 13. THE HONBLE DELHI HIGH COURT IN CIT VS J. DALMIA [1 984] 149 ITR 215/[1985] 20 TAXMAN 86 (DELHI), WHEREIN THE ASSESS EE ENTERED INTO AGREEMENT WITH CONTRACTOR FOR CONSTRUCTION OF A BUI LDING. THE CONTRACTOR FAILED TO EXECUTE HIS PART OF THE AGREEMENT AND THE ASSESSEE GAVE UP THE CLAIM TO SPECIFIC PERFORMANCE BUT RETAINED THE RIGH T TO DAMAGES. IN ARBITRATION AWARD, THE ASSESSEE BECAME ELIGIBLE FOR COMPENSATION WHICH WAS HELD AS NOT CHARGEABLE TO TAX AS THE RIGHT TO D AMAGES WAS A MERE 'RIGHT TO SUE' AND COULD NOT BE TRANSFERRED. 14. THE HONBLE BOMBAY HIGH COURT IN BHARAT FORGE CO. L TD VS CIT (SUPRA) HELD THAT WHEN ASSESSEE-COMPANY DECIDED TO SET UP A UNIT FOR MANUFACTURE OF CRANKSHAFTS AND FOR THIS PURPOSES IT OBTAINED IM PORT LICENSE TO IMPORT PLANT AND MACHINERY. THE COST OF PLANT AND MACHINER Y WAS PAID IN FOREIGN EXCHANGE BY OBTAINING A LOAN. THE REPAYMENT OF THIS LOAN WAS IN INSTALLMENTS. THE MACHINERY WAS IMPORTED AND INSTAL LED, THE ASSESSEE REALIZED POSSIBILITY OF DEVALUATION OF RUPEE AND IT INSTRUCTED ITS BANKER TO MAKE A FORWARD PURCHASE OF FOREIGN EXCHANGE AT A FO RWARD RATE. A CONTRACT WAS SIGNED BY ASSESSEE AND HIS BANKER. THE BANKER W AS REQUIRED TO OBTAIN PRIOR APPROVAL OF RBI FOR AFORESAID AGREEMENT. HOWE VER, NO SUCH APPROVAL WAS OBTAINED. THE ASSESSEE WAS INFORMED LATE BY BAN KER ABOUT THE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 23 CANCELLATION OF THE CONTRACT BETWEEN THE ASSESSEE A ND THE BANKER AND IN MEANWHILE RUPEE HAD BEEN DEVALUED. THE ASSESSEE, TH US, SUFFERED LOSS AND CLAIMED COMPENSATION/ DAMAGES FROM BANKER. ON SETT LEMENT BANKER AGREED TO PAY A SUM OF RS. 24.92 LAKHS TO ASSESSEE. THE AFORESAID RECEIPT OF RS. 24.92 LAKHS WAS HELD AS NOT ASSESSABLE AS CAPIT AL GAINS IN HANDS OF ASSESSEE. 15. FURTHER, HONBLE BOMBAY HIGH COURT IN CIT VS ABBASB HOY A. DEHGAMWALLA (SUPRA) ON THE FACTS OF CASE THAT IN TH E YEAR 1945 THE ASSESSEE HAD AGREED TO TAKE ON LEASE CERTAIN LAND AND THE GO VERNMENT OF INDIA ALSO AGREED TO GIVE IT TO THE ASSESSEE. THE DEAL DID NOT GO THROUGH AND THE ASSESSEE FILED SUIT FOR SPECIFIC PERFORMANCE WITH A LTERNATIVE CLAIM FOR DAMAGES FOR BREACH OF CONTRACT. THE SUIT WAS DECREE D ON 20-9-1961 AND CLAIM FOR SPECIFIC PERFORMANCE REJECTED. BUT CLAIM FOR COMPENSATION FOR BREACH OF CONTRACT HAVING TAKEN PLACE ON 7-1-1958 W AS UPHELD. AFTER PROLONGED LITIGATION THERE WAS A COMPROMISE BETWEEN THE PARTIES AND A CONSENT DECREE WAS PASSED ON 11-6-1969 AND THE UNIO N OF INDIA WAS DIRECTED TO PAY A SUM OF RS. 2,52,000/- AS DAMAGES AS WELL AS A SUM AS INTEREST FROM 30-1-1959 UP TO THE DATE OF THE CONSE NT DECREE. IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 1970-71 THE INCO ME TAX OFFICER (ITO) HELD THAT THE ASSESSEE HAD AN ENFORCEABLE RIGHT AS A RESULT OF ACCEPTANCE OF HIS OFFER BY THE UNION OF INDIA IN 1945 AND THE SAI D RIGHT WAS ACQUIRED BACK BY THE GOVERNMENT OF INDIA ON PAYMENT OF RS. 2,52,0 00 IN THE YEAR 1969. ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 24 THE ITO, THEREFORE, HELD THAT THE AMOUNT OF RS. 2,5 2,000 WAS TAXABLE AS CAPITAL GAINS IN THE ASSESSMENT YEAR 1970-71. THE A SSISTANT APPELLATE COMMISSIONER (AAC) HELD THAT THE ASSESSEE HAD NO CA PITAL ASSET AND THE AMOUNT OF RS. 2,52,000/- COULD NOT BE TREATED AS C APITAL GAINS. AS REGARDS THE INTEREST AWARDED TO THE ASSESSEE, THE AAC HELD THAT IT WAS RIGHTLY TAXED IN THE YEAR IN QUESTION. THE TRIBUNAL UPHELD THE AA CS ORDER. ON FURTHER APPEAL TO HONBLE BOMBAY HIGH COURT IT WAS HELD THA T IT IS A TRITE LAW THAT INCOME CAN BE HELD TO ACCRUE ONLY WHEN THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INCOME. UNLIKE COMPENSATION PAYABLE BY THE STATE WHEN IT ACQUIRES A CITIZENS LAND UNDER ACTS SUCH AS LAND A CQUISITION ACT WHERE THE RIGHT TO RECEIVE COMPENSATION IS STATUTORY RIGH T, THE RIGHT THAT A PERSON ACQUIRES ON THE ESTABLISHMENT OF BREACH OF CONTRACT IS AT BEST A MERE RIGHT TO SUE. DESPITE THE DEFINITION OF THE EXPRESSION CAPIT AL ASSET IN THE WIDEST POSSIBLE TERMS IN SECTION 2(14), A RIGHT TO A CAPIT AL ASSET MUST FALL WITHIN THE EXPRESSION PROPERTY OF ANY KIND AND MUST NOT FALL WITHIN THE EXCEPTIONS. SECTION 6 OF THE TRANSFER OF PROPERTY ACT WHICH USE S THE EXPRESSION PROPERTY OF ANY KIND IN THE CONTEXT OF TRANSFERAB ILITY MAKES AN EXCEPTION IN THE CASE OF MERE RIGHT TO SUE. THE DECISIONS THE RE UNDER MAKE IT ABUNDANTLY CLEAR THAT THE RIGHT TO SUE FOR DAMAGES IS NOT AN ACTIONABLE CLAIM. IT CANNOT BE ASSIGNED AND ITS TRANSFER IS OP POSED TO PUBLIC POLICY. AS SUCH IT WILL NOT BE QUITE CORRECT TO SAY THAT SUCH A RIGHT CONSTITUTED CAPITAL ASSET WHICH IN TURN HAS TO BE AN INTEREST IN PROPE RTY OF ANY KIND. THE RIGHT ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 25 TO SUE FOR DAMAGES FOR BREACH OF CONTRACT NO DOUBT IS CAPABLE OF MATURING INTO A RIGHT TO RECEIVE DAMAGES FOR BREACH OF CONTR ACT. BUT THAT HAPPENS ONLY WHEN DAMAGES CLAIMED ARE ADMITTED OR DECREED A FTER PASSING THROUGH VARIOUS STAGES E.G., ESTABLISHMENT OF CLAIM FOR BRE ACH OF CONTRACT, LOSS SUFFERED, SUITS, APPEALS, ETC. THE ONLY REASONABLE CONCLUSION WAS THAT THE RIGHT TO RECEIVE DAMAGES IN THIS CASE ACCRUED TO TH E ASSESSEE ON THE DATE OF THE CONSENT DECREE ONLY; SINCE THE RIGHT UNDER THE AGREEMENT CAME TO AN END IN THE YEAR 1961, IF NOT EARLIER, AND THE RIGHT ACQ UIRED IN LIEU THEREOF WAS ONLY A MERE RIGHT TO SUE, IT COULD NOT BE ACCEPTED THAT RS. 2,52,000 WERE RECEIVED AS CONSIDERATION FOR THE TRANSFER OF CAPIT AL ASSET, I.E., THE RIGHT TO THE EXECUTION OF LEASE DEED IN TERMS OF THE 1945 AG REEMENT DURING THE PREVIOUS YEAR IN QUESTION. THUS, IN THE INSTANT CAS E, NO PART OF COMPENSATION WAS TAXABLE AS CAPITAL GAINS. THE INTE REST AMOUNT WAS, HOWEVER, A REVENUE RECEIPT. IT WAS TAXABLE AS IF IT HAD ACCRUED FROM YEAR TO YEAR FROM 30-1-1959 TO THE DATE OF THE CONSENT DECR EE. 16. THE HONBLE GUJARAT HIGH COURT IN BARODA CEMENTS & CHEMICALS LTD. V. CIT [1986] 158 ITR 636/25 TAXMAN 324 (GUJ.) HELD TH AT THE ASSESSEE ENGAGED IN MANUFACTURE AND SALE OF SUGAR CONTRACTED TO BUY A SECOND HAND MILL FOR AN AGREED PRICE. SUBSEQUENTLY, THE VENDOR COMMITTED BREACH OF CONTRACT WHICH ENTITLED THE ASSESSEE TO RECEIVE DAM AGES. THE COURT HELD THAT SINCE A 'RIGHT TO SUE' FOR DAMAGE WAS NOT AN ACTION ABLE CLAIM, THERE COULD BE NO QUESTION OF EXTINGUISHMENT OF RIGHTS THEREIN. SINCE IT WAS NOT A ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 26 TRANSFER THE AMOUNT RECEIVED THEREON WAS NOT CHARGE ABLE TO TAX UNDER THE HEAD 'CAPITAL GAINS'. 17. FURTHER HONBLE CALCUTTA HIGH COURT IN CIT V. ASHO KA MARKETING LTD. 26 TAXMAN 215 (CAL.) THE ASSESSEE ENTERED INTO AN AGRE EMENT FOR PURCHASE OF CERTAIN PROPERTY. IN THE EVENT OF DEFAULT BY THE VE NDOR A SUM OF RS. 1 LAKH WAS PAYABLE TO THE ASSESSEE BY WAY OF LIQUIDATED DA MAGES. THE VENDOR FAILED TO COMPLETE THE TRANSACTION AS THERE WAS A P RIOR MORTGAGE OF THE PROPERTY WITH THE UTTAR PRADESH GOVERNMENT AND IT W AS NOT POSSIBLE FOR THE ASSESSEE TO PURCHASE THE PROPERTY. IT WAS HELD THAT FOR THE TRANSACTION THERE WAS NO ELEMENT OF COST FOR RECEIVING THE COMPENSATI ON OF RS. 1 LAKH. ACCORDINGLY, IT WAS HELD THAT AS THERE WAS NO ELEME NT OF COST INVOLVED IN THE ACQUISITION OF DAMAGES RECEIVED AND, HENCE, IT COULD NOT BE TREATED EITHER AS CAPITAL GAIN OR AS A REVENUE RECEIPT. 18. FURTHER THE COORDINATE BENCH OF MUMBAI TRIBUNAL IN ACIT VS JACKIE SHROFF (SUPRA) HELD THAT AMOUNT RECEIVED BY ASSESSE E AS COMPENSATION FOR WITHDRAWING A CRIMINAL CASE AGAINST ACCUSED WHO FOR GED HIS SIGNATURE FOR SALE OF SHARES, WAS TO BE REGARDED AS CAPITAL RECEI PT. 19. NOW TURNING TO THE FACTS OF THE PRESENT CASE THE A SSESSEE RECEIVED A SUM OF RS. 20 CRORE ON EXECUTION OF CANCELLATION DEED DATE D 11.09.2011. THE RELEVANT CLAUSE NO. 5 OF CANCELLATION DEED IS REPRO DUCED BELOW: ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 27 5. THE DEVELOPER DECLARE THAT SIMULTANEOUS UPON TH E EXECUTION OF THESE PRESENTS THE DEVELOPER HAVE RECEIVED BACK FRO M THE CONFIRMING PARTY THE CONSIDERATION AMOUNT OF RS. 20 ,00,00,000/- ( RUPEE TWENTY CRORE ONLY) BEING REFUND OF THE AMOU NT PAID BY THE DEVELOPERS TO THE OWNERS IN PURSUANCE OF THE SAID D EVELOPMENT AGREEMENT DATED 24 TH MARCH, 2005 READ WITH SUPPLEMENTARY AGREEMENT DATED 25 TH MARCH,2005 ALONG WITH INTEREST, TOWARDS LOSS OF PROFIT/ LIQUIDATED DAMAGE FOR LOSS OF OPPORTUNIT Y TO DEVELOP THE PROPERTY AND SALE OF FLATS IN THE OPEN MARKET AND T OWARDS THE COST OF LITIGATION, RECEIPT WHEREOF THE DEVELOPERS DO HE REBY ADMIT AND ACKNOWLEDGE AND THE DEVELOPER HAVE NOW NO CLAIM WHA TSOEVER NATURE AGAINST THE OWNERS AND /OR CONFIRMING PARTY IN RESPECT THEREOF. 20. FROM THE CONTENTS OF CLAUSE 5 OF THE CANCELLATION DEED DATED 11 TH SEPTEMBER 2011, WE HAVE NOTED THAT THE ASSESSEE HAS NOT TRANSFERRED ANY RIGHT IN FAVOUR OF THE CONFIRMING PARTY (THIRD PART Y) IN RESPECT WITH REGARD TO THE RIGHTS, WHICH WERE SOUGHT TO BE CONFIRMED IN MOU DATED 24 TH MARCH AND 25 TH 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 O F THE AMOUNT PAID BY ASSESSEE TO THE OWNERS IN PURSUANCE OF THE SAID DEV ELOPMENT AGREEMENT DATED 24 TH MARCH, 2005 READ WITH SUPPLEMENTARY AGREEMENT DATE D 25 TH MARCH, 2005 ALONG WITH INTEREST, TOWARDS LOSS OF PR OFIT/ 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. THE REFORE, IN VIEW OF THE ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 28 RATIO OF DECISIONS OF HONBLE DELHI HIGH COURT IN C IT VS J DALMIA (SUPRA), BOMBAY HIGH COURT IN CIT VS ABBASBHOY A. DEHGAMWALL A (SUPRA), HONBLE SUPREME COURT IN SAUGHTRA CEMENT LTD (SUPRA ) AND DECISIONS OF MUMBAI TRIBUNAL IN JACKIE SHROFF (SUPRA) AND AHMEDA BAD TRIBUNAL IN BHOJISON INFRASTRUCTURE (P ) LTD (SUPRA), THE AMOUN T RECEIVED BY THE ASSESSEE IN EXCESS OF ADVANCE IS ON ACCOUNT OF COMP ENSATION FOR EXTINCTION OF ITS RIGHT TO SUE THE OWNER, THE RECEIPT IS A CAP ITAL RECEIPT NOT CHARGEABLE TO TAX. SINCE THE ASSESSEE HAS NOT RECEIVED THE AMO UNT 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 HONBLE MADRAS HIGH COURT IN K.R.S RINATH VS ACIT (SUPRA) RELIED BY ASSESSING OFFICER IS NOT APPLICAB LE 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 PE RFORMANCE WHICH WAS ACQUIRED UNDER AGREEMENT TO SALE, IS LIABLE TO CAPI TAL GAIN TAX. HOWEVER, IN THE CASE IN HAND THE RIGHT OF ASSESSEE WAS IN DISPU TE AS THE OWNER OF THE LAND HAS ALREADY TRANSFERRED SUCH RIGHT TO THIRD PA RTY. RATHER THE ORIGINAL AGREEMENT WAS CANCELLED. 22. IN CIT VS TATA SERVICES LTD (SUPRA) THE RIGHT, TITL E 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 PROPERT Y. ITA NO. 86 MUM 2017-M/S CHHEDA HOUSING DEVEL OPMENT CORPORATION 29 23. SIMILARLY IN CITVS VIJAY FLEXIBLE CONTAINERS (SUPRA ) THE RIGHT, TITLE AND INTEREST OF THE ASSESSEE WERE NOT IN DISPUTE. HOWEV ER, THE RIGHT, TITLE OR INTEREST OF THE ASSESSEE WAS IN DISPUTE, THE ASSESS EE 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. ORDER PRONOUNCED IN THE OPEN COURT ON 29/05/2019. SD/- SD/ - G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 29.05.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI