Income Tax Appellate Tribunal - Mumbai
15Th Income-Tax Officer vs M.M. Aga on 25 February, 1994
Equivalent citations: [1994]50ITD604(MUM)
ORDER
T.V.K. Natarajachandran, Accountant Member
1. These appeals were heard together as they involve common facts and disposed of together for the sake of convenience.
2. Appeal ITA 530 relates to assessment of Late Sri M.M. Aga through his legal heir R.M. Aga while appeal ITA 5328 relates to assessment of Sri R.M. Aga in his individual capacity. The long-term capital gains arising on the sale of property known as "Bakhtawar Ice Factory" belonging to late Sri M.M. Aga was assessed taking the total consideration of Rs. 1,05,25,000 consisting of amount realised on public auction Rs. 61,25,000, amount received from purchasers of the property as per Consent Term dated 26-9-1988 Rs. 39 lakhs and earnest money Rs. 5,00,000 in the hands of Sri R.M. Aga, legal representative. At the same time, the amount of Rs. 39 lakhs received as per Consent terms dated 26-9-1984 was also assessed in the hands of Sri R.M, Aga, individual, on protective basis as income from "Profits & Gains of business or profession". The facts of the case have been elaborated which are common to both the appeals.
3. The brief facts are that during his lifetime, Sri M.M. Aga had entered into an agreement of sale of Bakhtawar Ice Factory on 31 -3-1981 with Sri P. C. Bafna, for a total consideration of Rs. one crore and received Rs. five lakhs as earnest money. The deal did not materialise. Sri P.C. Bafna alleged a supplementary agreement wherein the consideration was reduced to Rs. 80 lakhs and he has also filed a Suit No. 845 of 1981 in April 1982 for specific performance. An interim order dated 12-8-1983 has been passed by the Bombay High Court injecting and restraining the legal heirs from parting with or disposing of the property or creating any tenancy thereof. The said property was sold by public auction held on 23-4-1984 by Tax Recovery Officer, G-III Ward, Bombay, for a total consideration of Rs. 61,25,000 to M/s. Veena (P.) Ltd., Narpat Raj Mehta, Parasmal Jain, H.D. Jogani and P.C. Bafna. At this juncture it is to be pointed out that the original agreement dated 31-3-1981 was entered into by Sri P.C. Bafna only. Sri R.M. Aga received notice from the purchasers on 12-6-1984 to vacate the property and after coming to know the sale of the property by auction filed a Writ in the Bombay High Court on 15-6-1984 numbered as '1259 of 1984'. This was dismissed in limine by a Single Judge on 18-6-1984. On appeal, this judgment was dismissed but Court Receiver was appointed to take possession of the property. Sri R.M. Aga filed a Special Leave Petition dated 25-7-1984 before the Supreme Court to appeal against the order of the Division Bench, challenging the auction sale, as collusive one as the auction sale price of Rs. 61,25,000 was much below the price of Rs. one crore agreed upon earlier by Sri P.C. Bafna. R.M. Aga arrived at a settlement of all disputes as per Consent Terms dated 26-9-1984 in respect of S.L.P. Nos. 8609 & 9293 of 1984, according to which the sale by public auction on 23-4-1984 of Rs. 61,25,000 was confirmed and clear title passed and that amount is to be retained by the Department towards taxes and vacant possession should be handed over to the purchasers. As Sri P. C. Bafna is entitled to withdraw Rs. 5 lakhs paid as earnest money and interest accrued thereon. The Supreme Court passed an order on 28-9-1984 as per the Consent Terms confirming the sale of the property by public auction and clear title to the said property was passed on to the purchasers.
4. In the light of the aforesaid facts and circumstances, the Assessing Officer held that the total consideration paid for the sale of the property was Rs. 1,05,25,000 and worked out the long-term capital gains with reference to that amount. On appeal, the CIT(A) came to the conclusion that it is only the amount of Rs. 61,25,000 which is the auction sale price of the property and which has been confirmed by the Supreme Court that should be taken into consideration as sale price for purposes of completion of capital gains. The observation of the CIT(A) is as follows:
Once a court of law has decreed that a certain property has been sold for a certain amount and the certificate of sale of immovable property given in Form No. I.T.C.P. 20 also confirms the sale of 23-4-1984 made in auction, the ITO cannot intervene and say that the sale amount was anything more than Rs. 61,25,000." (vide para 4 of the impugned appellate order) Having concluded the sale price, the CIT(A) further held that the sum of Rs. 39,00,000 received by Sri R.M. Aga for settlement of all disputes with the purchasers to the exclusion of all other legal heirs was for giving up his right to enjoyment of the said property and therefore such right is a capital asset. The value of such right could be ascertained. In this view of the matter, therefore, he held that the entire sum of Rs. 39 lakhs received by R.M. Aga to the exclusion of other legal heirs is to be taxed in his hands and compute the capital gains arising out of that amount. Accordingly, he directed the ITO to compute capital gains in the case of the assessee with reference to the sale price of Rs. 61,25,000 and further directed the Assessing Officer to take assessment proceedings in the case of Sri R.M. Aga to tax the benefit arising out of Rs. 39 lakhs.
5. In the assessment of R.M. Aga, the Assessing Officer assessed the aforesaid amount of Rs. 39 lakhs as income from 'Profits & Gains of business or profession' on protective basis. According to the Assessing Officer, the assessee has rendered services on behalf of himself and other legal heirs in challenging the sale of the impugned property before various courts. He has taken extensive efforts to fulfil the terms of the Consent Decree by undertaking to obtain the consent of other legal heirs and also had undertaken to hand over the delivery of the vacant and peaceful possession of the impugned property to the purchasers against all damages or loss which may arise in future.
On the other hand, the assessee contended that he was not having any profession or business and the amount of Rs. 39 lakhs did not represent such income earned by him. No activity of the nature of the business or profession was carried out by him. Certain rulings were relied upon by the assessee in this regard. The further contention taken by the assessee was that there was no other similar receipt at any time and therefore the onus was on the Assessing Officer to prove that the transaction was an adventure in the nature of trade. In other words, the assessee contended that there was no element of trade or business in a litigation and settlement. It was further contended that the amount of Rs. 39 lakhs could not be considered for the purpose of determination of capital gains because there must be a transfer of property and mere right to receive compensation was a mere right to sue which could not be transferred under Section 6(e) of the Transfer of Property Act. Even if such right is considered as an asset transferred, the capital gains could not be assessed because such asset had no cost to the assessee. In this connection, reliance was placed on the judgment of the Supreme Court in the case of CIT v. B.C. Srtnivasa Setty [1981] 128 ITR 294. Hence it was argued that the amount in question was simply a capital receipt not liable to tax. It would appear that the assessee had a legal right, of ownership in the said property by birth. The amount received was a consideration for relinquishing or surrendering his rights in the immovable property which in itself constituted a transfer. The CIT(A) was of the opinion that the assessee being one of the legal heirs, he could have relinquished or surrendered or transferred only his share of rights in the immovable property and therefore liability to capital gains arises to that extent and not as income from business or profession.
6. As regards the balance amount out of Rs. 39 lakhs excluding the portion of value of share of the assessee in the immovable property, the CIT(A) concluded that in the light of eight-fold activities carried on by the assessee as reproduced in the appellate order, it should be treated as income from adventure in the nature of trade. In other words, a portion of the amount of Rs. 39 lakhs representing share of right in the immovable property is to be assessed for long-term capital gains while the balance is to be assessed as income from adventure in the nature of trade in the hands of the assessee.
7. The Revenue is in appeal against the order of the CIT(A) directing the exclusion of Rs. 39 lakhs from the sale consideration for the purpose of assessment of long-term capital gains in the hands of late M.M. Aga while R.M. Aga is in appeal against the order of the CIT(A) directing the assessment of Rs. 39 lakhs in his hands partly for capital gains and partly as income from business or profession.
8. Sri Dastur, learned Counsel for the assessee and Sri M. C. Nair, the learned Departmental Representative have been duly heard at great length and the paper compilations filed were duly taken into account and the case laws relied upon by them have been duly considered. It appears that the broad question appears to be whether Rs. 39 lakhs is to be assessed in the hands of late M.M. Aga or his son Sri R.M. Aga. According to the learned Counsel for the assessee, that if at all, it could be income in the hands of the father and not in the hands of the son.
9. The next question that arises is as to the amount of consideration. According to the learned Counsel for the assessee, the total consideration for the sale of the property is to be taken at Rs. 61.25 lakhs only and for this statement, relied on the order of the Division Bench of the High Court and the consent decree passed by the Supreme Court on the basis of consent terms arrived at between the parties wherein the sale by public auction of the property for Rs. 61,25,000 was confirmed. At the same time, the learned Counsel for the assessee pleaded that the sum of Rs. 39 lakhs received by Sri R.M. Aga can never be his business income because capital gains were charged on the transfer of the property in the hands of late M.M. Aga. The point canvassed by the learned Counsel for the assessee was if Rs. 39 lakhs so viewed is not part of sale proceeds, it cannot also be part of sale price for capital gains purposes.
10. In this connection, he reiterated the judgment of the Allahabad High Court in the case of Kali Nath v. CIT [1973] 88ITR 347 for the proposition that the burden is on the Revenue to show that the sum of Rs. 39 lakhs received by Sri R.M. Aga is income from adventure in the nature of trade, and the nature of transactions is such that it is normally entered into by persons who carry on trading activity. In that case, a compromise had been entered into between Rajbahadur, brother of the assessee Sri Kashinath and Henry Selastin John and Rajbahadur gave up his claim under a decree by receiving a sum of Rs. 1,70,000. The Allahabad High Court held that transaction did not bear the indicia of a trade. Therefore the sum or any part thereof could not be assessed under the head "Profits & Gains of Business". The judgment of the Bombay High Court in the case of Ashok Kumar Jalan v. CIT [1991] 187 ITR 316 was cited for the proposition that in deciding the character of a solitary transaction of purchase and resale, several factors are relevant, and in respect of solitary transaction, the onus is on the Revenue to prove that the transaction was an adventure in the nature of trade. In that case, purchase and sale of National Defence Gold Bonds, 1980 was involved and the Court held that did not amount to an adventure in the nature of trade and the profits arising there from were not assessable as business profits. The decision of the Punjab and Haryana High Court in the case of Kaur Singh v. CIT [1983] 144 ITR 756 was relied upon wherein the profits arising on sale of plots of land by converting a portion of the land let out to college, was not held to be Profits & Gains of business because at the time of purchase of the property, Kishan Bagh Kothi, there was no intention to make profits by plotting out the land and selling them. The decision of the Delhi High Court in the case of CIT v. Raunaq Singh Swaran Singh [1972] 85 ITR 220 was cited for the proposition that profit making would normally be not of an irrelevant consideration for every honest and prudent purchaser, but will not in every case make the purchase an adventure in the nature of trade. In that case, two plots of land were purchased and later on sold the same because the assessee at that relevant time was hard-pressed for funds to purchase Rs. 25 lakhs worth of shares in a company and it was this pressing necessity which forced it to drop the original idea of constructing buildings over the plots and sell them. The Delhi High Court held that the venture was not an adventure in the nature of trade and therefore the excess amount realised on the sale of 2 plots did not constitute income from business. The High Court ruled that to bring a transaction within this category it has to be shown that the sole intention at the time of purchase was to sell the property purchased later on at a profit, and the burden is upon the department to show that a transaction effected by the assessee is an adventure in the nature of trade. In the light of the aforesaid decisions, the learned Counsel for the assessee urged that the amount of Rs. 39 lakhs received by R.M. Aga cannot be assessed as profits & gains of business or adventure in the nature of trade. It was not a revenue receipt at all in his hands. The learned Counsel for the assessee further submitted that in Parsee law, no child gets any right in the property of the father on birth.
11. The learned Departmental Representative on the other hand referred to pg. 157 of the paper compilation containing the order of the Supreme Court dated 28-9-1984 wherein Clause [fl directs Consent Terms as recorded in the agreement placed on record by the concerned parties along with the undertaking shall be kept on record and shall form part of this order. He referred to pg. 161 of the compilation containing consent terms of the parties wherein Clause (3) specifies that in consideration of all disputes between the petitioner, Sri R.M. Aga and the respondents, the respondent had undertaken to deposit a sum of Rs. 39 lakhs within six weeks from the signing of these Consent terms for payment to the petitioner. Thus, the learned Departmental Representative urged that the sum of Rs. 39 lakhs should be assessed as income from business being adventure in the nature of trade.
12. Taking the departmental appeal, the learned Departmental Representative argued that a sum of Rs. 39 lakhs received by Sri R.M. Aga is to be taken as part and parcel of sale consideration "Bakhtawar Ice Factory". The assessment of the same amount in the case of R.M. Aga is only protective and consequential in nature. According to the learned Departmental Representative, the purchasers had parted with not only the sum of Rs. 61.25 lakhs but also Rs. 39 lakhs all of which constituted sale consideration. In this connection, he pointed out that a sum of Rs. 49 lakhs was fixed as floor price for the auction of the said property. In this connection he referred to Clause (f) of the decree of the Supreme Court dated 28-9-1984 according to which consent terms in the agreement with the undertaking shall form part of the record. Therefore, the sum of Rs. 39 lakhs paid to R.M. Aga as the legal heir rightly formed part of the total sale consideration of the property and it is to be assessed as capital gains.
13. The learned Counsel for the assessee, on the other hand, submitted that while confirming the sale of the property the Tax Recovery Officer has to take the market price of the property or otherwise it would be set aside. He referred pg. 157 of the paper compilation containing the order of the Supreme Court dated 28-9-1984 wherein Clause (c) it has been specified that the amount of Rs. 61.25 lakhs realised by way of sale of the property will be retained by the Income-tax Department for satisfaction of all taxes. In other words, the learned Counsel for the assessee reiterated his argument that the sale price as per the Supreme Court order was only Rs. 61.25 lakhs and therefore the sum of Rs. 39 lakhs received by Sri R.M. Aga did not form an integral part of sale consideration as stated by the Revenue in ground No. 3 of the appeals filed in the case of late M.M. Aga. The amount of Rs. 39 lakhs was a capital receipt but it was received not for transfer of capital asset.
14. After due consideration of the rival submission, record and the paper compilation filed by the parties, we are of the opinion that the sum of Rs. 39 lakhs paid to Sri R.M. Aga for dissolution of the disputes by the purchasers of the property constituted part and parcel of the sale consideration of the impugned property. The reason for this is not far to seek. Sri R.M. Aga appeared on the scene only after the property was sold by auction by the TRO on 23-4-1984 for Rs. 61,25,000. Sri R.M. Aga, one of the legal heirs of late M.M. Aga hurried up and filed Writ Petition in the Bombay High Court on 15-6-1984 numbered as Writ Petition No. 1259 of 1984. Rule 9 of the Schedule II of the IT Act, 1961 specifically bars jurisdiction of civil courts which reads as under :
9. Except otherwise expressly provided in this Act, every question arising between the Tax Recovery Officer and the defaulter or their representatives, relating to the execution, discharge or satisfaction of a certificate or relating to the confirmation or setting aside by an order under this Act of a sale held in execution of such certificate, shall be determined, not by suit, but by order of the Tax Recovery Officer before whom such question arises :
Provided that a suit may be brought in a civil court in respect of any such question upon the ground of fraud.
The proviso to the said Rule enables filing of a suit in a civil court in respect of any such question relating to execution, discharge or satisfaction of a certificate or relating to the confirmation or setting aside by an order of sale held in execution of such certificate only on the ground of fraud. In other words, on the ground of fraud, the action of the TRO could be challenged by way of suit in a civil court. Rule 53 (cc) provides the reserve price below which the auction of the property may not be sold should be specified. Rule 56 provides that sale shall be by public auction to the highest bidder and shall be subject to confirmation by the TRO. The proviso to the said rule provides that no sale under this rule shall be made if the amount bid by the highest bidder is less than the reserve price, if any, specified under Clause [cc) of Rule 53. Rule 60 provides for a remedy to the defaulter to apply to the TRO to set aside the sale on consideration of depositing the amounts due with interest thereon and payment of penalty to the purchaser. Rule 63 provides that where no application is made for setting aside the sale or where such application is disallowed by the TRO, shall make an order confirming the sale and thereupon the sale shall become absolute. Upon confirmation of the sale, the sale shall become absolute. In view of the aforesaid relevant rules, the only course open to the defaulter is to challenge the action of the TRO on the ground of fraud. This is exactly what has been done by R.M. Aga by rushing to the court and filing a writ in the Bombay High Court on 15-6-1984. It is not necessary to trace the course of the outcome of the said writ petition. However, contents of the writ petition are very much relevant and have direct bearing on the issue involved in these appeals.
15. In Clause 7(b) of the Writ Petition, it has been stated by Sri P.C. Bafna, Respondent No. 8, had agreed to purchase the property from the deceased for Rs. One crore under a written agreement dated 31-1-1981 in respect of which 2 suits were filed in the High Court for the specific performance. The suit property could not have been sold by the TRO and purchased by the respondent Sri P.C. Bafna for Rs. 61,25,000.
In Sub-clause (c) thereof, it was stated that there was collusion and connivance among the respondents for the sale and purchase of the suit property and the respondents (1), (2) & (3) have acted malafide, arbitrarily and in violation of the rights guarantee under Articles 14, 19(1)(g), etc. In Sub-clause (e) it was stated that the auction sale was illegal as it was held on 23-4-1984 in spite of the letter dated 21-4-1984 of the CIT Bombay City IX granting the stay of the said sale.
In Sub-clause (g), it was stated that the said sale was otherwise illegal. In Clause [g), the petitioner prayed for issue of appropriate writ order or direction under Article 226 of the Constitution quashing and setting aside the auction sale of the suit property.
16. In appeal No. 552 of 1984, from the order in Writ Petition No. 1259 of 1984, Sri R.M. Aga stated in para 8, the Tax Recovery Officer issued prohibitory order to the said P.C. Bafna on 6-3-1982 in and yet that the TRO has sold the property for Rs. 61.25 lakhs ignoring the agreement with Sri P.C. Bafna, Respondent No. 8 dated 31-1-1981 for a consideration of Rs. one crore. In para 8, it is stated that the said agreement of sale dated 31-1-1981 for Rs. 1 crore was known to the TRO as the deceased intimated it to the ITO and the TRO duly. In fact, the TRO had issued on 6-3-1982 prohibitory order restraining Sri P.C. Bafna from making payment to the deceased and in fact the deceased had no other transaction with the said Sri P.C. Bafna. In para 9, P.C. Bafna alleged supplementary agreement with the deceased for a reduced consideration of Rs. 80 lakhs and Suit No. 845 of 1981 was filed on or before 22-4-1982 for specific performance. The deceased was injuncted and restrained from bearing with or disposing of the said property by the court. In the appeal, the assessee sought to rely on such proceedings to bring home the factual position of the agreed sale price of Rs. one crore for the impugned property. In para 20, Clause XTV, the reserve price of Rs. 47 lakhs fixed by the TRO in the proclamation of sale was pointed out to be highly unreasonable and illegal and in Clause XV, it is stated such reserve price was mala fide and the auction sale price was totally vitiated. In Clause XVI, the auction sale was stated to be collusive one, rushed through, fixing absolutely low reserve price and complete the sale for Rs. 61.25 lakhs though the authorities were fully aware of the fact that Sri P.C. Bafna himself had more than 3 years earlier agreed to purchase the property for Rs. one crore. The auction sale was said to be bad in law inasmuch as the agreed sale price was known to the TRO but it was not referred to in the proclamation of sale. In Clause 23, it was stated that Rule 52 of the Second Schedule of the IT Act was violated while in Clause 24, the auction sale was stated to be highly arbitrary, unreasonable and unjust. The sale was illegal and null and void. In Clause 25, the sale is to be fraudulent, mala fide and dishonest.
17. We shall now refer to the contents of the Special Leave Petition dated 25-7-1984 filed by the assessee. At the end of para 1, it has been stated that the assessee challenged the auction sale of the property at Rs. 61,25,000 even though the Respondent No. 8, Sri P.C. Bafna had entered into an agreement earlier for purchasing the property for a consideration of Rs. one crore.
In para 9, the fact of agreement dated 31-1-1981 for a consideration of Rs. one crore was within the knowledge of the TRO and he has issued prohibitory order to Sri P.C. Bafna stating that the deceased owed Rs. 8,01,200 and the part of the debt was to be handed over to the TRO.
In para II the reserve price of Rs. 47 lakhs was questioned as unreasonable and illegal with reference to the agreement dated 31-1-1981 for Rs. one crore.
In para KK, the auction sale was challenged to be a collusive one, rushed through despite the agreement price of Rs. one crore.
In para LL it is challenged as bad in law and as agreement of sale was not referred in the proclamation of sale issued by the TRO.
In para UU, the transaction was challenged as fraudulent, mala fide and dishonest to enable the respondents to acquire the property at lowest possible price below Rs. one crore agreed to be paid under agreement of sale.
18. Thus, it will be crystal clear from the aforesaid challenges made by the assessee questioning the auction sale on the ground of fraud and illegality and also in view of the fact that PC Bafna, Respondent No. 8, has filed 2 suits in the Bombay High Court for specific performance, one for Rs. one crore and the another for Rs. 80 lakhs, the Respondents hastened to agree to Consent Terms with the assessee who is more concerned with the agreed sale price of Rs. one crore. All the terms of the Consent Terms dated 26-9-1984 would lead to the same conclusion and the assessee got the amount of consideration for which he pursued litigation relentlessly from court to court. The Respondents got the prize property by getting a Consent Decree passed by the Supreme Court on 28-9-1984 which virtually amounted to grant of specific performance. The Consent Decree also satisfied the object and purpose of challenging the auction sale on the ground of fraud inasmuch as the additional sum of Rs. 39 lakhs paid to the assessee by the Respondents together with the auction sale price of Rs. 61,25,000 amounts to Rs. 1,00,25,000 which equal the agreed sale price of the agreement dated 31-1-1981 between the deceased and P.C. Bafna. The Consent Decree also dissolves the Writ Petition No. 1259 of 1984 filed by Sri R.M. Aga and also appeal No. 552 of 1984 filed by him. It also dissolved 2 suits filed by Sri P.C. Bafna, Respondent No. 8 for specific performance. Thus, the Consent Decree has brought about the sale of the impugned property for a consideration of Rs. one crore so to say. This is the irresistible conclusion one could draw when all the developments and disputes taken together culminating in dissolution of disputes and arriving at consensus by way of Consent Decree passed by the Supreme Court.
19. In this connection, the various contentions raised on behalf of Sri R.M. Aga in connection with taxing the amount of Rs. 39 lakhs received by him are not valid and tenable because Sri R.M. Aga never waged a war to enforce his share of right in the property as a legal heir of late M.M. Aga and therefore the question whether the amount received by him is taxable as a revenue receipt or non-taxable as a capital receipt is purely academic in nature. Even in the Consent Decree, Their Lordships of the Supreme Court have made it very clear that though the sum of Rs. 61,25,000 could be retained by the Income-tax Department towards the tax arrears of late M.M. Aga the balance remaining after meeting the tax liabilities should be handed over to legal heirs of late M.M. Aga. Therefore, the legal heirs of the deceased had rights not only in the sale proceeds as determined in the auction sale but also in the amount of Rs. 39 lakhs paid by way of Consent terms by the Respondents to Sri R.M. Aga. We are not concerned with the distribution of the balance amount of sale consideration out of auction sale and also the sum of Rs. 39 lakhs between the legal heirs in accordance with the Law of Inheritance, of the Parsee community because we are not called upon to do so. Whatever might be the facade or form in which the additional consideration of Rs. 39 lakhs was paid as per consent terms, the substance of the transaction by piercing the veil of the documents or the reality of the transaction could be ascertained and established. The fact that Sri R.M. Aga waged relentless legal battles by going to one court from another to seek remedy and the fact that he has also undertaken to comply with the requirements of Consent Decree both before the Supreme Court and before the Respondents did not mean that he has rendered any specific services so as to merit any separate remuneration there for. Sri R.M. Aga happened to be one of the Legal heirs on the site and vigilant to take legal action to resist the fraud perpetuated by knocking off the property by the respondents in the guise of auction sale of the property which has otherwise become absolute. But for the Consent Decree, the duplicity of Sri P.C. Bafna would have been exposed in the Bombay High Court when the 2 suits for specific performance filed by him were decided. Sri P.C. Bafna had saved himself from such embarrassment by agreeing to pay the balance amount of Rs. 39 lakhs through the medium of the Respondents acting together. Similarly, the undertaking given by Sri R.M. Aga to indemnify Respondents (4) to (8) against loss, damage, proceedings etc. are merely legal formalities when the legal title for the impugned property has been absolutely vested by the confirming auction sale and issuing a certificate there for.
20. In the facts and circumstances of the case, therefore, we do not agree to the proposition that the sum of Rs. 39 lakhs was paid for the specific services rendered by Sri R.M. Aga because we are of the firm opinion that it is part and parcel of the sale consideration of the impugned property and the Supreme Court has only put seal of approval to the consent terms arrived at by the party and it does not mean that the sale price is only Rs. 61,25,000 as per auction sale. If the parties have not agreed to the consent terms, the auction sale would have been knocked off on the ground of fraud and the respondent would have lost a valuable property. If the respondents have saved themselves and succeeded in retaining the property it is only at the cost or price of Rs. 39 lakhs paid for the property and nothing else. The consent decree is couched in such a manner as if the sum of Rs. 39 lakhs was paid to Sri R.M. Aga for giving up all disputes and rights in the property. As we have demonstrated hereinabove that the burden of the song of Sri R.M. Aga all through has been that the original price agreed to as per agreement of sale dated 31-1-1981 was not paid to the vendor. Viewed from this angle, we do not agree with the contention of the learned Counsel for the assessee that the amount of Rs. 39 lakhs received by Sri R.M. Aga was a capital receipt in his hand and inasmuch as there was no cost, therefore it was not liable to capital gains. We also do not agree with the contention of the learned Counsel for the assessee that Sri R.M. Aga having not indulged in any other activity, the single activity of waging legal battles from court to court did not amount to a venture in the nature of trade so as to assess it as business income in his hands for which he has cited several decisions, because such consideration are wholly extraneous with reference to the context in which the auction sale has been challenged by one of the legal heirs which has otherwise become absolute. The only remedy open to any legal heir was to obtain the price agreed for which has been denied by the auction sale by the respondents knocking off the property for a sum of Rs. 61,25,000. It is pertinent to point out at this juncture that no legal heir has come forward to own up the responsibility for paying the tax arrears of the deceased and retaining the property, even after the auction sale of the property as provided under the law. Equally no legal heir has come forward to fight the issue on merits so as to get back the valuable property. It is abundantly clear from the consent terms that the parties to the terms got back what they wanted with the result all the disputes came to an end.
21. In view of the facts and circumstances and the findings given above, we are of the opinion that the Assessing Officer was quite justified in taking the sale consideration of Rs. 1,05,25,000 and computing capital gains on that basis. For the same reason, the CIT (A) was not justified while deciding the case of late M.M. Aga that only Rs. 61,25,000 should be taken into account as the sale price for the purpose of computation of capital gains and he was not justified in giving direction to frame fresh assessment in the case of Sri R.M. Aga to assess the benefit arising out of the receipt of Rs. 39 lakhs separately. In view of our aforesaid conclusion and decision, the inclusion of Rs. 39 lakhs in the hands of Sri R.M. Aga on protective basis would not stand inasmuch it is being substantially considered in the hand of late M.M. Aga as additional payment of sale price of the property. In the appeal relating to Sri R.M. Aga, ground No. 7 relating to the addition of Rs. 1,500 as estimated rent from house property was not pressed.
22. In the result, the appeal of the Revenue in the case of late M.M. Aga as allowed while the appeal filed by Sri R.M. Aga is also allowed.