Income Tax Appellate Tribunal - Delhi
Gynendra Bansal vs Assistant Commissioner Of Income Tax ... on 21 April, 2003
Equivalent citations: [2003]86ITD421(DELHI), (2003)81TTJ(DELHI)240
ORDER
Y.K. Kapur, J.M.
1. These two appeals filed by the assesses involve the common question of law and facts and thus are being taken up and are disposed of together.
2. Common grounds in the appeals, which revolve around the tax liability of the amount in the hands of the assessee which amount have been received by the assessee the form of compensation from the original owners whose property the assessee had purchased in Court auction and ultimately left the property on the receipt of compensation under compromise recorded in the apex Court. The assessee has a grievance that the amount has wrongly been taxed as casual and non-recurring by the authorities below. According to the assessee the amount so received is not taxable at all
3. To adjudicate this controversy in its right prospective it would be proper to refer to a few relevant facts available on record.
4. Against a property in Friends Colony, New Delhi which was mortgaged and belonged to M/s The Table Ware Craft Cottage, Shri R.K. Goel, Shri Virender Kr. Goel and Shri Jitender Kr. Goel, Punjab National Bank filed suit for recovery of money which was decreed. Consequent to the passing of the decree on 29th Jan., 1981, Plot No. 7-A Friends Colony Residential Scheme, New Delhi which was mortgaged was subjected to public auction. The assessee in these appeal before us participated in the said auction and their bid for the said plot of land was accepted by the Court auctioneer for a sum of Rs. 10,05,000. Consequent to the acceptance of the bid by the Court auctioneer, the same was confirmed by the civil Court in accordance with law and on 2nd Feb., 1989. Sale certificate with respect to Plot No. A-7 was issued in favour of the two assesses by the Registrar, High Court Delhi, which Court was executing the decree. It is also on the record that the issuance of the sale certificate led to the execution of the sale deed, which was duly registered with the office of sub-Registrar Delhi on 6th Feb., 1989.
5. As far as the assessee is concerned, the issuance of the sale certificate and execution of sale deed did not put an end to the litigation but the matter was taken up to the Supreme Court by the original owner by way of Special Leave Petition. It is also on the record that during the pendency of the proceedings before the apex Court in the Special Leave Petition which ultimately resulted in to civil Appeal 1003 of 1992, the dispute pending before the apex Court was amicably settled between the parties. Consequently to the settlement arrived between the parties, the apex Court recorded the terms of settlement in its order of 28th Feb., 1992. Some of the consent terms before the apex Court which are relevant for our purposes are that the assessees before us agreed to the sale certificate and the sale deed being set aside and also agreed to offer the vacant possession of the plot to the appellant subject to their being paid a sum of Rs. 10,05,000 which was deposited with the apex Court. As a result of the said settlement, the assessees before us received the amount. Consequent to the receipt of the amount, the sale certificate as well as the sale deed stood cancelled.
6. With the aforesaid background, for the relevant assessment year the assessees filed its return of income. The AO while finalizing the assessment came to the conclusion that the amount of Rs. 10,05,000 which was received by each of the assessee is liable to be taxed as casual and non-recurring though the case of the assessee before the AO was that the amount does not attract any tax for the reason that it was not the income of the assessee as the amount received by the assessee was only compensation. According to the assessee they at no point of time acquired any right in the property. The contentions raised by the assessee before the AO did not find favour and the AO held that the amount of Rs. 10,05,000 received by the assessee is covered under Section 10(3) of the IT Act and is liable to be taxed as casual and nonrecurring receipt.
7. The assessee against this order of the AO filed appeal before the CIT(A). Before the CIT(A), it was stressed by the assessee in the background of the facts narrated above that the assessee did not acquire any right in the said plot as the sale was set aside by the Supreme Court and the amount received by the assessee in compromise was wrongly taxed as casual and nonrecurring. In sum and substance the case of the assessee before the authorities below was that the amount received by the assessee in the manner indicated above is not at all taxable as it was a receipt by chance because at the time when they participated in the auction they could not have visualized this situation. It was the case of the assessee before the CIT(A) that the difference between the purchase price and the amount received pursuant to the orders of the apex Court was in the nature of the compensation only to the assessees and was thus not an income of the assessee. The case of the assessee we may say was also that the amount has been received for deprivation of use of the property.
8. The arguments put forward by the assessee did not find favour with the CIT(A) who held that the amount received by the assessee was compensation in lieu of forfeiture of the their right in the said property and was, therefore, directly relatable to the investment made by the appellant. In this background the CIT(A) held that the amount received by the assessees pursuant to the orders of the Supreme Court was an income of casual and non-recurring nature falling within the meaning of Section 10(3) of the IT Act. With this reasoning the CIT(A) confirmed the order of the AO.
9. The assessee has a grievance to the orders of the tax authorities below and is in appeal before us. The main thrust of the argument of the learned senior counsel was that the receipt of the sum of Rs. 10,05,000 each was not in the nature of income as it is an amount received not in lieu of any transfer made of any asset but only as compensation for deprivation of the use of the property and thus not liable to tax. Mr. Aggarwal was making the submission on the premise that the assessee had never acquired any such asset or acquired even any interest in the property and, therefore, the receipt could not be regarded as income accruing as a result of exercise of any business or profession. The learned senior counsel further contended that the amount so received was not on account of exercise of any business or profession or any other activity and thus does not fall under any of the heads where income chargeable to tax has been defined. Mr. Aggarwal during the course of hearing suggested that the order of the High Court whereunder rights were granted to the assessee on account of issuance of sale certificate and sale deed were set aside by the Supreme Court and, therefore, neither the appellant acquired any capital asset nor there was any transfer of the same by them. According to the senior learned counsel the appellant never acquired any right in the plot. The payment received by the assessee according to Mr. Aggarwal was received in a compromise and has been received as per the agreement between the parties. The thrust of Mr. Aggarwal's argument was that if amount has been received in this manner it cannot be said to be in nature of income and is not taxable as such. The amount of Rs. 10,05,000 each received by the two assessees was stated to have been received as a matter of gesture of goodwill from the judgment debtors for deprivation of the use of property by the assessee. The sum and substances of the arguments raised at the bar by Mr. Aggarwal was that the assessee never acquired any right in the property nor could they transfer the same and the amount received in terms of the compromise was not an income earned and thus not eligible to tax. According to the senior learned counsel it is only the income earned which is liable to the tax which is not the case here.
10. In support of arguments raised certain, legal precedents were relied upon by the learned authorised representative in the case of Smt. C. Kamla v. CIT (1978) 114 ITR 159 (Kar), Parimisetti Seetharamamma v. CIT (1965) 57 ITR 532 (SC), Smt. Anand Bala Bhushan v. CIT (1995) 83 Taxman 548 (All), T.N.K. Govindaraju Chatty v. CIT (1967) 66 ITR 465 (SC), J.K. Synthetics Ltd. v. ITO and Anr. (1976) 105 ITR 864 (All), Bawa Shiv Charan Singh v. CIT (1984) 149 ITR 29 (Del), and J.C. Chandiok v. Dy. CIT (1999) 64 TTJ (Del)(SB) 1 : (1999) 69 ITD 75 (Del)(SB).
11. To the arguments raised by the authorised representative, learned Departmental Representative submitted that the assessee in this case had acquired a valuable right in the property and the amount was received by the assessee was for extinguishment of the right in the property and the amount so received given any name would be liable to be taxed. Another submission of the learned Departmental Representative was that in this particular case after having obtained a sale certificate and the sale deed before the apex Court, the assessee given a consent to relinquish his right in the property and for relinquishing that right which he has acquired from the sale certificate and sale deed, the assessee asked for a price which is paid, on the receipt of which amount they cease to have right, It was the submission of the learned Departmental Representative that if the said amount received by the assessee for voluntarily giving up his right cannot be said be income of the assessee then according to learned Departmental Representative different meaning needs to the definition of the income. The learned Departmental Representative in support of his argument drew our attention to the sale certificate placed on the record dt. 2nd Feb., 1989, issued by the Registrar of Delhi High Court wherein the Court puts the seal to the auction sale, by issuing a sale certificate. According to the learned Departmental Representative the matter does not stop on issuing of a sale certificate but consequent to the issuance of sale certificate the sale deed is also executed. The learned Departmental Representative submitted that an immovable property is acquired through a document called sale deed which is duly executed in favour and once the sale deed is executed it was the case of the learned Departmental Representative that a valuable right is granted in favour of the persons holding the sale deed and it is this valuable right which has been given away for a consideration pursuant to the consent given by the assessee in the apex Court. The learned Departmental Representative submitted that there is a difference between the decree/judgments being distributed on merits and an order being obtained on consent. For giving this consent the assessee has got a payment of Rs. 10,05,000. If ultimately the matter would have been argued in the apex Court, it was the submission of the learned Departmental Representative, that the outcome of the matter might not have been the same. The learned Departmental Representative submitted that the assessee in their wisdom agreed and consented to take the compensation for giving up of the right in the property and once having received the amount be it given in any name the said amount is to be brought to the tax and taxed not only under the proper hands but also in the proper heads. After having said so, the learned Departmental Representative submitted that the amount received is the capital receipt. In the alternative, it was the submission of the learned Departmental Representative that if the amount is not to be taxed as capital receipt, then it has rightly been taxed as casual and non-recurring and in the circumstances, no interference in the orders of the authorities below is called for. In support of the arguments raised the learned Departmental Representative reopened the judgment of the apex Court reported in Emil Webber v. CIT (1993) 200 ITR 483 (SC), CIT v. G.R. Karthikeyan (1993) 201 ITR 866 (SC), CIT v. J.C. Wahal (1988) 170 ITR 635 (All), and RM. AR. AR. RM. AR. AR. Ramanathan Chettiar v. CIT (1967) 63 ITR 458 (SC) and 841 ITR 125 (sic).
12. The moot question that arises for the consideration in these appeals is as to whether the assessee had acquired any right in the said property and if the answer to this question is in the affirmative, then what is the nature of that right which the assessee had acquired.
13. The order issue apart from the above is that if the answer to the aforesaid question is in the negative then the issue that would further arise for adjudication is that if the assessee had not acquired and right in the said property then whether the receipt of the sum of Rs. 10,05,000 received by the two assessees is still liable to be taxed and if so then under which head.
14. We have heard the parties and taken ourselves through the record. This is not in dispute that pursuant to the auction by the Court in which the assessees participated they were held to be successful and their bids were accepted. Consequent to the acceptance of the bids the sale certificate and the sale deed were also executed in their favour but ultimately the sale certificate and the sale deed were set aside on account of compromise between the parties in the apex Court. The submissions of the assessee before us were that they had not acquired any right in the said property as their bids were cancelled but the submissions those were made on behalf of the Revenue were that assessee had acquired a capital asset and out of his own volition and given up that right. The submission of the Revenue was that what the assessee had acquired was a capital right in the capital asset which right the assessees on his own volition had given up against payment called compensation by the assessees. The amount so received was capital receipt and in the alternative if not capital receipt, then casual and non-recurring receipt,
15. The argument of the Revenue at the threshhold sounded not only positive but appealed to be based on very sound foundation but when we examined the argument so raised in the light of the judgment of Karnataka High Court in (1978) 114 ITR 159 (Kar) (supra) we fail to persuade ourselves with the contentions raised by the Revenue. The facts of the case of Smt. C. Kamla (supra) were identical to those of the one before us. In that case also Smt. C. Kamla had purchased the property in Court action when the matter went up for confirmation of the sale in the Court, the compromise was arrived at between the parties whereunder the assessee Smt. C. Kamla was paid a sum of Rs. 20,000 for getting the sale set aside. The AO brought the said amount of Rs. 20,000 received by her/assessee to tax as capital gains but when the matter reached the High Court, the High Court held that the transactions could not be treated as a transaction for transfer of a capital asset by the assessee. The reason for stating so by the High Court was that the assessee never acquired any interest in the property and she had not done any act which is directly or indirectly amounts to the transfer of the asset. The findings of the Tribunal which held that a sum of Rs. 20,000 is long-term capital gain was set aside.
16. We in these circumstances have no hesitation in holding that once a sale was set aside pursuant to a compromise recorded in the apex Court the assessee could never be said to have acquired any right in the said property. Once they had no right they could not transfer any. We, therefore, have to agree with the senior learned counsel for the assessee that the assessee had not acquired any capital asset and the receipt was not a capital receipt assessable to tax.
17. In view of this, the questions referred to in para 10 have to be answered in favour of the assessee and against the Revenue.
18. This brings to the vital issue that in case this is not as capital receipt whether it is still liable to be taxed under any provision of the Act or not. The senior learned counsel submitted that there is no element of income attached to the amount received as the said amount has been received for the deprivation of the use of property which the assessee was entitled to but could not do so and as a matter of gesture of goodwill from the judgment debtor whose land had been auctioned in favour of the assessee, the assessee has only received compensation, which amount is not liable to be taxed. To the said argument so raised by the learned senior counsel, Shri C.S. Aggarwal, the learned Departmental Representative submitted that if the said amount has not taken as capital receipt then the authorities below were right in bringing to tax the amount received by the assessee within the provisions of Section 10(3) of the IT Act.
19. Some legal precedents were cited on both sides with which we shall deal with a little later but let us examine as to whether the amounts received by the assessee would still be liable to be taxed under Section 10(3) of the IT Act. Section 10(3) falls in Chapter III of the IT Act, which deals with income, which do not form part of total income. Section 10(3) of the IT Act, is reproduced below for ready reference :
In computing the total income of a previous year of any person, any income falling within any of the following clauses shall be included "(3) Any receipts which are of casual or non-recurring nature to the extent such receipts do not exceed Rs. 5,000 in aggregate;
Provided that whether such receipts relate to winnings from races, including horse races, the provisions of this clause shall have effect as if for the words 5,000 rupees the word 2,500 rupees had been substituted :
Provided further that this clause shall not apply to :
(i) capital gain chargeable under the provisions of Section 45;
(ii) receipts arising from business or the exercise of a provision of occupation; or
(iii) receipts by way of addition to the remuneration of the employee;"
20. The perusal of the Section 10(3) of the IT Act reveals that it opens with the word "any receipt." The word "any receipt" is of a wide aptitude. It covers according to us of those receipts which are of casual and non-recurring in nature and that too to the extent that it does not exceed five thousand rupees, which is definitely not the case here as the amount received is manifolds to the limit prescribed under Section 10(3). A further analysis of this section reveals that the receipt should not be of capital in nature. We have already held in the foregoing paragraphs of this order that the amounts received by the assessee are not of the nature of the capital receipts and not chargeable to the capital gains. This section also reveals that it should not be received from business or exercise of profession or occupation and the receipt should not be by way of addition to the remuneration of an employee, which is also not the case here. If all the ingrediants of Section 10(3) of IT Act are satisfied, as is the case here, the amount has to be held as casual and non-recurring.
21. The submission of the learned counsel for the assessee was that the amount received is as compensation and not accessible to tax. The learned counsel submitted that the authorities below were wrong in bringing this amount to tax under Section 10(3) of the IT Act.
22. In support of his contention, the learned senior counsel during the course of hearing relied upon the judgment of the Delhi High Court in the case of Bawa Shivcharan Singh v. CIT (supra). The submission of the learned counsel was that in view of the ratio of this judgment the amount received by the assessee is not accessible to tax and the provisions of Section 10(3) of the IT Act were wrongly invoked. Another judgment of which the reliance was placed by the learned senior counsel was that the one in the case of Parimisetti Seetharamamma v. CIT (supra). This judgment was apparently cited with an idea that every receipt received by the assessee is not his income liable to the tax. The submission of the senior learned counsel while drawing strength from its judgment was that in case where the receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provisions. Having said so the learned senior counsel further drew our attention to another judgment of the Allahabad High Court in the case of Anand Bala Bhushan v. CIT (supra).
23. The judgment relied upon by the learned counsel for the assessee do not advance the case of the assessee. We are saying so because in the case reported in Bawa Shiv Charan Singh v. CIT (supra) facts were that a certain amount were received for surrendering tenancy rights which amount was taxed by the AO under the head 'Capital gain'. The matter travelled to the High Court and the High Court found that the capital gain could be calculated only with reference to the provisions of Sections 45, 46 & 52 of the IT Act as they then existed. The cost of acquisition for acquiring the tenancy rights in that case was not known. It was held that amount could not be taxed as a capital gain.
24. We have already held that the amount received by the assessee is not taxable as a capital gain, we feel that this judgment in this background does not advance the case of the assessee. As far as the judgment relied upon by the learned senior counsel reported in Anand Bala Bhushan (supra) is concerned, the facts were that certain rights were acquired by the assessee in a particular land on which the assessee built up certain buildings. This happended way back in 1950. In 1971, the rights of the assesses in the said building, were sought to be resumed by the Government of India, Ministry of Defence and the assessee agreed to give up those rights which he had in the building and the land for a certain amount of compensation. High Court held that receipt of compensation was certainly a capital receipt but it is only out of capital receipt that the capital gain arises. The receipt of compensation was not in the nature of the ordinary income and, therefore, the question of treating the same, as casual receipt for the purpose of income-tax does not arise. We feel that even this judgment (does not) advance his case any more because in this case the findings are that the gain of Rs. 56,287 was taxable as capital gain under Section 45 of the Act and the receipt of Rs. 87,887 was a capital receipt out of which capital gain of Rs. 56,287 arose.
25. This brings us to another judgment relied upon by the learned senior counsel in J.C. Chandiok (supra). In this case certain amount was received for vacating the premises which was brought to tax within the net of capital gain, The Special Bench of this Tribunal held that the amount received in question was of the nature of capital receipt and it can even charge to tax only under the head "Capital gain". This judgment also does not advance the case of the assessee.
26. The Revenue has relied upon the judgment of the Bombay High Court in the case of Kishan Mahadev Jaghav v. V.D. Vakhaskar and Ors. (2001) 249 ITR 266 (Bom) wherein it has been held that when the source of receipt has link with business income, or salary income or capital gain chargeable under Section 45, then Section 10(3) will not apply. The judgment was cited by the Revenue to draw support that none of the three ingredients were attracted in the present case and neither it was a business income nor a salary income nor an income from capital gain chargeable under Section 45 and, therefore, provisions of Section 10(3) are attracted and have rightly been applied. We find that the judgment relied upon by the Revenue supports the view we are taking.
27. The words "casual" and 'non-recurring' had not been defined in the Act but the ordinary dictionary meaning says that it is subject to be produced by chance accidental or fortuitous or coming at uncertain time or not to be calculated on or unsettled. When we see this meaning in background of this case we feel that the parties could never expect such a happening and, therefore, this receipt can only be termed as casual receipt. As it is not to happen in future that is why it is said to be a non-recurring.
28. In view of the discussion above we feel that the conditions of Section 10(3) of the IT Act were fulfilled in the present case and the authorities below were justified in bringing the amount within the provisions of Section 10(3) of the IT Act. We have no reluctance in saying that the amount so received has rightly been held to be a casual and non-recurring and rightly brought to tax under Section 10(3) of the IT Act.
29. Consequent to the above, the appeal filed by the assessees fail and are hereby dismissed.