Simatajvar Yusufkhan Khan Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad: MOU Receipts Taxable as ‘Income from Other Sources’ When Assessee Has No Ownership Rights in Land
The Income Tax Appellate Tribunal dismissed all four appeals of the assessee for AYs 2009-10, 2010-11, 2013-14 and 2014-15, holding that amounts received under an unregistered MOU for sale of land were not capital receipts but were rightly taxable as income from other sources.
The Tribunal found that the assessee was neither the owner nor in possession of the land, which had admittedly been sold as far back as 1968 to third parties. The assessee was also not a party to any litigation relating to ownership of the land. Consequently, the MOU could not confer any enforceable or contingent ownership rights, and the receipts could not be treated as advances towards sale of land.
On merits, the ITAT upheld the finding that the year-to-year receipts were casual receipts without consideration, falling squarely within section 56, since no transfer of capital asset had taken place and no right in property existed with the assessee.
On the legal challenge to reopening under section 147 (pressed only for AY 2009-10), the Tribunal held that although the Assessing Officer had mentioned an incorrect quantum of receipt in the reasons recorded, this factual error was not material enough to invalidate the reopening, as the fact of receipt itself and escapement of income was undisputed.
Accordingly, all additions were sustained and all appeals were dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
