ITO Vs Shri Kamal Kumar Ghosh (ITAT Kolkata)
It is not in dispute that the amount received in the sum of Rs 90,00,000/- (assessee’s share of 50%) was only for surrendering his leasehold rights. The assessee treated the same as mesne profits and hence capital receipt whereas the ld AO treated the same as revenue receipt. Now the short question is whether the said mesne profits would be liable for tax in the hands of the assessee. We find that the definition of mesne profits is provided in section 2(12) of Code of Civil Procedure 1908 as under:-
“Mesne Profits of Property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession.”
We find that the Special Bench of Mumbai Tribunal in the case of Narang Overseas Pvt Ltd vs ACIT reported in 111 ITD 1 (Mum ITAT ) (SB) had held that mesne profits received by assessee for wrongful deprivation of use and occupation of property constitutes capital receipt and hence not chargeable to tax. Respectfully following the same , we hold that the ld CITA had rightly granted relief to the assessee by holding that the receipt of Rs 90 lacs by the assessee is a capital receipt not chargeable to tax.
