Raghav Maheshchandra Trivedi Vs CIT (ITAT Ahmedabad)
ITAT Ahmedabad held that compensation received from proposed building by way of allotment is extinguishment of right in relation to capital asset and hence provisions of section 45 of the Income Tax Act gets applicable.
Facts- On verification of the assessment order, PCIT found that the assesse received a compensation of Rs. 1,92,18,157/- from M/s. Adarsh Developers and Others on purchase of a villa at Bangalore. Since the developer failed to execute the contract and defaulted in completing the project thereby the assessee got this compensation through litigation at National Consumer Disputes Redressal Commission (NCDRC), New Delhi.
PCIT issued a show cause notice that the compensation received by the assessee is required to be assessed as “Income from Other Sources” rather than “Income from Capital Gains” as per Section 2(14) of the Act. The same was confirmed by PCIT. Being aggrieved, the present appeal is filed.
Conclusion- It is been held by the Co- ordinate Benches of the Tribunal that compensation received by the assessee from the proposed building by way of allotment is actually extinguishment of a right in relation to capital asset, in view of the provisions of section 2(47)(vi) of the Act. This clearly falls within the definition of transfer and hence provisions of section 45 is applicable. Therefore the Revision proceedings initiated by the Ld. CIT (IT &TP) is liable to be quashed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee as against the Revision order dated 30.03.2021 passed by the CIT (IT & TP), Ahmedabad under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2015-16.
2. The brief facts of the case is that the assessee is an individual and Non Resident. For the Assessment Year 2015-16, the assessee filed his Return of Income admitting total income of Rs. 37,66,640/- under “Income from House Property”, “Income from Capital Gain” and “Income from other sources”. The assessment was completed passing an assessment order dated 07.08.2017 admitting the returned income which resulting in a refund of Rs.32,95,970/- which is inclusive of interest of Rs. 4,29,915/- u/s. 244A of the Act.
2.1 On verification of the above assessment order, the Ld. PCIT found that the assesse received a compensation of Rs. 1,92,18,157/- from M/s. Adarsh Developers and Others on purchase of a villa at Bangalore. Since the developer failed to execute the contract and defaulted in completing the project thereby the assessee got this compensation through litigation at National Consumer Disputes Redressal Commission (NCDRC), New Delhi.
2.2 The Ld. PCIT issued a show cause notice that the compensation received by the assessee is required to be assessed as “Income from Other Sources” rather than “Income from Capital Gains” as per Section 2(14) of the Act. Since the assessee was not in a possession of capital asset, against the booking amount of a villa, the assessee got the compensation as there is no capital asset involved no question of invoking capital gains as per the provisions of section 45 of the Act. Therefore the assessment order passed by the Assessing Officer without making any enquiry is an erroneous order and prejudicial to the interest of Revenue and why the assessment order not be set aside and to do afresh.
2.3 The assessee replied as follows:
2.1 It has been submitted by the assessee that there is an Underlying asset allotted by “Adarsh Developers”. Adarsh Developers issued letter, letter of allotment on 05.08.2005 which was attached as Annexure-2 of the submission. This allotment letter indicates the allotment of Villa 208 at Palm Retreat, having plot area of 4250 sq.ft with built up area of 2230 sq.ft. at a total consideration of Rs.1,38,01,000/- subject to the approval of plans by the concerned authorities As per the arrangement the assessee has remitted Rs.76,13,444/-comprising as under:
