Milan Saini Vs DCIT (ITAT Delhi)
Assessee Milan Saini, Co-founder & former Joint Managing Director of Cinepolis India Pvt. Ltd. (CIPL), received ₹33.12 crores from Cinepolis Group (Thymelicus Holding BV, Netherlands) pursuant to a Settlement Agreement dated 12.11.2013. The payment was made to resolve multiple civil & criminal litigations arising from Cinepolis’ failure to allot agreed equity to the Assessee as per the 2007 arrangement. Assessee disclosed it as Long-Term Capital Gain in his return. AO treated it as business income u/s 28(iv). CIT(A) held it as salary, alternatively as PGBP, and further as short-term capital gain. Assessee appealed before the ITAT.
Facts & Settlement
- 2007 – Cinepolis Mexico explored Indian entry; the Assessee & Mr Deepak Marda were promised equity for developing the business.
- 2007 – CIPL incorporated; both became JMDs, but equity not granted.
- 2012 – Dispute arose; over 13 civil/criminal cases were filed by Saini & Marda.
- 2013 – Settlement Agreement executed: Cinepolis Group agreed to pay ₹33.55 crores (Saini’s share
- ₹33.12 crores) as full & final settlement, with the Assessee:
-relinquishing his right to equity & right to sue, and
-withdrawing all litigations.
Assessee’s Stand
- The payment was compensation for surrender of right to sue, hence a capital receipt not chargeable to tax.
- Alternatively, if taxable, it could only be capital gains for relinquishment of a capital asset, not salary or business income.
- Relied on multiple precedents:
- CIT v. J. Dalmia (149 ITR 215 Del.) – right to sue is not a transferable asset.
- Baroda Cement & Chemicals Ltd. (158 ITR 636 Guj).
- Cadell Weaving Mills (249 ITR 266 Bom), DP Sandu Bros (273 ITR 1 SC).
- Kettlewell Bullen (53 ITR 261 SC), Oberoi Hotel (236 ITR 903 SC), Saurashtra Cement (325 ITR 422 SC).
Also pointed out that co-founder Deepak Marda had received identical compensation, which the Revenue accepted as LTCG in his scrutiny assessment, later affirmed by Bombay HC.
