Deferred consideration contingent on uncertain future event cannot be taxed before vesting of right to receive

Brief of the case:

The Hon’ble Bombay High court in the above cited case held that a consideration receivable by the transferor which is contingent on happening of a future event the outcome of which is uncertain and cannot be predicted with a reasonable degree of certainty. Such a consideration cannot be said to have accrued merely on execution of agreement and can be taxed only on the vesting of right on favorable outcome of the event.

Facts of the case:

• The assessee filed here return of income for AY 2006-07 declaring total income of Rs.11,68,470/-. The assessee had also shown the long term capital gain of Rs.42,38,674/- arising out of the sale of 75,000 shares of M/s. Unisol Infraservices Ltd. to one M/s.Radha Krishna Hospitality Services (P) Ltd.(RKHSPL) in terms of agreement dated 25th January, 2006.
• The Assessing Officer on perusal of the said agreement was of the view that under the agreement, the assessee as well as other co-owners (Shete family) of M/s. Unisol were to receive in aggregate a sum of Rs.20 crores and proceeded to tax entire amount of Rs.20 crores in the subject assessment year (AY 2006-07) itself in the hands of all co-owners of shares. This resulted in assessee being taxed on her share of capital gains at Rs.4.48 crores after availing exemption under Section54EC of the Act.
• Henceforth, the AO passed an order assessing total income to Rs. 4.60 crores. On appeal to CIT(A) the said addition was deleted on the ground that the assessee had shown her share of initial consideration as received and the balance consideration which is conditional had not been shown because the agreed formula to which such balance consideration had been subjected to may or may not make assessee eligible to claim balance consideration  capped to a maximum of Rs.20
• On appeal before tribunal, tribunal also upheld the findings of CIT(A) holding that as there is no certainty of receiving any amount as deferred consideration, the bringing to tax the maximum amount of Rs. 20 crores provided as a cap on the consideration in the agreement dated 25th January, 2006 is not tenable because the same has not accrued to the assessee in so far as the assessee has no right to claim the same.
• Aggrieved revenue is in appeal before High court.

 Contention of the Revenue: