Case Law Details
Chandarani N. Goyal Vs ITO (ITAT Mumbai)
Chandarani N. Goyal contested an order by the Income Tax Department, challenging the taxability of a security deposit refund under section 56(2)(vii)(a) of the Income Tax Act. The Mumbai Income Tax Appellate Tribunal (ITAT) addressed this issue.
The case revolved around a security deposit received by Chandarani N. Goyal from a developer as part of a development agreement. The Income Tax Officer (ITO) treated this deposit as taxable income under section 56(2)(vii)(a). However, the ITAT ruled that the refund of this deposit is not taxable, emphasizing that the crucial factor for taxability under this section is the receipt of money without consideration.
The ITAT examined the transaction closely, noting that the deposit was received in the context of a development agreement for non-agricultural land. As the deposit was made as security for the agreement, it did not qualify as money received without consideration, as required by section 56(2)(vii)(a).
The tribunal further considered evidence provided by Goyal, including bank statements and confirmations from the developer, which indicated that the deposit was indeed refunded. This, combined with the nature of the transaction, led the ITAT to conclude that the deposit refund should not be taxed.
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