Shireen J. Dastur Vs ITO (ITAT Mumbai)
The appeal concerned the taxability of ₹15 crore received by the assessee, a non-resident individual, for withdrawing a civil suit filed before the Bombay High Court in relation to a claimed inheritance right in an immovable property known as “The Mount,” forming part of the estate of late Ms. Amba Wadia. The Dispute Resolution Panel had upheld the Assessing Officer’s finding that the amount was taxable as long-term capital gains.
The assessee contended that the payment was not income, as she had not transferred any capital asset. She stated that trustees were selling the property, and although she was neither a seller nor a confirming party, she had asserted an inheritance claim through a civil suit. The purchaser sought acquisition free of encumbrances and paid her ₹15 crore solely to withdraw the suit. She argued that what was given up was only a claim or potential right to inherit, not an existing capital asset capable of transfer.
The Assessing Officer held that the amount represented consideration for relinquishment of rights in the property and therefore constituted capital gains. Alternatively, he proposed taxation under “income from other sources” under section 56(1). The assessee objected before the DRP, arguing that section 56(2)(x) was not applicable because the receipt was not without consideration, but the DRP did not examine this alternative view and upheld only capital gains tax.
