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2015 (4) TMI 634 - HC - Income TaxTransfer of capital asset - capital gains v/s business income - whether appellate authorities were correct in holding that a sum of ₹ 6,37,00,726 received by the assessee for the purpose of finding a purchaser of the property of Mrs. Rubab Mohamed Ali Kazerani, at No. 1, Cubbon Road, Bangalore-01, which was sold for ₹ 11.87 crores and the owner paid ₹ 5.5 crores cannot be brought to tax under the head 'Business income' but should be brought to tax under the head 'Capital gains' ? - Held that:- The memorandum of understanding entered into between the owner and the assessee is not an agreement of sale for transfer of a capital asset and it is not stamped or registered, any transaction which has the effect of transferring or enabling the enjoyment of any immovable property in the nature of a capital asset would fall within the definition of transfer and, therefore, the consideration they seek for such transfer constitutes capital gains. In the hands of the owner, the property, it is a capital asset. Then the amount of ₹ 5.5 crores received under the document by the owner would be liable to tax as capital gains. Now, the question before the court is not whether the ₹ 5.5 crores constitutes capital gains or not. The question is whether over and above ₹ 5.5 crores paid by the purchaser to the assessee would constitute capital gains. In that context, in the instant case, it is clear that the assessee had no intention to acquire a capital asset in lieu of transfer. His intention was only to identify a buyer for the property to bring about a sale transaction and any amount paid in excess of ₹ 5.5 crores is his profit minus the expenditure which he has incurred. It is clear from the recitals in the memorandum of understanding that even if the assessee is not able to get the purchaser who is willing to pay ₹ 5.5 crores 50,000 and pays less, the loss is to the account of the assessee. Only in the event of the purchaser is willing to pay more than ₹ 5.5 crores, that profit is his. Therefore, the transaction was entered into with a sole intention of making profits and gains from the aforesaid transaction and as such do not fall within the definition of capital gains. The assessee did not hold the capital asset. He did not transfer the capital asset, he only facilitated the transfer of capital asset from the owner to the purchaser. He took the risk. He identified the purchaser. Any amount paid in excess of ₹ 5.5 crores which the owner was expecting from the transaction was his margin of profit. - Decided in favour of the Revenue
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