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2019 (7) TMI 221 - AT - Income TaxCharacterization of income - Compensation received for foregoing the rights in the agreement to purchase property is taxable - revenue or capital receipt - HELD THAT:- Once the compensation is held to be is only on account of foregoing right to sue, which is a right in personam the same cannot be brought to tax. Furthermore, in the case of Oberoi Hotels (P.) Ltd. vs. CIT [1999 (3) TMI 2 - SUPREME COURT] held that the amount received by the assessee for giving up its right to purchase or for getting it on lease is a capital receipt. Further, clause (ix) to sub s. (2) of s. 56 was inserted w.e.f assessment year 2015-16 providing to assets to tax the amount any sum of money received as an advance otherwise in the course of negotiation for transfer of capital asset if sum is forfeited and does not result in transfer of capital asset only w.e.f 01.04.2015. The amount received in giving up the right for specific performance was held to be capital receipt to the same effect in the decision of CIT vs. Smt. Laxmidevi Ratani [2005 (2) TMI 105 - MADHYA PRADESH HIGH COURT] . In the light of above legal position, the amount of compensation received by the assessee cannot held to be a revenue receipt, but is a capital receipt and not liable to tax and it cannot be brought to tax under capital gain for the reason that it is not a capital asset. Thus, we reverse the orders of lower authorities and allow the appeal filed by the assessee.
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