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2019 (7) TMI 855 - AT - Income TaxLTCG - sum received on execution of cancellation deed - surrender of right sue under MOU and withdrawal of complaint before criminal court - receipt of compensation is a capital receipt within the meaning of section 2(47) or capital gain and liable to tax as long term capital gain - HELD THAT:- The Hon’ble Supreme Court in CIT Vs Saurashtra Cement Ltd [2010 (7) TMI 11 - SUPREME COURT] has held that the amount received by way of damages was directly linked to acquisition of capital asset and led to delay in coming into existence of the profit-making apparatus. Accordingly, it was held that the amount so received was a capital receipt and could not be taxed as income. In the present case from the contents of clause 5 of the cancellation deed dated 11th September 2011, we have noted that the assessee has not transferred any right in favour of the confirming party (third Party) in respect with regard to the rights, which were sought to be confirmed in MOU dated 24th March and 25Th March 2005. In facts all those right were already stand transferred by the owners in favour of M/s Star Habitat Pvt Ltd. The assessee received compensation of ₹ 20 Crore consisting of refund of the amount paid by assessee to the owners in pursuance of the said Development Agreement dated 24th March, 2005 read with supplementary agreement dated 25th March, 2005 along with interest, towards loss of profit/ liquidated damage for loss of opportunity to develop the property and sale of flats in the open market and towards the cost of litigation only. Therefore, in view of the ratio of decisions of CIT Vs J Dalmia [1984 (5) TMI 32 - DELHI HIGH COURT] , Bombay High Court in CIT Vs Abbasbhoy A. Dehgamwalla [1991 (4) TMI 38 - BOMBAY HIGH COURT], Hon’ble Supreme Court in Saughtra Cement Ltd [2010 (7) TMI 11 - SUPREME COURT] and Jackie Shroff [2018 (9) TMI 1006 - ITAT MUMBAI] and Bhojison Infrastructure (P ) Ltd [2018 (9) TMI 1239 - ITAT AHMEDABAD] the amount received by the assessee in excess of advance is on account of compensation for extinction of its right to sue the owner, the receipt is a Capital receipt not chargeable to tax. Since the assessee has not received the amount in excess of advance in the course of his business it must be construed as capital receipt and not business receipt. - Decided in favour of assessee.
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