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2020 (1) TMI 647 - AT - Income TaxUnexplained cash credit u/s.68 on account of relinquishment of right - CIT (A) concluded that the amount of compensation received by the assessee does not represent as a result of breach of contract. As such the assessee by using dubious method tried to avoid the payment of tax thus confirmed addition - HELD THAT:- Character of the transaction for receiving the compensation will not change merely on the ground that the development agreement, termination of agreement and the sale of the property happen in different financial years. It is because there are different parties involved in the transactions and the assessee has no control of whatsoever on these parties. As such, when the societies terminated the agreement with the assessee, it acquired the right to sue and for relinquishment of such right it received the compensation. On perusal of the ITAT order for the assessment year 2009-10, we find that the assessee received the compensation from the 3 parties. And the assessee at the time of entering into agreement with these parties paid or agreed to pay certain amount as per the understanding. Therefore it is clear that the assessee has made or agreed to make the payment of certain amount to these parties from whom it has received the compensation in the assessment year 2009-10. Similarly, the assessee for the year under consideration has also made or agreed to make the payment of certain amount to the societies which has been detailed somewhere in the preceding paragraph. Therefore, we are of the view that the finding of the learned CIT (A) that there was no payment made to the parties by the assessee in the assessment year 2009-10 is factually incorrect. Transaction between the assessee and the society was not representing the related party transaction as alleged by the learned CIT (A). As such we note that the learned CIT (A) has given contrary findings about the fact whether the assessee and the societies were related to each other either directly or indirectly. The parties involved in the entire flow of transactions namely, the assessee, societies and the buyers of the land who are separate taxable and independent persons/ entities viz a viz complying the provisions of the Act. Thus the amount of the compensation received by the assessee for relinquishment of its right to sue from societies to avoid the litigation cannot be treated as a colorable device. Hence, the amount received as compensation in view of said right is not chargeable to tax. - Decided in favour of assessee.
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