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2023 (2) TMI 848 - AT - Income TaxCapital gain - compromise settlement for breach of contract - Transfer u/s 2(47) - assessee has entered into an agreement for purchase of a property by paying an amount partially but subsequently the seller expired in 2007 by executing a Will in favour of his son and same property was sold to another five vendees - assessee has relinquished her right on the specific performance of the contract by agreeing to the compromise settlement for receiving a compensation - whether extinguishment of a right of specific performance of a contract shall be covered under the definition of ‘capital asset’ as defined U/s. 2(14)(a)? - HELD THAT:- Extinguishment of a right of specific performance of a contract shall be covered under the definition of ‘capital asset’ as defined U/s. 2(14)(a) of the Act. In the instant case, the assessee has relinquished her right on the specific performance of the contract by agreeing to the compromise settlement for receiving a compensation of Rs. 3 Crs. The argument of the Ld. AR that there is no transfer of any capital asset for receiving the compensation and it is merely a right to sue for damages cannot be considered as a capital asset could not be accepted. As decided in H. Anil Kumar [2011 (1) TMI 1159 - KARNATAKA HIGH COURT] since the word “transfer” in relation to capital asset is defined under the IT Act, 1961 it is not necessary to import the meaning assigned to them under the provisions of the Transfer of Property Act. The word “Capital Asset” as defined in the IT Act, 1961 means any kind of property held by the assessee which is not necessarily be confined to the immovable property. Similarly, the definition of word “transfer” in relation to ‘capital asset’ includes ‘sale, exchange or relinquishment of the asset’. The said asset need not necessarily be an immovable property. In the instant case, the assessee has paid an amount during 2001 while entering into an agreement with the seller. We are therefore of the considered view that the compensation received by the assessee arises out of the transfer of capital asset in the nature of relinquishment of the specific performance of the contract shall be treated as transfer of capital asset within the meaning of section 2(47) of the Act, and hence it is a capital gains under the Income Tax Act, 1961 and exigible to tax. Accordingly, this ground raised by the Revenue is allowed. Deduction u/s. 54F - We direct the Ld. AO to look into the facts of the owning of the residential properties by the assessee afresh and accordingly the deduction U/s. 54F shall be decided after providing a reasonable opportunity to the assessee. Accordingly, this ground raised by the Revenue is allowed for statistical purposes.
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