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2014 (12) TMI 678 - AT - Income TaxTaxability of sale of shares and receipt of sum of ₹ 1.20 crores, after the death of her father - settlement of family dispute - nature of enhanced compensation, whether part of sale consideration of shares or otherwise - whether the amount of compensation of ₹ 1.20 crores is to be assessed under the head “income from other sources” or capital gain or partly as capital gain and or any other head of income - Shares were transferred in the year 2002 - family dispute was settled in the year 2004 - taxable in the AY 2003-04 or 2005-06 - Indo–French DTAA - Held that:- It has been specifically mentioned that out of sum of ₹ 1.20 crores, only sum of ₹ 33,38,135, pertains to settlement towards transaction of shares in respect of which Police complaint against Ms. Rashmi Agarwal, was filed by the assessee - The total sale consideration for sale of shares has been said to be for ₹ 93,70,135, out of which sum of ₹ 60,32,000, admittedly has been received by the assessee on 14th May 2002 i.e., in the A.Y. 2003–04 - no dispute other than the dispute relating to shares and land was involved - for the purpose of taxability/assessability of sum of ₹ 1.20 crores, the amount of ₹ 33,38,135, and ₹ 15 lakhs has to be segregated, because, the sum of ₹ 33,38,135, pertains to transaction of shares which is to be assessed and taxed under the head capital gains, which is not taxable by virtue of Article–14(6). The balance sum of ₹ 71,61,865, i.e. can neither be taxed as capital gain nor as income from other sources for the reason that the lump sum amount which has been agreed under the terms of settlement is basically a kind of compensation on account of personal damage done by Ms. Rashmi Agarwal, on the assessee for committing fraud, misappropriation of assets and breach of trust - it is not a case here, where the compensation has been paid on some kind of a breach of any agreement in the course of business or any transaction or any breach of contract between the two parties - Neither it is in the form of any interest on some principal amount, because nowhere it has been mentioned that M/s. Rashmi Agarwal, will pay any interest on the delayed payment of shares sold by her in the year 2002 - Thus, it cannot be taxed as income from other sources u/s 56 - Such a compensation is mainly towards damage for breach of trust or fraud which and has no co–relation with any such business transactions and, therefore, the compensation amount received by the assessee cannot be taxed under any heads of income. All the receipts would not necessarily be income or deemed to be income for the purpose of income tax, because it will depend upon the nature of receipt and the true scope and effect of the relevant taxing provisions - the payment is towards compensation on account of personal injury caused by fraud and breach of personal trust - The amount has been paid to withdraw the criminal complaint and suit - The nature and character of such kind of receipt cannot be brought under charging section and hence cannot be taxed under any other provision - out of sum of ₹ 1.20 crores, sum of ₹ 33,38,135, is assessable under the head “capital gain” which cannot be taxed in case of the assessee due to benefit under Article–14(6) of Indo–French DTAA, Secondly, sum of ₹ 15 lakhs towards sale of Alibaugh land has already been directed by the CIT(A) to be taxed as short term capital gain; and lastly, the sum of Rs ₹ 71,61,865, cannot be taxed under the charging provision of the Act, as the same is compensation in the form of capital receipt – Decided against revenue. Liability to pay advance tax for deletion of interest charged u/s 234B – Held that:- Following the decsoin in DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) Versus NGC NETWORK ASIA LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] - when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee – Decided against revenue.
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