TMI Blog2006 (2) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... lso taken up and heard, with the consent of the parties. 2. The facts of the case are that assessee is a dealer in vans and had purchased a Santro car from Hyundai company. There was some problem in the said car, which according to the assessee was a defective piece and assessee returned the same to the company. The company took back the car and in addition to the price also issued a credit note worth Rs. 3,25,000, which was to the following effect: "Being amount credited to your account with us towards compensation for Santro Model L-2 bearing Vin No MAHAA51GRY M 078386 in terms of your various communications with Hyundai Motor India Ltd. as a goodwill gesture gift." The assessee divided and credited above amount as gift to the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstantial evidence clearly show that the assessee got benefited at the outcome of dispute, resulting into a gain of Rs. 3,25,000 received as compensation. The gift is not executed by any gift deed. The gift is not out of love and affection. But the gift in this case is for some consideration. The consideration is that out of settlement to buy peace and to save reputation of a big car company. It is purely an out of Court settlement. The consideration of Rs. 3,25,000 has been arrived at by mutual talks. Controversy erupted and the same was settled. It is purely a compensation received by the assessee. The settlement was arrived on 12th Nov., 2000, as appearing in two credit notes issued by Samara Hyundai, one for purchase of second hand Hy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,000 was a benefit or perquisite which arose from the tax payer's business and it was thus assessable under s. 28(iv) of the Act. It is to be remembered that cl. (iv) of s. 28 comes into play irrespective of whether the value of such benefit or perquisite is convertible into money or is not so convertible. The impugned addition of Rs. 3,25,000 is sustained on the reasoning aforesaid and I am fortified in this view by the ratio laid down by the apex Court in CIT vs. Groz-Beckert Saboo Ltd, (1979) 8 CTR (SC) 155 : (1979) 116 ITR 125 (SC). Grounds numbered 2(c) to 2(e) are also rejected." The assessee is aggrieved and has brought the issue in appeal. 5. The AO also initiated penalty proceedings under s. 271(1)(c) of the IT Act taking abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be taxed under the IT Act. It is not sufficient to hold a receipt as of revenue nature with mere finding that it is connected with business of the assessee. It has to be shown that it is a trading or a taxable receipt, i.e., it is income liable to be taxed in accordance with provisions of IT Act. There is no presumption that a device has been adopted in every case to hoodwink the Revenue where a receipt is shown as gift or is otherwise claimed to be not taxable. The onus is on the Revenue to prove that a colourable device has been adopted and taxable income is concealed. On the facts of the case, we are of the view that no material has been brought on record to show that device was adopted and under that device taxable income was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income. But, the difficulty arises in ascertaining whether what is received in a given case is compensation for loss of a source of income, or profit in a trading transaction'." After considering various decisions it was further held as under: "These cases illustrate the principle that compensation for injury to trading operations, arising from breach of contract or in consequence of exercise of sovereign rights, is revenue. These cases must, however, be distinguished from another class of cases where compensation is paid as a solatium for loss of office. Such compensation may be regarded as capital or revenue : it would be regarded as capital, if it is for loss of an asset of enduring value to the assessee, but not where payment is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claimed by the assessee." Thus, depreciation treating the Santro car as a capital asset has specifically been allowed. 10. On appeal, learned CIT(A) in para 5 of impugned order quoted above has observed, "both the subject motor cars, i.e., of Santro model and the Accent model were treated by the appellant-firm as its assets of business and they were duly reflected in the block of assets." Thus, CIT(A) has also noted that Santro car was treated as a capital asset and included in the block of assets for claiming depreciation. It is no doubt true that Santro car was a business asset but then as already noted a distinction has to be drawn between a capital asset and a trading asset. Only gain or compensation paid or connected with trading ..... X X X X Extracts X X X X X X X X Extracts X X X X
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