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M/s. Vikram Traders Versus Asst. Commissioner of Income-tax, Circle -10 (1) , Bangalore

2015 (10) TMI 937 - ITAT BANGALORE

Income assessable under the head ‘profits /gains from business / profession’ - liquidated damages - sum of ₹ 2,50,00,000/- received by it from M/s. Prestige Estate Projects P. Ltd Held that:- There is no communication from M/s. PEP on any of the aspects mentioned in the letter. Fundamental for a valid contract is either a written or an oral agreement. Above letter is not an agreement. At the best it is only a conditional offer. Not only is there any acceptance from M/s. PEP, there is a com .....

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8377; 4.95 crores paid was nothing but an advance for acquiring the stock for its real estate development venture. Instead of getting the developed areas as desired, what assessee received was a sum of ₹ 7.45 crores from M/s. PEP. Surplus in our opinion had all the features of business profit, since assessee’s adventure or foray into real estate development was only a trading or business venture. The back ground of the transaction, where partners of assessee firm had already done similar b .....

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jects P. Ltd, (in short PEP ) as income assessable under the head profits /gains from business / profession . As per the assessee by the very nature of the deal under which the said amount was received, it was only capital receipt. 02. Facts apropos are that assessee engaged in the business of trading in fabrics, power generation etc., had filed its return for the impugned assessment year declaring income of ₹ 1,83,82,717/-. During the course of assessment, AO noted that a sum of ₹ 2 .....

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ur PAN is AABCP8096K. We are assessed by DCIT / JCIT Central Circle 1(1), Bangalore Hope this will suffice your requirement. 03. Assessee was put on notice. Reply of the assessee was as under : In connection with this transaction, we submit that an advance of ₹ 4.95 crores was made to M/s. Prestige Developers for purchase of property. The deal did not come through and M/s. Prestige Developers repaid an amount of ₹ 7.45 Crores. The difference was shown as payable to M/s. Prestige Deve .....

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herefore treated the amount as cessation of liability and added it to the income of the assessee. 05. Aggrieved assessee moved in appeal before the CIT (A). As per the assessee it was not in the line of real estate business. According to it the advance of ₹ 4.95 crores to M/s. PEP was with the intention of buying a property in their Silver Oak project. As on 31.03.2010, when the project did not materialise assessee was still in negotiation with PEP. Meanwhile M/s. PEP had paid back ₹ .....

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coordinate bench in the case of Yogesh Arora (P) Ltd (2009) TIOL-511-ITAT-Bang, and that of Hon ble Calcutta High Court in the case of CIT v. Ashoka Marketing Ltd [(1987) 164 ITR 664]. 06. CIT (A) after considering the submission of the assessee and the business relationship that partners of the assessee firm had with M/s. PEP, held that the surplus was nothing but business receipt in assessee s hands. Reasons given by the CIT (A) are summarised hereunder : (i) Though there was no written agree .....

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lf-serving document. (iv) Though section 41(1) was not applicable, the surplus received was Revenue in nature and the dealings had colour of a business venture. (vi) Since the transactions were a part of a business venture, surplus was taxable under the head Profits and Gains from Business / Profession . 07. Now before us, Ld. AR strongly assailing the orders of the authorities below, submitted that assessee was in the business of trading in fabrics and had never done any real estate business. I .....

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No.8646/Mum/2010, dt.21.06.2013 • B. Ramakrishnaiah v. ITO [(2010) 39 SOT 379] • Govindbhai C. Patel v. DCIT [(2010) 1 ITR (Trib) 34] Again as per the Ld. AR, even presuming that there was a business venture, the business itself had never taken off and hence the receipt of compensation by virtue of the judgment of Hon ble Delhi High Court in the case of Khanna and Annadhanam v. CIT [(2013) 351 ITR 0110] was receipt of a capital nature. 08. Per contra Ld. DR strongly supported the orde .....

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agreement. At the best it is only a conditional offer. Not only is there any acceptance from M/s. PEP, there is a communication dt.07.11.2012 from M/s. PEP to the AO reproduced by us in para 2 above which points to an opposite position. Thus claim of the assessee what was received by it from M/s. PEP, in excess of what was paid by it, was only a compensation in the capital field falls flat. 11. Now coming to the nature of receipt, admittedly assessee had shown the sum of ₹ 4.95 crores, pai .....

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llage and Sy.No.67/2, 67/3, 67/4 and 67/5 of Adugodi Village, Segur Hobli, Sangalore, North Taluk). This property was jointly developed into a commercial complex, with M/s. Prestige estates Projects (P) Ltd and presently the property is known as "Forum Mall". The commercial complex and the parking area so developed are jointly owned by the developer M/s. Prestige Estates Projects'(P) Ltd and the co-owners of the land. Considering these facts the appellant advanced amounts for the w .....

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all the features of business profit, since assessee s adventure or foray into real estate development was only a trading or business venture. The back ground of the transaction, where partners of assessee firm had already done similar business with M/s. PEP, corroborates this further. 13. Before parting it will not be proper if we do not deal with the decisions / judgments relied on by the assessee. Both in the case of Yogesh Arora (supra) decided by the coordinate Bench and in the case of M/s. .....

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