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2015 (12) TMI 962 - ITAT MUMBAI

2015 (12) TMI 962 - ITAT MUMBAI - TMI - Nature of interest received - revenue receipt or capital receipt - compensation for breach of contract relating to capital assets - CIT (A) treated the interest received and tax deducted at source from the same u/s 194A as capital in nature - Held that:- We find merit in the submissions of the learned Counsel for the assessee. Merely because the tax has been deducted by the builder and recorded it in his books of account as revenue expenditure, the same ca .....

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enue : Shri Love Kumar For The Assessee : Shri Kishor Chaudhari ORDER Per Sanjay Garg, Judicial Member The present appeal preferred by the Revenue is directed against the impugned order dated 24th September 2013, passed by the learned Commissioner (Appeals)-27, Mumbai, for the assessment year 2009-10. The grounds raised by the Revenue are as follows:- 1. Whether on the facts and circumstances and in law, the ld. CIT (A) has erred in deletion of interest income received by assessee, and treating .....

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agreement with Mazda Construction Pvt. Ltd., for sale of his office premises owned by assessee and his wife i.e., units no.301, 302 and 303 situated at Pande House, which was under redevelopment. However, the builder did not obey the terms of the contract and asked for additional time to make payment. The Assessing Officer, from the personal balance sheet of the assessee, noticed that the assessee has shown a liability of ₹ 69,13,649, as advance from Mazda and was of the view that this am .....

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er has broken the terms of the contract, therefore, the builder is required to pay compensation for damages. The amount of ₹ 69,13,649, represents such liquidated damages received by the assessee and it is a part of the total amount that is receivable by the assessee towards sale consideration which is not income of the assessee. The assessee, in support of this contention, relied upon the decision of the Hon'ble Supreme Court in Travancore Rubber and Tea Co. Ltd. v/s CIT, (Civil Appea .....

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as revenue expenditure in his books, therefore, the impugned amount was held to be revenue receipt in the hands of the assessee. Accordingly, the Assessing Officer added a sum of ₹ 69,13,649, to the total income of the assessee. 3. Aggrieved, the assessee carried the matter before the first appellate authority, wherein the learned Counsel for the assessee submitted that the Assessing Officer got confused between the figure of ₹ 69,13,649 which pertained to advance for sale of premise .....

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the documents which were also available before the Ld. AO, I am of the considered opinion that the compensation received for breach of contract is not chargeable to tax at the time of receipt but it would go to reduce the cost of acquisition of the asset while reckoning capital gains at the time of its ultimate sale and as the possession of the property is still with the appellant, sale of the asset is not complete and hence, the amount added by the Ld. AO cannot be the subject matter of the add .....

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