TMI Blog2016 (9) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... profit making apparatus and not on loss of profit. We thus find that the only inference can be drawn is that the compensation received by way of reward due to non-supply of land by JMA Buildcom (P) Ltd. under the agreement was capital receipt. - ITA No. 5054/Del/2011, ITA No.5058/Del/2011 - - - Dated:- 12-8-2016 - SHRI I.C. SUDHIR AND SHRI J.S. REDDY For The Assessee : Shri P.C. Yadav, Adv. For The Department : Shri R.K. Garg, DR ORDER PER I.C. SUDHIR: JUDICIAL MEMBER The assessees have questioned the first appellate order on the following common grounds of appeals: The order of Learned CIT(Appeals) is bad in law and on facts. 1. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in taxing the compensation of ₹ 1 crore as Revenue receipt ignoring the various judicial pronouncements and submissions of the assessee. 2. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has wrongly rejected the additional evidence, I the shape of fard of land and resolution of the company, produced by the as per the provision of Rule 46A. 3. The Learned CIT(Appeals) has erred in not appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rolls, rights and responsibilities along with their respective shares in the consortium. Thereafter, the consortium companies, namely, Aerens R Infra-structure (P) Ltd. formerly known as Visage Properties (P) Ltd., Samurai Entertainment P. Ltd., Shivgiri Suppliers (P) Ltd., the assessee and Aerens Goldsok International Ltd. through their lead company, namely, A.R. Developers (P) Ltd. entered into an agreement to sell dated 02.03.2005 with GMA Buildcom (P) Ltd. to purchase 10 acres of land for a consideration of ₹ 15 crores in village Bhattian, Tehsil and District Ludhiana (Punjab). Since GMA Buildcom (P) Ltd. failed to transfer minimum land of 10 acres within the prescribed and extended time limits as per the terms of the agreement. The matter was settled through arbitration award dated 11.8.2006 wherein following compensations were awarded to the entities involved: M/s. A.R. Developers (P) Ltd. Rs.1,00,00,000 M/s. Samurai Entertainment P. Ltd. Rs.3,50,00,000 M/s. Shivgiri Suppliers P. Ltd., Rs.1,00,00,000 M/s. Aerens R. Infrastructure (P) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Page No 35 of the PB. b. It is submitted that the AO and CIT (A), though categorically observed in their respective orders that the assessee and its associates have entered into agreement to sell with JMA buildcon, however failed to appreciate that the assessee in its individual capacity, had not entered into agreement to sell with JMA buildcon. It is submitted that had it been a case where assessee would have entered into the agreement independently then situation would have been completely different. c. The lower authorities failed to appreciate that it is not the case that the consortium has lost one of his arm of its business. It is case where the entire business of the consortium got demolished even prior to the setting up of the new project. It is further relevant to mention here that the consortium was completely vanished after the demise of this deal and has not carried out any business. d. It is next submitted that it is not the business of the assessee to form consortium day in day out therefore normal course of business proposition completely ruled out. e. It is settled position of law that under taxing provisions every step of a transaction would have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paper Book page No 3-9 and 10-16 respectively, a perusal of these objects of would abundantly show that the assessee was not dealer of agriculture land. c. Therefore the above observations of the CIT (A) are factually incorrect. It is next submitted that the assessee in order to prove that the land in question was an agriculture land produced certified copy of Khasra Khatoni, which is a public document, the CIT (A) and AO denied the admission of this document however impliedly accepted that the land was an agriculture land. d. The AO in his two remand reports (Page No 81-82 and 93-97) have not denied the status of the impugned land as agriculture land. However discarded the claim of the assessee on the ground that assessee was not an agriculturist and intention of the assessee was to develop the upcoming project- See observation of the AO at Page No 81-82 and in subsequent remand report. Therefore, it can be said that the AO has accepted that the land in question was an agriculture land on the date when the agreement was entered into. e. It is next submitted that despite the acceptance of AO vis- -vis character of agriculture land the CIT (A) without brining any mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the purchase and as also on the date of acquisition, the land in question was agricultural land. Having come to such a conclusion, the Tribunal ought not to have gone into question of intention of the assessee and definitely not into the question of intention of the land acquiring authority, the latter being a wholly irrelevant consideration. In these circumstances, the land acquired from the ownership of the assessee was agricultural land. 6. It is submitted that decision of Sarifabibi (supra) has been distinguished by the Pune Bench of the ITAT in the case of Harish V Milani VS JCIT reported in 114 ITD 428(Pune) wherein the Hon ble Bench has held as under :- From the perusal of the said entries in the extract of 7/12, it is thus clear that the aforesaid lands were subjected to land revenue and assessment of the land revenue was accordingly entered into the extract of 7/12. It is also seen that the total cultivatable land has also been shown therein. The area mentioned in the extract of 7/12 has been classified as cultivable land. In the 7/12 extracts, it is also indicated that the land was cultivated by the owner himself, i.e. Khudd. The nature of crop produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Chand Prabha Jain copy of the decision is annexed in PB at Page- 49-97 of the Paper Book. Relevant observations of the Hon ble Bench are at page No 82 on wards of the decision s paper book. 9. It is next submitted that memorandum of association of the assessee Company permits the assessee to deal in land but not in agricultural land. It is very pertinent to mention here that in cases where the real estate dealers purchase some agricultural land, the dealers don t include the land in their stock in trade till the conversion of the same into developed land. The AO in his first remand report has also accepted that land in question was to be converted into nonagriculture land after taking approvals from Govt. 10.It is submitted that no material has been brought on record either from the balance sheet and other documents to prove that the assessee has taken steps towards the development of land. In fact the fact of the matter is that prior to the conceivement of the ownership the deal got spoil. Therefore, the case of the assessee is on stronger footage when compare to the case of DLF and others. In fact the CIT(A) has also admitted that land in question has never come i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1971) 82 ITR 540 (SC). 9. In rejoinder, the Learned AR submitted that there is no any allegation of colorable device to obtain the award and the only issue involved is as to whether the compensation received on the breach of the agreement by the assessee is Revenue or capital in nature. 10. Considering the above submissions, we find that the issue involved in the grounds is as to whether the compensation received by the assessee through award on breach of the contract is a Revenue or capital receipts in the hands of the assessee. It is an established proposition of law that there cannot be a standard test to determine the nature of receipt as to whether it is capital or Revenue in nature. The nature of receipts depend on facts of each case. The claim of the assessee remained that it is capital in nature and the Assessing Officer has held it as revenue in nature. In support of its claim, as discussed above, the assessee contended that the agreement with JMA Buildcom (P) Ltd. to arrange land was entered into normal course of business observed by the Assessing Officer has no relevance as the consortium between some entities as one part and JMA Buildcom (P) Ltd. as other part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, the assessee argued that the previous year relevant to the assessment year under consideration was first year of manufacturing of anti-fire chemicals and compensation received was an award for non-fulfilling of their part of the contract by AIK. It was damaged for non-performance of the contractual obligation by the AIK. It was contended that the authorities below while deciding the issue against the assessee have not appreciated the injury caused to the profit making apparatus and that the knowhow was foundation of the business of the assessee. Appreciating the same, huge compensation was awarded by the arbitrator. The basis of award remained the lost profit due to non-supply of the knowhow and not on loss of profit and that newly installed machinery in absence of supply of knowhow have gone completely wasted. Reliance was placed on several decisions. After dealing with the issue in detail, the ITAT has decided the issue in favour of the assessee. When we examine the facts of the present case in view of the above cited decision of Pune Bench of the ITAT, we find that in the present case before us also the injury was caused to the profit making apparatus as the land which was pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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