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M/s C.K. Ahuja, M/s L.K. Ahuja Versus The Commissioner of Income Tax

2016 (12) TMI 499 - ALLAHABAD HIGH COURT

Compensation received on account of the cancellation of contract - Held that:- The assessee was having other sources of income and therefore the termination of the contract with BCCL was nothing but was normal incident of business. Other than that the assessee was free to carry on his trade because there was no restriction on the assessee that he would not be able to execute any other contract and therefore the tribunal came to the conclusion that the money received by the assessee from the canc .....

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e have heard learned counsel for the parties. As the controversy involved in both the appeals is identical, the same is decided by a common judgment and order by treating the Income Tax Appeal no.119 of 2005 as the leading case. This is assessee's appeal under section 260A of the Income Tax Act, 1961 against the order of tribunal dated 17.1.2005. The questions of law no.1, 2 and 3 sought to be answered in this appeal read as under: "1. Whether on a due and correct interpretation of the .....

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00 Total Rs.44,81,194.80 were in the nature of trading receipts and accordingly taxable as such in the hands of the assessee in the assessment year 1998-99? (2) Whether on the facts and circumstances of the case particularly that the assessee had been following mercantile system of accounting regularly and on a correct interpretation of section 145 of the Income Tax Act, the tribunal was legally correct in holding that the sums in question having been received in the previous year relevant to th .....

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ribunal has examined the matter at length and has recorded findings of fact that the amount of compensation received by the assessee was on account of the cancellation of contract because the BCCL could not provide site to each of the assessee for raising construction. It has been noted in the tribunal's order that the assessing officer also noted in his order that the assessee has received an amount of ₹ 17,11,050/- as business receipt for the period ending 30.6.1986 the year to which .....

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h BCCL was nothing but was normal incident of business. Other than that the assessee was free to carry on his trade because there was no restriction on the assessee that he would not be able to execute any other contract and therefore the tribunal came to the conclusion that the money received by the assessee from the cancellation of the contract was a revenue receipt and not a capital receipt. Learned counsel for the assessee has sought to argue that in any case the interest could not have been .....

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lso looked into the decision of Hon'ble Punjab &^ Haryana High Court in the case of CIT vs.Chiranji Lal Multani Mal Rai Bahadur Pvt. Ltd. 179 ITR 157 and the other decision in the case of T.N.K. Govindaraju Chetty vs. CIT, 66 ITR 465 referred to by the learned counsel for the assessee before the ld.CIT (A) but fact remains that the ratio of the decision of the Apex Court in the case of CIT vs. Govinda Choudhury and Sons (supra) is fully applicable. The factual position of the ratio of th .....

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t so awarded included interest for delay in payment of the amounts due to it. The appellate tribunal held that, out of the amount awarded, the interest to be taken into account for the assessment year was ₹ 2,77,692. The respondent claimed that the interest of ₹ 2,77,692/- was of the same nature as the other trading receipts, and since assessment had been completed by applying a net profit rate of ten per cent to the trading receipts, only ten per cent, thereof, was assessable in its .....

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revenue receipt. Held, that, if the amounts under a contract were not paid at the proper time and interest was awarded to the respondent for such delay, the interest was only an accretion to the respondents' receipt from the contract and was attributable to an incidental to the business carried on by it. The interest payable to the respondents partook of the character as a receipt for the payment of which it was otherwise entitled under the contract and which payment had been delayed as a re .....

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