TaxTMI 
TaxTMI 
2017 (2) TMI 793
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....8 lakhs. 2. The effective Ground of appeal is about making addition of Rs. 59.98 lakhs under the head 'liquidated damages received'. During the assessment proceedings the AO found that the assessee had entered into an agreement, dt.21.10.2008, with Eleventh Land Developers Pvt. Ltd.(ELDPL)for sale of 180952 equity shares of Great Offshore Limited (GOL) at the agreed rate of Rs. 540/- per share on a spot delivery basis with certain conditions, that assessee did not receive any amount of advance or any other money at the time of the agreement, that the sale had to be completed on or before 18.11.08, that as per the cl.7 of the agreement in event of failure by the purchaser to purchase the shares he had to pay liquidated damages not in the na....
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.... the only reason that the liquidated damages were receivable was that purchasers did not honour the agreement, that the assessee was an investor in shares, that she did not trade in shares, that the department had also treated her as an investor in shares, that the receipt was referable to fixed capital and was not part of circulating capital, that the character of liquidated damages would be the same as of the asset. The assessee relied upon the case of Saurashtra Cement Ltd.(325 ITR422). After considering the submission of the assessee and the assessment order, the FAA confirmed the order of the AO without passing a speaking order. 4. During the course of hearing before us, the Authorised Representative(AR)argued that liquidated damage r....
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....e of an additional cement plant. The agreement contained a condition that in the event of delay caused in the delivery of the machinery, the assessee was to be compensated at 5% of the price of the respective portion of the machinery, without proof of actual loss, but the total amount of damages was not to exceed 5% of the total price of the machinery. The supplier failed to supply the machinery within the stipulated time and the assessee received Rs. 8,50,000/-from the supplier by way of liquidated damages. The assessed the amount in question in the hands of the assessee. In appeal,Tribunal held that the amount was a capital receipt. The High Court answered the reference in favour of the assessee. After deliberating upon the issue, the Hon....
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....d income, trading profit or no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts'." 12. In Kettlewell Bullen and Co. Ltd. [1964] 53 ITR 261; AIR 1965 SC 65 dealing with the question whether compensation received by an agent for premature determination of the contract of agency is a capital or a revenue receipt, echoing the views expressed in Rai Bahadur Jairam Valji [1959] 35 ITR 148 (SC) and analysing numerous judgments on the point, this court laid down the following broad principle, which may be taken into account in reaching a decision on the issue (page 282) : "Where on a consideration of t....
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....ement of a capital asset, i.e., the cement plant, which would obviously lead to delay in coming into existence of the profit-making apparatus, rather than a receipt in the course of profit earning process. Compensation paid for the delay in procurement of capital asset amounted to sterilization of the capital asset of the assessee as supplier had failed to supply the plant within time as stipulated in the agreement and clause No. 6 thereof came into play. The aforestated amount received by the assessee towards compensation for sterilization of the profit earning source, not in the ordinary course of their business, in our opinion, was a capital receipt in the hands of the assessee. We are, therefore, in agreement with the opinion recorded b....