TMI Blog1993 (1) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1980, of the Calcutta High Court, the cost of the capital asset would be the amount spent towards stamp duty and other legal expenses incurred for obtaining the decree ?" Income-tax Reference No. 9 of 1992 (at the instance of the assessee): "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sum of Rs. 2,00,000 received by the assessee in terms of the order dated February 28, 1980, passed by the High Court was assessable as capital gains ? 2. Whether the findings of the Tribunal in relation to the mesne profits are against the evidence on recovery , unreasonable an or otherwise perverse or contrary to law ?" Shortly stated, the facts leading to these references are that the assessee inherited, on the death of her husband in 1960, a property which was under lease. The lease expired in 1970. However, the lessee did not give possession to the assessee. The assessee filed a suit for eviction and mesne profits. The suit was decreed in favour of the assessee on August 11, 1971. The decree was affirmed on May 19, 1970 (sic) by the Additional District judge, by this court on May 6, 1976, by the Supreme Court on Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id sums to her, if found necessary by the State of West Bengal at any time." By the subsequent order of this court, it was clarified as under : "It is clarified that Rs. 2 lakhs have been paid to Smt. Lila Ghosh by the State Government on the ground of mesne profits for the period from May 1970, to February, 1980." The undisputed facts are that the assessee was the owner of the premises in question. The said premises were tenanted and after determination of the tenancy and even after the decree was passed for ejectment by the trial court and affirmed by the appellate courts including the Supreme Court, the tenant continued to occupy the said premises. Ultimately, the State of West Bengal acquired the said premises and gave it to the said tenant for its use and occupation. The tenant Was thus ultimately not ejected. The ownership of the property passed from the assessee to the State of West Bengal under the Said acquisition proceedings. In this reference, the matter in question relates only to the sum of Rs. 2 lakhs received as mesne profits for the period prior to the acquisition. While making the assessment, the Income-tax Officer assessed the said sum of Rs. 2 lakhs repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee on the order of this court passed on February 28, 1980. The Tribunal also rejected the contention advanced on behalf of the assessee that no capital gains tax was chargeable inasmuch as there was no cost of acquisition of the so-called capital asset. Reliance in this connection was placed on the decision of the Supreme Court in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294. The Tribunal, however, distinguished the said decision of the Supreme Court and observed that the instant case was not a case of transfer of goodwill. The capital asset transferred was a decree representing the right to receive money stipulated in the decree. This asset, according to the Tribunal, was assignable and it had been so assigned on a definite date. It was possible to determine the exact date on which the transfer took place. The Tribunal held that it was also possible to determine the cost of acquisition of the asset in question which, according to the Tribunal, consisted of the amount spent by the assessee towards stamp duty and other legal expenses incurred for obtaining the decree. From the aforesaid decision of the Tribunal, both the assessee as well as the Revenue have sought ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the amount of compensation and did not affect the question whether interest so paid was for deprivation of the property or not. In CIT v. J. D. Italia [1983] 141 ITR 948 (AP), the land of the assessee was unauthorisedly acquired and the civil suit instituted by the assessee for recovery of possession was decreed in his favour. During the pendency of the appeals, the parties arrived at a compromise whereunder the assessee was paid a sum of Rs. 40,000 which though described as interest was essentially in the nature of damages for use and occupation paid to the owner or compensation received by the owner for the deprivation of the use and possession of the land. The Andhra Pradesh High Court held that the amount in question was not a revenue receipt and was not includible in the taxable income of the assessee for the assessment year 1969-70. In CIT v. Ashoka Marketing Ltd. [1987] 164 ITR 664 (Cal), the assessee had entered into an agreement for purchase of certain property belonging to the vendor. The agreement stipulated that, if the transaction could not be completed due to any default on the part of the vendor, a sum of Rs. 1 lakh was to be paid to the assessee (intending pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngful possession are liable to be assessed as income. Neither the decision of the Privy Council in Girish Chunder Lahiri [1900] 27 I. A. 110, nor the decision of the Supreme Court in Lucy Kochuvareed, AIR 1979 SC 1214, were either cited or noticed by the learned judges of the Madras High Court. In fact, even the decision of the Patna High Court in CIT v. Rani Prayag Kumari Debi [1940] 8 ITR 25, and that of the Kerala High in CIT v. Periyar and Pareehanni Rubbers Ltd. [1973] 87 ITR 666, were neither noticed nor considered by the Madras High Court. In our view, on the facts of the case, the Appellate Tribunal was justified in holding that the mesne profits of Rs. 2 lakhs received by the assessee in this case were in the nature of damages and, therefore, capital receipt. The next question is whether the aforesaid capital receipt is liable to capital gains tax. As indicated, the Tribunal held that the decision of the Supreme Court in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294, has no application in the facts and circumstances of this case. In our view, the Tribunal fell into an error. The amount spent by the assessee towards stamp duty and/or other legal expenses incurred in o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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