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TMI Blog2025 (5) TMI 1652X X X X Extracts X X X X X X X X Extracts X X X X ..... held to be revenue receipts chargeable to tax. 3. Brief facts qua the issue involved are that assessee is a cooperative housing society located in Vile Parle, Mumbai and has been deriving rental income from commercial premises on the ground floor and partly in the basement. The background and the various events leading to determination of Mesne Profit are discussed as under: - i. The Society building was constructed between 1982 and 1984 and it was occupied from 1.1.1985. The Central Bank of India (Bank, for short), had advanced a loan to the Society and also taken on rent commercial premises consisting of ground floor and basement, admeasuring 4100 sq.ft and 2000 sq.ft, respectively. The lease rent initially for ten years was Rs. 6 per sq.ft per month. As per the finance agreement with the Bank, as long as the loan was outstanding, the lease could not be terminated. The loan, along with the interest was fully paid in 2001. ii. Although the going market rate of rent in the area was close to Rs. 100 per sq.ft per month in 2002, the Bank continued to pay only the old rent at the rate of Rs. 6 per sq.ft per month till 2005, in spite of continuous efforts by the Society to revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precondition for interim disbursement of Rs. 2 crores. vii. Due to some procedural delays, the interim disbursement could not be received by the Society till October, 2011. In the meantime, in July, 2011, the Bandra Appeal Court disposed of the appeal filed by the Bank, allowing it partially in which the decretal amount stood reduced from Rs. 3.32 crores to Rs. 2.40 crores. The Bank was not satisfied with even this verdict and decided to go in appeal before the High Court. viii. The Appeal Court on 9.9.2011, allowed the Society to claim interim disbursement of Rs. 2 crores, as per the High Court order of 21.6.2011. Accordingly, on 10.10.2011, the Bandra Small Causes Court paid the amount of interim disbursement of Rs. 2 crores to the Society on 10.10.2011, against the submission of Rs. 10 lakhs as bank guarantee and the undertaking to repay full amount if required, by any of the Appellate Courts. ix. The Bank filed appeal, by way of Writ in the High Court in October, 2011, which was later converted to Civil Revision Application in March, 2012. Subsequently, on 3.10.2012, the High Court dismissed the Civil Revision Application filed by the Bank. 4. Thus, total amount of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various judgments to decide against assessee which has been duly considered by the Special Bench of the Tribunal. In so far as reliance placed by the ld. CIT(A) on the Judgment of CIT v. Goodwill Theatres P. Limited [400 ITR 566], the Hon'ble Supreme Court has only directed the Hon'ble Bombay High Court to decide the issue of exemption of Mesne profits on merits. 8. On the other hand, ld. DR relied upon the judgment of the Hon'ble Delhi High court in the case of Skyland Builders (P.) Ltd., v. ITO reported in [2020] 429 ITR 255 (Delhi), wherein the Hon'ble High Court has held that Mesne Profits and interest on Mesne profits received under the direction of Civil Court for un-authorised occupation of immovable property of the assessee by erstwhile tenants of the assessee is liable to tax u/s. 23(1) of the Act. Thus, it was held to be a revenue receipts. 9. We find that this Tribunal in the case of ACIT vs. Amrut Enterprises in ITA No. No.1215/Mum/2020, 1017& 1018/Mum/2020 vide judgment and order dated 02/01/2023, has discussed this issue of Mesne profits, whether it is a capital or revenue receipt after discussing the judgment of the Hon'ble Madras High Court in the case of CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ................................................................. 22. ................................................................................... 23. ................................................................................... 24. ................................................................................... 25. Before us, the department has relied upon, the decision of Hon'ble Madras High Court as referred to by the Assessing Officer and another judgment of Hon'ble Delhi High Court in the case of Sky Land Builders P. Ltd vs. ITO, (2020) 121 taxman.com 151. Ld. DR has also relied upon, another decision of Hon'ble Madras High Court in the case of Kenpadevammaa vs. CIT (2002) 121 taxman 35. 26. On the other hand, the Assessee has relied upon the decision of Hon'ble Bombay High Court in the case of Good Will Creators P. I.T.A. No. 1017,12 15 & 1018 /Mum/2020 AMRUT ENTERPRISES Ltd. 386 ITR 394; decision in the case of M/s. Annamma Alexander 191 ITR 551 Kerala High Court; and judgment of Calcutta High Court in the case of Smt. Leela Ghosh 205 ITR 9. The Hon'ble Bombay High Court in the case of "CIT vs. Good Will Creators P. Ltd (Supra) held that, me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 17. All the aforesaid cases clearly support the assessee in this reference. Since the mesne profits are only damages for loss of property or goods, these are not in the nature of revenue receipts. The receipt of Rs. 2 lakhs is clearly capital in nature. The counsel for the revenue, however, invited our attention to a decision of the Madras High Court in CIT v. P. Mariappa Gounder [1984] 147 ITR 676. In that case, the assessee agreed to purchase a Tile Factory under an agreement dated 22-5-1950. The vendor, contrary to the agreement and in breach thereof, sold it to another person and put him in possession. The assessee sued the vendor for specific performance. This suit was decreed in favour of the assessee and the same was affirmed by the Supreme Court. The Supreme Court also decreed mesne profits payable to the assessee as fixed by the trial Court. The Madras High Court held that a claim to mesne profits is usually directed against the one who has deprived the true owner of possession of his' property and who has thereby prevented the true owner from enjoying the income therefrom or usufruce of the property. When in such a suit or proceeding, the Court awards mesne profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the mesne profit receipts for illegal occupation of property is revenue receipt or capital receipt. Thus, the decision of Hon'ble Delhi High Court is not being followed for this reason and accordingly, we are following the decision of M/s. Annamma Alexander 191 ITR 551 Kerala High Court; judgment of Calcutta High Court in the case of Smt. Leela Ghosh 205 ITR 9; and more importantly the judgement of Hon'ble Jurisdictional High Court in the case of CIT vs. Good Will Creators P. Ltd (Supra). Thus, we hold that entire receipts of Rs. 6,31,49,000/- is capital receipts is not chargeable to tax. 10. Thus, we find that there are divergent opinions by different High Courts on this issue, therefore, the judgment of Hon'ble Kerala High Court in the case of CIT vs. Annamma Alexander 191 ITR 551 Kerala High Court; and judgment of Calcutta High Court in the case of Smt. Leela Ghosh 205 ITR 9 is being followed. It is a well settled law that, if there are two divergent views of different High Courts, then one favour to the assessee should be followed. Accordingly, we hold that Mesne profit is treated as capital receipt not chargeable to tax. In the result, this issue is decided in favour of t ..... 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