2013 (4) TMI 860 - AT - Income Tax

Summary

Issues involved:
The judgment involves the deletion of addition by treating it as a capital receipt instead of income from house property, and the treatment of receipts from a bank tenant as mesne profit/damages not liable to tax.

Deletion of Addition - Capital Receipt vs. Income from House Property:
The appeal filed by the revenue pertained to the deletion of an addition of Rs. 18,48,790 by the CIT (Appeals), treating it as a capital receipt instead of income from house property. The amount was received by co-owners from a bank tenant in pursuant to a court order. The CIT (A) granted relief to the assessee based on a decision of the ITAT, Delhi Bench-I, which held that mesne profits constitute capital receipt not chargeable to tax. The ITAT upheld the CIT (A)'s decision, stating that the nature of the receipt does not change in the hands of the appellant, and thus, the addition made by the Assessing Officer was unjustified. The ITAT dismissed the revenue's appeal, following the decision of the coordinate Bench in a similar case.

Receipts from Bank Tenant - Mesne Profit/Damages not Liable to Tax:
The issue revolved around the treatment of the assessee's share of receipts from a bank tenant as mesne profit/damages not liable to tax, which the CIT (A) had upheld. The ITAT referred to a decision of a larger special bench in the case of Narang Overseas Pvt. Ltd. vs. ACIT, where it was held that mesne profit received for deprivation of use and occupation of property is a capital receipt not chargeable to tax. The ITAT, in line with this decision, concluded that the appellant's share of mesne profit was a capital receipt and therefore not taxable. The ITAT dismissed the revenue's appeal, following the decision of the coordinate Bench in a similar case.

Conclusion:
In both issues, the ITAT ruled in favor of the assessee, upholding the treatment of the receipts as capital receipts not liable to tax. The judgment was based on legal precedents and interpretations regarding the nature of mesne profits and their taxability under the Income-tax Act, 1961.