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2023 (4) TMI 567 - AT - Income TaxTaxability of excess money received by the assessee over and above the cost of acquisition/WDV - Capital gain or Income from other sources - assessee submitted that it is well settled law that any amount received against the sale of capital asset is a capital in nature not a revenue receipt , hence can be subjected to capital gain only and it cannot be taxed under the head income from other sources - HELD THAT - It is not in dispute that assessee had entered into agreement to sell of the property as buyer VA Realcon Pvt. Ltd on 07.12.2013 for a total sell consideration of Rs. 25 crores and an amount of Rs. 6 crores was received as advance/ part payment by way of 4 demand drafts issued by IDBI Bank. Since, the buyer failed to pay the balance amount in complying with the conditions of the agreement, an amount of Rs. 6 crores paid as advance sale consideration was forfeited by the assessee. Thus Amount of 6 crores received by the assessee will not fall within the ambit of section 56(2) Admittedly money has been received in pursuance to the agreement to sell which could not be materialized due to non performance of contract by the buyer. Therefore, it cannot be said that the amount was received by the assessee without any consideration. Delhi High Court in the case of CIT vs Meera Goyal 2013 (2) TMI 74 - DELHI HIGH COURT have observed that earnest money of 18 Cr forfeited by the assessee as provided in the agreement to sell received from the purchaser, Shinestar Buildcon Pvt. Ltd. who failed to pay the 'balance consideration by 30.03.2007, is a capital receipt not liable to tax. Provisions of section 51 would come into play in these circumstances as it specifically covers this type of transaction, once the transaction had been held to be genuine, there is no question of the transaction being without any consideration so as to invoke provisions of section 56(2)(vi) of the Act. The judgement of the Jurisdictional High Court is squarely applicable to the present case. Thus, we do not find any error/ infirmity in the approach of the ld CIT(A) in deleting the addition made by the A.O. and we find no merit in the Ground No.1 of the Revenue. Accordingly, ground No. 1 is dismissed. Assessee has not proved the genuineness and creditworthiness of the buyer - In the absence of any contrary evidence it cannot be said that the transaction i.e. agreement to sell entered into by the assessee and the buyer is not proved and the buyer is genuine. Therefore, in our opinion the order of the ld CIT(A) in deleting the said addition requires no interference. Accordingly the Ground No. 2 of the Revenue is dismissed Depreciation at 10% on the value of building - Admittedly, the agreement to sell was entered by the assessee with the buyer and even the advance of Rs. 6 crores was received and forfeited, but ultimately the said amount of Rs. 6 crores has been forfeited due to failure on the part of the buyer. The premises was continued to be used by the assessee for its business purposes. Therefore, in our opinion the depreciation is allowable to the assessee, therefore, we find no error in the order of the ld CIT(A) on the said issue. Accordingly we dismiss the Ground No.3.
Issues involved:
The issues involved in the judgment are: 1. Taxation of excess money under different heads. 2. Substantiation of genuineness and creditworthiness of the buyer. 3. Allowance of depreciation on the property. Issue 1: Taxation of excess money under different heads: The appeal was filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals) regarding the taxation of excess money of Rs. 6 crores. The Revenue contended that the amount should be taxed under income from other sources as the sale of the property did not materialize. However, the CIT(A) deleted the addition relying on legal precedents. The brief facts revealed that the assessee received an advance of Rs. 6 crores from a buyer for a property sale, but the buyer failed to pay the balance amount leading to forfeiture of the advance. The AO treated the excess amount over the cost of acquisition as income from other sources. The CIT(A) deleted this addition citing relevant case law. The Tribunal held that the amount received by the assessee cannot be taxed under income from other sources as it was received against the sale of a capital asset. The Tribunal referred to legal precedents to support its decision, emphasizing that forfeited amounts related to capital assets are not taxable under income from other sources. Issue 2: Substantiation of genuineness and creditworthiness of the buyer: The Revenue raised a concern regarding the genuineness and creditworthiness of the buyer, VA Realcom. However, it was noted that the AO did not doubt the genuineness of the transaction, and no deficiencies were found in the agreement to sell. The CIT(A) also acknowledged the transaction's authenticity, stating that the advance was received through banking channels. The Tribunal found no evidence to dispute the genuineness of the transaction between the assessee and the buyer. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the addition related to the buyer's genuineness and creditworthiness. Issue 3: Allowance of depreciation on the property: Regarding the claim for depreciation of Rs. 3,60,903 on the property, it was established that the property was used as a business asset by the assessee. Despite the forfeiture of the advance and the failure of the buyer to complete the transaction, the property continued to be utilized for business purposes. Therefore, the Tribunal upheld the allowance of depreciation on the property, concurring with the CIT(A)'s decision. In conclusion, the Tribunal found no merit in the Revenue's appeal and dismissed it based on the analysis of the issues presented.
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