9911796707
TMI Blog2007 (5) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... term capital asset, and that the CIT(A) ought to have held that the said receipt is in the nature of mesne profits liable to be taxed under the head 'Income from other sources' as was the stand of the AO. 3. Briefly, the relevant material facts. In the course of scrutiny assessment proceedings, the AO noticed that the assessee has claimed long-term capital gains on account of sale of bungalow at 384/1, Jai Co-operative Society, Bhawani Peth, Pune. This property was sold by the assessee by way of agreement dt. 8th July, 2000 to one Abdul K. Jaffery. The assessee had acquired the property, as noted by the AO, vide agreement dt. 6th Dec., 1980 from one Mamta Lal Gurani. The AO noted that the agreements did not contain usual details about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income of the assessee. It was also noted that in any event there is no reasoning whatsoever in support of AO's stand that the receipt is on account of mesne profits. It was in this backdrop that the stand of the AO was reversed, and the grievance of the assessee was upheld. The AO was, accordingly, directed to treat the receipt of Rs. 11,00,000 as on account of sale of long-term capital asset, and to grant exemption under s. 54F accordingly. Revenue is aggrieved of the order of the CIT(A) and is in appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 5. We find that the AO has proceeded on the basis that unless the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for purchase of certain property belonging to the vendor. The vendor, having failed to complete the transaction because title of the property was not marketable as there was a prior mortgage of the property with the Government, paid liquidated damages of Rs. 1 lakh to the assessee. Hon'ble High Court, dealing with taxability of such liquidated damages received by the assessee, observed that such liquidated damages are neither in the nature of capital gain nor in the nature of a revenue receipt, and, therefore, outside the ambit of taxable income. We may, in this regard, quote following observations of the Hon'ble High Court: "2. It may be recalled that on the failure on the part of vendor to complete the agreement, because of the title bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so safely infer that merely because a receipt is not a capital gain chargeable to tax, it would not mean that such a receipt is revenue receipt in nature. The view of the CIT(A) is supported by this judicial precedent. 7. The next issue that we may touch upon is whether the assessee can be said to have received mesne profits in this case. 8. The expression 'mesne profits' is not defined under the IT Act, but the same is defined in the CPC. Sec. 2(12) of the CPC defines it as follows: "'Mesne profits' of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits but shall not include profits due to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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