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TMI Blog2015 (4) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... law or public policy. That they can be accepted and based on that a Decree can be passed. Therefore, it is not an agreement between the parties, by which the Suit was disposed of but on that agreement there is a seal of approval or satisfaction of the Court and in terms of Order XXIII Rule 3 of the Civil Procedure Code, 1908. In such circumstances, even if there was any interim order in favour of the Assessee in the present case eventually the Suit ended in the Assessee's claim for specific performance being refused and he being entitled to receive the sum stipulated in this Court's order in lieu of the specific performance. In these circumstances, the Assessee was right in urging that he has no right, title or interest in the immovable property. The Tribunal completely misread and misconstrued this Court's order. In the Consent Terms, which are drawn up and based on which the Suit is decreed by the Court, it does not deal with the rival cases on merits. There is no requirement of the Court then passing an order and Judgment on merits of the claim of the parties. The Court is required to apply its mind and consider as to whether the arrangement reached by the parties can be accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 12th June, 2000. The Tribunal s Mumbai Bench heard an Appeal of the Appellant/Assessee being Income Tax Appeal No. 2337/Mum/1999 for the assessment year 1995-96. 2. The Appeal of the Assessee before the Tribunal challenged the order of the Commissioner of Income Tax dated 31st March, 1999. That order of the Commissioner was passed by invoking the powers conferred in him under section 263 of the Income Tax Act, 1961 (for short the IT Act ). 3. This Appeal has been admitted on the following substantial questions of law: (i) Whether the Tribunal was justified in holding that the Order passed by the AO under Section 143(3) read with Section 144A was erroneous and prejudicial to the interest of the revenue and, therefore, the CIT was justified in exercising the jurisdiction under Section 263 of the Act ? (ii) Whether the Tribunal was justified in holding that the compensation received by the Appellant as per the Consent Terms dated 19.08.1994 was on account of relinquishment of the claim for specific performance and, therefore, the same was liable to capital gains tax ? (iii) Whether the Tribunal was justified in holding that the Appellant's case was governed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount of ₹ 5 crores received by them under the said Consent Decree from the said ECL was by way of damages after the breach of oral agreement and hence, the same represented a capital receipt, not liable to tax. Accordingly, the Appellant filed its return of income for the assessment year 1995-96 on 15th March, 1996 treating the said receipt on account of damages as capital receipt. 8. In intimation made by the Assessing Officer under section 143(1), he treated the said damages of ₹ 4.95 crores (net) as taxable by making prima facie adjustment. However, thereafter he felt that taxability of the said sum was highly debatable and cannot be subject matter of prima facie adjustment. Accordingly, he made a reference to the Commissioner of Income Tax, who confirmed his view and directed him to decide this issue in regular assessment proceedings after discussing the matter with Range Deputy Commissioner of Income tax. 9. The Appellant, vide his letter dated 24th May, 1996, made an application to the Deputy Commissioner of Income Tax (Range-21), Mumbai, under section 144A of the IT Act, enclosing brief facts, case laws, opinion of Mr. V. H. Patil, Advocate and request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner of Income Tax was challenged by the Appellant in the Appeal filed before the Tribunal on various grounds, which has confirmed the order of the Commissioner of Income Tax. 16. Mr. Toprani, learned Advocate appearing for the Appellant submits that the impugned order is contrary to law. Mr. Toprani submits that on the available material, the Commissioner could not have concluded that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. The Assessing Officer made inquiries and arrived at certain conclusions which cannot be interfered with or upset merely because another view is possible. In the present case, the then Commissioner of Income Tax held that taxability of damages is highly debatable. If the issue is debatable, it means more than one view is possible. If that is the position, then, power under section 263 of the IT Act could not be invoked and exercised. The exercise thereof in such circumstances would be contrary to the settled principles. 17. Mr. Toprani submits that, in this case, there was no right to claim specific performance as this Court has held that the Appellant had no right, title or interest in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Assessee. In the present case and concerning the assessment year in question 1990-91, some meetings took place, but the oral agreement, according to the Appellant/Assessee, was not honoured. Therefore, a Suit came to be filed in this Court in October, 1990 with a prayer, inter alia, for specific performance of the agreement for sale of the immovable property and alternatively for grant of damages/ compensation in lieu thereof. It is stated that there were some interlocutory proceedings in this Suit. However, during the course of an Appeal against certain interim orders, the matter was settled and Consent Terms came to be drawn between the parties. These Consent Terms, copy of which is at page 21 to 23 of the Appeal paper book, read as under: CONSENT TERMS 1. Declared that the Plaintiffs have no right, title or interest in the property described in Ex. 'A' to the Plaint save and except as provided herein. 2. The Defendants do pay to the Plaintiffs the sum of ₹ 5 Crores on or before 28th February, 1995. 3. In the event of the Defendant not paying the sum of ₹ 5 Crores on or before February 28th, 1995 the Defendants to pay interest thereon at 18% per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the capital asset in the amount of ₹ 17,500/- and expenses and legal charges in the sum of ₹ 17,904/- the capital gain to be ₹ 82,086/-. The Assessee was aggrieved by this order or view of the Assessing Officer and therefore, preferred an Appeal and in which he succeeded. The First Appellate Authority held that the Agreement for Sale did not bring a capital asset into existence. The Revenue preferred an Appeal against this decision, before the Tribunal and it was upheld. 23. The question of law was, whether the right conferred upon the Assessee by the sale agreement of property of any kind? It is in that context that the Division Bench arrived at the conclusion that the right acquired is not a mere right to sue. The Assessee acquired under the said agreement for sale the right to have the immovable property conveyed to him. He was, under the law, entitled to exercise that right not only against his vendors but also against a transferee with notice or a gratuitous transferee. He could assign that right. What he acquired under the said agreement for sale was, therefore property within the meaning of the IT Act and consequently a capital asset. In the Sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the Division Bench leaves us in no manner of doubt that such a Decree was expressly denied. The Consent Terms may constitute an agreement or contract between the parties, however, a Consent Decree is passed after the agreement is placed before the Court and the Court applies its mind and records a satisfaction that the terms are not contrary to law or public policy. That they can be accepted and based on that a Decree can be passed. Therefore, it is not an agreement between the parties, by which the Suit was disposed of but on that agreement there is a seal of approval or satisfaction of the Court and in terms of Order XXIII Rule 3 of the Civil Procedure Code, 1908. In such circumstances, even if there was any interim order in favour of the Assessee in the present case eventually the Suit ended in the Assessee's claim for specific performance being refused and he being entitled to receive the sum stipulated in this Court's order in lieu of the specific performance. In these circumstances, the Assessee was right in urging that he has no right, title or interest in the immovable property. The Tribunal completely misread and misconstrued this Court's order. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laintiff compensation even if it decides the specific performance ought not be granted. However, there are specific provisions which the Plaintiff must comply with. Eventually, the jurisdiction to decree specific performance conferred in a Court is discretionary and it is not bound to grant such relief merely because it is lawful to do so (see section 20 of the Specific Relief Act, 1963). 27. The agreement for sale of immovable property itself does not create any right, title or interest in the immovable property, which is subject matter of such agreement but creates a right to obtain performance of the agreement by approaching Court of law and seeking a Decree of specific performance in terms of the Specific Relief Act, 1963. It is that limited right which is recognised by law and the difference between contract for sale of an immovable property and sale as emerging from section 54 of the Transfer of property Act, 1882 is thus explained. 28. In this context, the following observations of the Hon'ble Supreme Court in the case of Bai Dosabai vs. Mathurdas Govinddas and Ors. Reported in AIR 1980 SC 1334 are pertinent. ..... The ultimate paragraph of Section 54 of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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