9911796707
TMI Blog2000 (9) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 6 lakhs was paid by M/s Nylo Plast Industries (P) Ltd. to the owners as earnest money. The purchase price of the property was not fixed. However, it was agreed that the price will be fixed with mutual consent and in the event of any dispute there was a provision of appointment of two valuers for fixing the price and if no agreement is reached even after the valuation of the property regarding the purchase price, then the agreement could be terminated. It is not disputed that no action was taken by the parties to effectuate the sale in terms of agreement dt. 3rd June, 1981. Though it was specifically provided under cl. 17 of the said agreement that the terms and conditions of the agreement shall not be construed to confer upon the assessee any right, title or interest of any kind whatsoever into the said premises known as G-A along with 20.89 per cent of the undivided right, title and interest of the vendors in the common area or facilities, yet the assessee entered into an agreement on 7th Sept., 1981, with M/s Powergas India (P) Ltd., having its registered office at 254, Dr. Annie Besant Road, Worli, Mumbai 400 025, for selling part of the property admeasuring 5,266 sq. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability to pay service charges, tax, water charges, etc. would cease from 1st June, 1988. They had also asked the assessee to refund a sum of ₹ 12,74,450 after adjustment of the dues. However, there is nothing on record, and strangely the assessee also does not disclose, as to when the premises was vacated by M/s Powergas India (P) Ltd. In order to resolve the dispute between the parties some efforts had been made to make a settlement between them. Ultimately the dispute has been settled in the previous year relevant to asst. yr. 1993-94 and M/s Powergas India (P) Ltd. have surrendered their right in respect of the remaining amount out of the earnest money of ₹ 18 lakhs subject to no further liability. The assessee accordingly has written back the sum of ₹ 11,60,840.85 in the books of account along with some other amounts aggregating to ₹ 11,66,184.85. The amount of ₹ 11,60,840.85 was claimed to be not liable to tax on the ground of it being a capital receipt on account of forfeiture of the earnest money in respect of the sale transaction of immovable property. The AO did not accept the claim of the assessee and held that the amount written off by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court and as such the decision of the Revenue authorities deserves to be reversed. 4. It was further contended by the learned counsel for the assessee that the finding of the Revenue authorities that the assessee had adjusted the amount towards the service charges, etc. is firstly contrary to facts on record. Secondly, such service charges could be assessed in the respective assessment years and not in the year under appeal. The purchasers had not paid the service charges from 1st June, 1988, and if the amount of service charges were to be adjusted, these could be adjusted in the asst. yrs. 1989-90, 1990-91 and 1991-92 and no amount would remain for adjustment in asst. yr. 1993-94, which is the year in appeal. Our attention was also invited to statement of account of M/s Powergas India (P) Ltd. placed at p. 53 in support of the contention that the assessee has not adjusted the amount against the service charges but had forfeited the amount in terms of the agreement. The learned counsel also relied upon the decision of the Madras High Court in the case of CIT vs. Seshasayee Bros. (P) Ltd. (supra) in support of the contention that the earnest money for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative that the purchasers were liable to pay electricity charges, maintenance charges and other outgoings including municipal and other property rates and taxes levied by the authorities and hire charges for furniture, etc. Besides damages at the rate of ₹ 1,500 per day for not vacating the premises were also payable by the purchasers. It was also contended that the decision of the Supreme Court in the case of Travancore Rubber Tea Co. Ltd. (supra) and that of the Madras High Court in the case of CIT vs. Seshasayee Bros. (P) Ltd. (supra) relied upon by the learned counsel for the assessee are inapplicable to the facts of this case. In this case there has been no forfeiture of the advance on account of sale of property. The purchasers were occupying the premises and were liable to pay the charges during the period of their occupation. The assessee had disclosed the service and other charges as business income. These charges were assessed as such in the preceding years. From 1st June, 1988, these charges were not disclosed nor adjusted against the earnest money. However, in the year under appeal the assessee appropriated the amounts and AO accordingly assessed the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchasers that they shall sell to the purchaser the said apartment No. G-A at such price as may be mutually agreed upon between the vendors and the purchaser. 3. If the parties hereto cannot for any reason whatsoever agree upon such purchase price, such purchase price will be decided by the valuers one to be appointed by the vendors and the other to be appointed by the purchaser. If, however, the said two valuers cannot agree upon the purchase price, this agreement shall stand determined and thereupon the vendors shall refund to the purchaser the earnest amount of ₹ 6,00,000 (Rupees six lakhs only) mentioned in cl. (5) thereof without interest (after deducting therefrom the liquidated damages) if any payable as provided in cl. (4) hereinafter appearing on the purchaser removing itself, its servants, agents, employees and all furniture, fixtures, fittings, articles and things belonging to and/or brought in by it in the said apartment No. G-A. 15. If the purchaser shall commit breach of any of the terms and conditions herein contained and on its part to be observed and performed, the vendors shall be entitled to terminate this agreement by giving 90 days notice in writing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aser, the vendors shall be entitled: (a) to require specific performance of this agreement by the purchaser and to claim all costs, charges and expenses incurred by the vendors; or (b) to forfeit the earnest money and terminate this agreement whereupon the vendors shall be entitled to deal with the said premises in such manner as they deem fit. In such event the purchaser shall not be entitled to claim reimbursement of the costs, charges and expenses incurred by it pursuant to this agreement. 8. The assessee-company, being purported buyer of the property executed another agreement, dt. 7th Sept., 1981, with M/s Powergas India (P) Ltd. intending to sell part of the property to them. The said agreement was executed notwithstanding the fact that the assessee-company had not become the owner of the premises. The terms and conditions of the agreement were almost similar to the agreement executed by the assessee with the landlords. Under the agreement there is a provision for fixing the price of the property with mutual consent. In the event of disagreement regarding the price of the property a provision was made for appointment of valuers by the vendor and the vendees and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined and thereupon the vendor shall refund to the purchaser the sum of ₹ 18,00,000 (Rupees eighteen lakhs) mentioned in cl. (4) hereof without interest (after deducting therefrom the liquidated damages) on the purchaser removing itself, its servants, agents, employees and all furniture, fixtures, fittings, articles and things belonging to and/or brought in by it in the said Apartment No. G-A(1). 10. A perusal of cl. 2 reproduced above does not leave us in doubt that in the event of purchase price of the premises not being determined the assessee was bound to refund ₹ 18 lakhs to the purchaser without interest after deducting therefrom the liquidated damages, etc. Clause 3 of the agreement provides for payment of liquidated damages at the rate of ₹ 1,500 per day. When the price of the property is not determined the stage of the purchaser's wilful default does not arise. Therefore, the operations of cl. 25 without fixation of the price under cl. 2 of the agreement is not perceivable. 11. There is another important aspect of the matter which is crucial for determination of the nature of the amount written off. It is well settled principle of law th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clause provides that in the event of the vendor failing to make out marketable title or......the vendor shall be at liberty to put an end to cancel this agreement and the vendor would thereupon return to the purchaser the earnest money without interest on the purchaser removing itself its servants, agents and employees and all its articles, things and other belongings from the said premises, each party bearing its own costs incurred till then. It is also provided that in such event neither party shall be entitled to claim any damages or specific performance of this agreement. It is not disputed before us that the vendor in this case being the assessee had failed to make out marketable title in respect of the premises. Therefore, the option with the assessee was either to allow the vendees to occupy the premises or to terminate the agreement. The terms of the agreement under the circumstances of the case, did not permit the assessee to forfeit the amount. 13. Considering the totality of the facts and circumstances of this case, in the light of the terms and conditions of the agreements in question, we are of the view that the amount of ₹ 11,60,841 cannot be termed as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgas India (P) Ltd. central air-conditioning plant in the said apartment. A sum of ₹ 42,001 per month was fixed till such time as M/s Powergas India (P) Ltd. remains in possession of the said apartment. It is not disputed that for five years no action was taken by the landlords and the assessee for fixation of the price of the premises to be first transferred to the assessee. There was thus no point in fixing the price for part of the premises purported to be transferred to M/s Powergas India (P) Ltd. when the title of the property was not transferred in favour of the assessee. The intention of the parties is also demonstrated by the fact that after five years of the execution of the agreement between the assessee and M/s Powergas India (P) Ltd. the only step taken was the revision of service charges. 16. The dispute between the assessee and M/s Powergas India (P) Ltd. was relating to quantum of service charges and there is no evidence whatsoever on record to establish that any steps had been taken by the assessee-company for getting the premises transferred in their favour and subsequently in favour of M/s Powergas India (P) Ltd. In the background of these facts we are of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
