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TMI Blog2017 (2) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... s not uttered a single word as to why the arguments of the assessee were not to be considered or as to why the cases relied upon by her were not applicable to the facts of the case. We have, after considering the available material, reached to the conclusion that liquidated damage received by the assessee on account of failure of the purchaser of shares of GOL to purchase the same, that it is a capital receipt as the shares were not held by the assessee as stock in trade. Reversing the order of the FAA,we decide the effective ground of appeal in favour of the assessee. - ITA No. 1166/Mum/2013 - - - Dated:- 15-2-2017 - Shri Rajendra, A.M. and Sanjay Garg,J.M. For The Revenue : Dr.Kailash P. Gaikwad For The Assessee : S/Shri M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that amount received by her was capital receipt as per the provisions of section 51 of the Act. After considering these facts, the AO held that the assessee had neither received advance money nor any other money at the time of agreement, that she did not receive/retain any money for the transaction till 18.11.2008, that the transaction would not fall within the meaning of provisions to Section 51 of the Act. He referred to the case of Travancore Rubber and Tea Co.(243ITR158)and held that provisions of section 51 were not applicable to the facts of the case, that she received ₹ 32.93 per share as liquidated damages through negotiations, that the prolonged negotiations resulted in reducing the liquidated damages, that the agreement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the submissions made by the assessee. He relied upon the case of Saurashtra Cement Ltd.(supra). The Departmental Representative(DR)supported the order of the FAA 5. W e have heard the rival submissions and perused the material before us. We find that the assessee along with members of her family, had entered into an agreement, dt.21.10.2008, with Eleventh Land Developers Pvt. Ltd.(ELDPL)for sale of equity shares of Great Offshore Limited (GOL) at the agreed rate of ₹ 540/- per share, that there was provision for liquidated damages in the agreement, that the purchaser failed to honour the agreement, that after a long negotiation session both the parties arrived at a settlement, that in pursuance of the settlement the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question. Time and again, it has been reiterated that answer to the question must ultimately depend on the facts of a particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a conclusion. In Rai Bahadur Jairam Valji [1959] 35 ITR 148 (SC), it was observed thus (page 152) : The question whether a receipt is capital or income has frequently come up for determination before the courts. Various rules have been enunciated as furnishing a key to the solution of the question, but as often observed by the highest authorities, it is not possible to lay down any single test as infallible or any single criterion as decisive in the determination of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue : Where by the cancellation of an agency the trading struc ture of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agree ment is normally a capital receipt. 13. We have considered the matter in the light of the aforenoted broad principle. It is clear from clause No. 6 of the agreement dated September 1, 1967, extracted above, that the liquidated damages were to be calculated at 0.5 per cent. of the price of the respective machinery and equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, it is clear that if an assessee is in receipt of liquidated damages that is directly and intimately linked with a capital asset, same has to be treated as capital reciept. But, if the damage is received in the ordinary course of their business it has to be taxed as revenue receipt. In the case under consideration, the assessee was holding the shares as an investor and not as a trader. So, the compensation received by her due to non performance on part of the purchaser cannot be taxed under the head revenue receipt. Prolonged negotiations and final settlement on a later date cannot alter the nature of the receipt. We have gone through the orders of the FAA in the cases of the husband and father in law of the assessee. He has, in both t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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