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TMI Blog2019 (11) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... of consideration over and above apparent consideration stated in registered sale deed. What is apparent should be believed to be real in the absence of any material to contrary on record. Apparently, the compensation was paid towards termination of long term lessee, in terms of MOU entered between parties on 29.03.2012. The Assessing Officer doubted the genuineness of the term of MOU. He should have examined the other parties to find out the purpose of the impugned payment, which the Assessing Officer had chosen not to do so. Therefore the MOU has to be believed and the amount received should be held to be compensation towards termination of long term lease. Then the question boils down to whatever compensation received on account of te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case. 2. The Commissioner of Income Tax (Appeals) should have found that the Memorandum of Understanding dated 29-03-2012 provides for compensation to the appellant on account of its inability to go for commercial exploitation/development rights of the property under consideration sold by it and hence, the compensation received on that account is not income but only capital receipt, not liable to tax. 3. The Commissioner of Income Tax (Appeals) should have found that as per the Lease Agreement, there is no provision for payment of compensation for termination of lease between the parties and lessor is not entitled for compensation for loss of rent when the lease is terminated by the lessor itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of ₹ 2.72,34,320/-. Against the said return of income, the assessment was completed by the Dy. CIT, Corporate Circle-I(2), Chennai (hereinafter called AO ) vide order dated 13.02.2015 passed u/s. 143(3) of the Income Tax Act, 1961 (in short the Act ) at total income of ₹ 7,46,42,470/- after making several disallowances. While doing so, the Assessing Officer made addition of H4,65,30,500/- towards compensation received from M/s. Butterfly Gandhimathi Appliances Ltd claimed to be capital receipt by the appellant. 4. Brief factual matrix of the issue are as under:- Assessee company owning property measuring 26,265 Sq.ft with super structure situated at Pudupakkam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal was preferred before the Ld.CIT(A) who vide impugned order confirmed the action of the Assessing Officer (AO). 6. Being aggrieved by the order of the ld. CIT(A), the appellant is in appeal before us in the present appeal. It is contended that the Assessing Officer ought not have inferred that compensation paid is part of the sale consideration, in as much as, the stated sale consideration is not below guideline value for stamp duty purpose and in absence of any evidence to the contrary, it cannot be assumed that consideration was paid over the above stated consideration. The ld. Authorised Representative placed reliance on the judgment of Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO,( 1981) 131 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question boils down to whatever compensation received on account of termination of long term lease of 99 years can be treated as revenue receipts and liable to tax. Any compensation received towards loss of source of income cannot be treated as Revenue receipts but capital receipts which is not liable to be taxed. The Hon ble Supreme Court in the case of Karam Chand Thapar Bros (P) Ltd vs. CIT (1971) 80 ITR 167, wherein it was held as follows. 9.In the determination of the question whether a receipt is capital or income, it is not possible to lay down any single test as infallible or any single criterion as decisive. The question must ultimately depend on the facts of the particular case, and the authorities bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal 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 structure 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 agreement is normally a capital receipt. In the li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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