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TMI Blog2020 (4) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... non-performance of contract and therefore, qualified for taxation under the head 'Income from Other Sources'." 3. The facts relating to the above said case are stated in brief: The assessee entered into an agreement for purchase of agricultural land on 14/3/2005 from a person named Shri Y Narasaraju. The property was agreed to be purchased for a sum of Rs. 50 lakhs and the assessee paid a sum of Rs. 46,50,000/- as advance to the seller Shri V Narasaraju. Since the seller could not execute the conveyance deed, a cancellation agreement was entered between the parties on 20/4/2009, as per which, a sum of Rs. 2,03,50,000/- was agreed to be paid by Shri Narasaraju to the assessee. The above said amount consisted of advance paid by the assessee of Rs. 46,50,000/- and liquidated damages of Rs. 1,73,50,000/-. The assessee offered above said amount of Rs. 1,73,50,000/- as Long term capital gains and also claimed exemption u/s 54F of the Act against above said capital gain. The AO took the view that the liquidated damages received by the assessee was not as a result of "transfer of any capital asset" within the meaning of sec. 2(14) r.w.s 2(47) of the Act. According to the AO, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of capital asset. Section 2(14) envisages that capital asset means property of any kind held by appellant. Section 2(47) envisages transfer in relation to a capital asset which includes ; (i) the sale, exchange or relinquishment of the asset: or (ii) extinguishment of any rights therein.... The case laws, which are relied upon by the appellant are discussed herewith and analysed to find out whether these are applicable in the appellant's case. 1 High Court of Madhya Pradesh, Indore Bench - CIT Vs. Smt.Laxmidevi Ratani, clearly observed that - 'instead, it was held that the said amount was a capital receipt exigible to capital gain tax as it involved transfer of property within the meaning of section 2(47)'. 2. CIT Vs. Suresh Chandra Jam (AP) - definition of the expression 'capital asset' occurring in section 2(14) & 2(47) have reference only to the assessment of capital gains. 3. K.R. Srinath Vs. ACIT (2004) (141 Taxman 268)(MAD) 4. CIT Vs. Vijay Flexible Containers (1980) (186 ITR 693), observed as under :- ..........A settlement was arrived at when the suit reached hearing at which point of time the assessee gave up his right to claim specific perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee to ".." was the consideration for which the property under the agreement had been acquired." 7. CIT Vs. Sterling Investment Corpn. Ltd. (1980) (123 ITR 441), observed as under :- "It considered the definition of "capital asset" under the Income-tax Act and held that the contractual right of the purchaser to obtain title to immovable property for a price, which right was assignable, had to be considered to be "property" and. therefore a "capital asset". In this behalf, reference was made to the judgment in the case of Tata Services Ltd. (supra). The court rejected the argument that if the right to purchase was given up and the vendor was relieved of his obligation, there would be no capital gain. The court approved of what had been said in the case of CIT V.Rasiklal Maneklal (HUF) (1974) 95 ITR 656 (Bom.), in regard to the essential features of a transaction of relinquishment, namely, that the property in which the interest was relinquished continued to exist; it continued to be owned by some person or persons even after the transaction of relinquishment and the interest of the person relinquishing his interest in the property was given up or abandoned or surrendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paid a sum of Rs. 6,00,0001-. The right, title and interest acquired under the agreement of sale clearly fall within the definition of 'capital asset' [section 2(14)]. Instead of assigning the right to third party/ parties, the assessee relinquished those rights. We have already seen that the definition of 'transfer' in section 2(4 7) is wide enough to include relinquishment of an asset.' 'Para 13. With regard to the contention that there was no cost of acquisition incurred by the assessee for obtaining the rights under the agreement dated April 3, 1986, and consequently there could be no capital gains assessable, it is to be noted that at the time of agreement of sale the assessee paid Rs. 40,000. That payment was made pursuant to the agreement. Only by paying the said amount the assessee acquired the right to get the sale deed executed in his favour.' 10. Keeping in view the factual noting as well the legal noting, in the instant case, it is held that the rights acquired on account of 'Agreement for Sale' entered into by the appellant amounting to Rs. 50 lakh is to be considered as the cost acquisition of the asset I property which is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the compensation received on the said cancellation of the Joint Development Agreement would not be profit or gain, which arises from transfer of capital asset which should be brought to tax u/s 45 r.w.s 48 of the Act. 7. On the contrary the ld AR placed his reliance on the decision rendered by Hon'ble High Court of Karnataka in the case of CIT Vs. H Anil Kumar (2011) 242 CTR (Kar) 537. The ld AR submitted that the facts in the above said case is identical with the facts prevailing in the present case. 8. The ld AR submitted that the assessee herein, by entering into agreement of sale on 4/3/2005 has acquired right over the property, i.e., the assessee got the right to enforce specific performance. He submitted that the said right constitutes "capital asset" within the meaning of sec. 2(14) of the Act. The ld AR submitted that, as per the condition of agreement of sale initially entered, the seller has to convert the status of agricultural land into non agriculture. However the seller could not convert the status of land into non agriculture as originally agreed. Hence a cancellation agreement was entered on 20/4/2009, by which the original sale agreement was cancelled and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nil Kumar (supra). The assessee herein has given advance for purchase of land in the year 2005 and accordingly acquired right for specific performance of agreement of sale. The said right constitutes "capital asset" within the meaning of sec.2(14) of the Act. Subsequently, the assessee has received money for giving up the said right. The same shall constitute capital gains in the hands of the assessee as per the decision rendered by the jurisdictional High Court in the case of H Anil Kumar (supra). 13. We have gone through the decision rendered by Hon'ble Supreme Court in the case of Balbir Singh Maini (supra). The facts prevailing in that case are distinguishable. First of all, it was a case of joint development agreement and the provisions of sec.53A of the Transfer of Property Act were applicable. Since the Joint Development Agreement was not registered, the Hon'ble Supreme Court held that there is no agreement in the eyes of law. Hence it was held that the compensation cannot be assessed as Capital gains. In the instant case, it is not the case of assessing officer that the assessee did not get the "right of specific performance of agreement of sale" upon entering the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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