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TMI Blog2021 (7) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in FY 2006-07. The said facts are not relevant to the issue on hand. The issue on hand is related to the property transaction subsequently entered by the parties, i.e., subsequently, the above said loan amount was converted into advance money in the property transaction, whereby a property belonging to the assessee was agreed to be purchased by Shri Naveen P. Patil for a sum - Thus the issue is related to the property transaction and not the earlier loan transaction. Merely for the reason that the amount received as loan in an earlier year was converted into advance payment for purchase of property, there is no reason to disbelieve the property transaction as a colourable device. No material has been brought to substantiate the above said view of the tax authorities, meaning thereby, they have entertained this view only on surmises and conjectures. Since the amount forfeited by the assessee is on account of sale of property, we agree with the submissions of the assessee that the provisions of section 51 of the Act shall be applicable and the above said amount would go to reduce the cost of property. The impugned amount is not taxable in the hands of the assessee u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction by the end of December, 2008. However, Mr. Naveen P. Patil failed to pay balance sale consideration and hence the assessee has forfeited the advance amount of ₹ 3 crores, as per the terms of Agreement for sale. The assessee submitted before A.O. that the amount of ₹ 3 crores forfeited by it is a capital receipt in its hand and the same is not taxable. The assessee also submitted that, as per provisions of section 51 of the Act, the amount of ₹ 3 crores would go to reduce the cost of property. The assessee placed its reliance on the decision rendered by Hon'ble Supreme Court in the case of Travancore Rubber Ltd. 5. The A.O., however, took the view that the assessee has given colour of a property transaction for the forfeited amount of ₹ 3 crores. Accordingly, he took the view that the agreement for sale entered between the assessee and Shri Naveen P. Patil is an afterthought. The observations made by the AO are extracted below:- 5.3 The assessee company forfeited an amount of ₹ 3 cr given by Sh Navin P Patil as loan. It thus got benefited by forfeiting this amount. The assessee has tried to later colour the loan transaction as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was forfeited by the assessee company the property has been leased out. Accordingly, the Ld. CIT(A) concurred with the view of the A.O. that the sale agreement is a colourable device adopted by the assessee in order to avoid taxation of forfeited amount of ₹ 3 crores. 7. The assessee contended before Ld. CIT(A) that the amount forfeited by it cannot be treated as a benefit within the meaning of section 28(iv) of the Act. In this regard, the assessee placed its reliance on the decision rendered by Hon'ble Bombay High Court in the case of Mahindra Mahindra Ltd. 261 ITR 501, wherein it was held that the provisions of section 28(iv) of the Act would not have application to any transaction involving money. The above contention of the assessee was rejected by Ld. CIT(A) by following the decision rendered by Hon'ble Madras High Court in the case of CIT Vs. Ramaniyam Homes Pvt. Ltd. (supra). In the above said case, the Hon'ble Madras High Court had expressed the view that waiver of a portion of the loan would certainly tantamount to the value of benefit within the meaning of section 28(iv) of the Act. Accordingly, the Ld. CIT(A) upheld the addition made by the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not take any step to recover the advance money as per this clause. 10. In the rejoinder, the Ld. A.R. submitted that there is no failure on the part of the assessee (Vendor) to comply with any of the clauses of the agreement and hence clause 11 of the agreement would not be applicable to the present case. On the contrary, as per clause 12 of the agreement, the assessee was having right to forfeit the advance money received, if the purchaser fails to pay the balance sale consideration. 11. We heard the rival contentions and perused the record. We have noticed earlier that the tax authorities have assessed the impugned amount of ₹ 3 crores u/s. 28(iv) of the Act. The above said section states that the value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession is assessable as business income. The Hon'ble Bombay High Court has held in the case of Mahindra Mahindra Ltd. (supra) that the provisions of section 28(iv) of the Act would not have application to any transaction involving money. However, the Hon'ble Madras High Court has taken a contrary view in the case of Ramaniyam Homes Pvt. Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler sells a car, the sale proceeds are revenue receipts in his hand, while it may be a capital asset in the hands of the buyer of car. If the said buyer, in turn, sells the very same car subsequently, the sale consideration is a capital receipt in his hands. Hence the nature of payment and nature of receipt would depend upon the facts prevailing in the case of payer and receiver. 14. In the present case, there is no dispute with regard to the fact that the assessee has received money from Naveen P. Patil initially in the financial year 2006-07. As per the recital in the Agreement for sale, the above said amount was given as investment in the projects taken up by the assessee. We notice that the Ld. CIT(A) has given much importance to the recital so made in the Agreement for sale by observing that neither the assessee nor Naveen P Patil has given the details of project. In fact, the parties have only stated the purpose of given money by Shri Naveen P Patil to the assessee in FY 2006-07. The said facts are not relevant to the issue on hand. The issue on hand is related to the property transaction subsequently entered by the parties, i.e., subsequently, the above said loan amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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