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TMI Blog1983 (11) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1969-70 ? " The facts briefly are these. The assessee is a registered firm of three partners carrying on business under the name and style of M/s. B. L. Dhingra Sons. The assessment year is 1969-70 and the relevant previous year followed by the assessee ended on October 10, 1968. The assessee entered into an agreement of sale dated March 8, 1968, for acquisition of the property of a cinema house known as Vivek Cinema for a consideration of Rs. 27 lakhs. Out of the consideration of Rs. 27 lakhs, sum of Rs. 11,10,000 was paid by the assessee and received by the vendors in part payment, as mentioned in the agreement, to sell and the balance payment of Rs. 15,90,000 was to be made by the assessee to the vendors in the manner mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent or hire charges for the cinema property and not any purchase consideration alleged to have been increased by virtue of the supplementary agreement. The AAC observed that the assessee's main purpose was not to allow the transaction to fall through and so it paid Rs. 35,000 extra which could only be taken as a part of the purchase consideration. In this view of the matter, the addition was held as justified. The assessee went up in second appeal before the Income-tax Appellate Tribunal (for short called " the Tribunal "). The Tribunal considered the provisions of the agreement to sell dated March 8,1968, and the modifications made in the agreement dated April 15, 1968, and opined that after the purchaser was put in possession of the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance is placed oil V. Jaganmohan Rao v. CIT [1970] 75 ITR 373 (SC), wherein it was held that where money is paid to perfect a title or as consideration for getting rid of a defect in the title or a threat of litigation, the payment would be a capital payment and not a revenue payment and that money paid in consideration for the acquisition of a source of profit or income is capital expenditure. In order to appreciate this contention, it is necessary to make a reference to certain clauses of the aforesaid two agreements which form part of the statement of case. The vendors had agreed to sell or to transfer to the assessee the cinema property for a sum of Rs. 27 lakhs. The sale consideration is, therefore, determined and fixed in the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the rights conferred by s. 53A of the Transfer of Property Act. Section 53A of the Transfer of Property Act creates certain rights which were not in existence before the enactment was passed. These rights to retain possession rest on the express provisions of the statute. One of the rights conferred is a right to the assessee to protect his possession. The vendors or their successors-in-interest are debarred from enforcing any right or interest expressly provided by the agreement to sell under which the assessee is put in possession. Therefore, from the date of handing over of the possession of the cinema property, the assessee was entitled to run and manage the cinema and enjoy the profits and in come from the said business. The only ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. The payment is made to procure extension of time for performance of the complete agreement to sell and payment of the balance consideration. If the requisite amount of consideration of Rs. 15,90,000 had been borrowed by the assessee from stranger, then interest paid thereon would have been permissible. An expenditure is allowable when it is incurred in the assessee's character as a trader. The compensation payment of Rs. 35,000 is incidental to the running of the cinema from the date of possession by the assessee and till the date of registration of the sale deed. The assessee retained sum of Rs. 15,90,000 and utilised it for its business. For the unpaid purchase price, the vendors were compensated by these payments of Rs. 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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