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TMI Blog2022 (4) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... from the order passed by the A.O under Sec. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short the Act ) dated 15.02.2016 for assessment years 2010-11 2012-13. Also, the assessee is before us as cross-objector in both the aforementioned years. As common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first take up the appeal filed by the revenue for A.Y 2010-11 wherein the impugned order has been assailed before us on the following grounds: 1. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of ₹ 3,20,56,139/- made by the AO treating the compensation received from Lafarge India Pvt. Ltd. as revenue receipts instead of capital receipts as claimed by the assessee? 2. Whether on the facts circumstances of the case and on points of law, the Ld. CIT(A) was justified in giving a finding that the alleged compensation from Lafarge India Pvt. Ltd. to assessee was a consideration for restrictive covenant to not to do business in the same line for a prescribed period, as against the facts on record that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 3,20,56,139/- 2011-12 3,01,47,107/- 2012-13 1,52,54,358/- Total 7,74,57,604/- 4. Observing that the aforementioned amount was wrongly claimed by the assessee as a capital receipt , as the same was in the nature of a revenue receipt , the Assessing Officer vide his order passed u/s.143(3) r.w.s. 147 of the Act, dated 15.02.2016 brought the same to tax in the hands of the assessee and assessed its income at ₹ 3,36,38,990/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). It was claimed by the assessee before the CIT(Appeals) that as the aforementioned amount was in the nature of compensation on account of closure/termination of its business activity which had resulted in to loss of source of income , therein impairing its profit making structure, therefore, the same was rightly claimed by it as a capital receipt . Observing, that as claimed by the assessee, and rightly so, the amount in question was paid by Lafarge India Pvt. Ltd. (LIPL) to the assessee company in lieu of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being queried by the bench that as to whether the facts involved in the present appeal i.e. A.Y. 2010-11 and A.Y 2012-13 were distinguishable as against those involved in its appeal for the assessment year 2010-11, the Ld. DR answered in all fairness answered in the negative. It was, however, pointed out by the Ld. DR that amount in question had been wrongly mentioned by the Assessing Officer in his order for the assessment year 2010-11 at ₹ 3,20,56,139/- as the amount received during the year under consideration was ₹ 1,50,73,554/-. In order to support the aforesaid claim the Ld. DR had drawn our attention to the balance sheet of the assessee company for the year under consideration which supported his aforesaid averment. 9. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the order passed by the Tribunal in the assessee s own case for the immediately preceding year i.e. AY 2011-12 in ITA No.157/RPR/2014 dated 23.10.2018. As observed by us hereinabove, it is the matter of fact borne from the record that an amount of ₹ 7,74,57,604/- wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records that the assessee had only acquired a part of the lands (including some development works) required for the said railway track and siding which were subsequently transferred to LIPL and income arising thereof was shown under the head Profits Gains of Business or Profession . We find from the correspondences filed on record between the assessee and LIPL, that LIPL was indecisive as to execution of the entire work of construction of Railway Track Siding from the assessee on Turnkey or Build-Operate-Transfer basis and subsequently, owing to various constraints, the balance works assigned to the assessee as per the scope of work as stipulated in the aforesaid MOU were not got executed by LIPL. After a considerable amount of time, another MOU was executed on 31st January, 2009 between LIPL assessee and in pursuance of the said MOU, the aforesaid Compensation has been determined by LIPL. We find merit from the submission of Ld. Counsel for the assessee that the entire work of construction of the Railway Track and Siding was its sole business and the isolated activity of acquisition of land for such Railway Siding was never visualized by it and further, that since LIPL co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and / or operate the hotel. On the basis of the said agreement the assessee has received a sum of ₹ 29,47,500/- from the Receiver after the sale of the hotel. The question which was considered by the IT authorities was whether the receipt of the said amount is capital receipt or revenue receipt. The ITO arrived at a conclusion that it was a revenue receipt, CIT(A) held that it was a capital receipt, the Tribunal confirmed the said finding, on reference to the High Court, the High Court arrived at a conclusion that it was a revenue receipt assessable to income-tax as business income for the asst. yr. 1979-80. On appeal by the assessee the Hon'ble Supreme Court held as under :- 3. The question whether the receipt is capital or revenue is to be determined by drawing the conclusion of law ultimately from the facts of the particular case and it is not possible to lay down any single test as infallible or any single criterion as decisive. This Court in the case of Karam Chand Thapar Bros. (P) Ltd. vs. CIT (1971) 80 ITR 167 (SC) : TC 13R.1235 discussed and held that in CIT vs. Chari Chari Ltd. (1965) 57 ITR 400 (SC) : TC 38R.878 it was held that ordinarily compensation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls in various countries and the amount which is received by him is for the termination of first contract which was executed in 1970 and, therefore, it should be considered his revenue receipt. In that case the Court was dealing with a trading contract and held that compensation paid in respect of the rights arising under the trading contract would be a revenue receipt and must be referred to the profits which would be made in carrying out of that contract. The Court has also observed : Whether a payment of compensation or termination of an agency is a capital or revenue receipt, it would have to be considered whether the agency was in the nature of capital asset in the hands of the assessee, or whether it was only part of nis stock-in-trade. 6. The aforesaid judgment was considered in the case of Kettlewell Bullen Co. Ltd. vs. CIT (1964) 53 ITR 261 (SC) : TC 13R.1226 wherein the Court has held as under : Whether a particular receipt is capital or income from business, has frequently engaged the attention of the Courts. It may be broadly stated that what is received for loss of capital is a capital receipt: what is received as profit in a trading transaction is taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is set aside and the appeal is allowed. The question is answered in favour of the assessee and against the Revenue by holding that receipt in the hands of the assessee was capital receipt. 19. We find in the case of Kettlewell Bullen Co. Ltd. Vs. CIT (1964) 53 ITR 261 (SC), the assessee therein was appointed as a Managing Agent upon certain terms and conditions. The assessee and its successors in business, whether under the same or any other style or firm, unless they resigned their office were entitled to continue as managing agent until they ceased to hold shares in the capital of the company of the aggregate nominal value of ₹ 1,00,000 and were on that account removed by a special resolution of the company passed at an extraordinary meeting of the company, or until the managing agent's tenure was determined by the winding up of the company. In the event of termination of agency in the contingencies specified, the managing agent was to receive such reasonable compensation for deprivation of office, as may be agreed upon between the managing agent and the company and in case of dispute, as may be determined by two arbitrators. By another clause, the managing agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of all the circumstances, we have no doubt that what the assessee was paid was to compensate him for loss of a capital asset. It matters little whether the assessee did continue after the determination of its agency with the Fort William Jute Co. Ltd. to conduct the remaining agencies. The transaction was not in the nature of a trading transaction, but was one in which the assessee parted with an asset of an enduring value. We are, therefore, unable to agree with the High Court that the amount received by the appellant was in the nature of a revenue receipt. 20. We find the Hon'ble Supreme Court in the case of Karam Chand Thapar Brokers (P) Ltd. Vs. CIT reported in 80 167 has held as under :- 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 bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a decision. That, however, is not to say that the question is one of fact, for these question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Ld.CIT(A) upheld and the grounds raised by the Revenue are dismissed. 10. As the fact and issue involved in the present appeal is squarely covered by the aforesaid order of the Tribunal, therefore, respectfully following the same, we herein conclude that the amount of compensation received by the assessee company from LIPL during the year under consideration i.e. A.Y.2010-11 being in nature of a capital receipt was not exigible to tax. Accordingly, finding no infirmity in the order of the CIT(Appeals) we uphold the same. 11. In the result, appeal of the Revenue in ITA No.29/RPR/2017 for the assessment year 2010-11 is dismissed in terms of our aforesaid observations. 12. As cross-objection filed by the assessee is merely supportive in nature, therefore, the same is dismissed as not pressed. Thus, cross-objection (CO No.04/RPR/2017 filed by the assessee for the assessment year 2010-11 is dismissed in terms of our aforesaid observations. ITA No.30/RPR/2017( By Revenue) CO No.05/RPR/2017 (By Assessee) A.Y.2012-13 13. As the facts and the issues involved in the captioned appeals remains the same as were there before us in the Revenue s appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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