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TMI Blog2022 (5) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... e compensation specially in respect of damage to properties through fire or any other activities, the businessman ensures his business equipment as well as assets. While claiming the compensation, the assessee was very well aware about the business loss and has given a treatment of the receipts as revenue receipts. Thus, the colour of the receipts in respect of the interest received on compensation amounts to a revenue receipt and thus, the assessing officer as well as the CIT(A) has rightly given the finding of making the said additions to the income of the assessee. Thus, the appeal of the assessee is dismissed. - ITA No. 7373/MUM/2017 - - - Dated:- 5-4-2022 - SHRI PRAMOD KUMAR (VICE PRESIDENT) AND MS. SUCHITRA RAGHUNATH KAMBLE (JUDIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice is clearly damages and a capital receipt and merely because computation of the same is based on notional interest such calculation does not convert the damages into a revenue receipt. 2. The assessee is engaged in the business of trading investment in shares and other assets, property/rental income and manufacturing of textile non woven products. The assessee revised its return of income on 15.03.2014 declaring the total income at Rs.2,87,77,652/-. During the year under consideration, in the profit and loss account, the assessee had shown revenue from operations at Rs.24,60,97,916/-, other income at Rs.9,54,90,043/- and closing stock at Rs.12,89,60,367/-. The net profit as per the profit and loss account was computed at Rs.4,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. A.R submitted that the assessee received the damage compensation only in the year 2011 i.e. after the lapse of over 22 years. The compensation consisted of an amount of Rs.2,83,39,608/- towards loss of stock and plant and machinery and an amount of Rs.4,88,19,661/- interest calculated @ 10% per annum from 6 months after the date of fire. 5. The ld. A.R submitted that the only dispute as regarding the chargeability to tax of the amount received of Rs.4,88,19,661/-. The assessee claim the same as capital receipt not exigible to tax being compensatory in nature though nomenclature as interest. In other words it only compensate the time taken to compute and determine the loss the fall in money value from the date the compensation be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a commercial point of view and also has to be examined what character of the receipt is in the hands of the receiver. One test for ascertaining as to whether what was received was a capital receipt or a revenue receipt is to find out whether the assessee suddenly changed the link of income/receipt with the profit making apparatus, that was transferred. The taxability of an amount would depend upon the nature and character of the receipt at the initial stage. If the amounts are initially not taxable, they cannot be taxed despite the magnitude of the accumulation and despite its appropriation by the assessee to his own credit subsequently. In the present case the assessee has given a treatment of these receipts in the initial period when the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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