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Tax Publishers
Meera Goyal v. ITO [I.T.A. Nos. 8239,
1198/Del/2019, dt. 14-12-2020] : 2020 TaxPub(DT) 5380 (Del-Trib)
Forfeiture of advances on agreement to sell -- Application
of section 56(2)(ix) (inserted w.e.f. 1-4-2015) for prior assessment years
Facts:
Assessee entered into an agreement to sell a property on
which Rs. 12.5 crores was taken as advance from the buyer. Subsequently the
said deal fell through with the amount of Rs. 12.5 crores being forfeited. Then
in financial year 2006-07 also the assessee was in receipt of Rs. 18 crores
which was forfeited. It was the case of the assessing officer that these should
be taxed as income from other sources under section 56(2)(ix). On appeal by the
assessee the FAA held that it was a capital receipt and fell in the scope of
section 51 and cannot be taxed under section 56(2)(ix) especially when the said
section did not exist in the year of assessment. Subsequently the Commissioner
(Appeals) passed a rectification order under section 154 taxing the same
alleging that the Rs. 18 lakhs and the Rs. 12.5 lakhs was more than the cost of
the property and thus the amount received was receipt of money without adequate
consideration also squarely hit by section 56(2)(ix). On this rectification
order there was the appeal of the assessee and the cross objections by the
revenue --
Held in favour of the assessee that the rectification order
of the Commissioner (Appeals) was incorrect as the amount cannot be taxed under
section 56(2)(ix) when there was no section 56(2)(ix) in the said year of
assessment. The Rs. 18 crore receipt was also upheld in favour of the assessee
in a separate order of the Delhi high court that it will need to go to offset
the cost of acquisition under section 51.
Editorial Note: The
receipt of two consideration as advances both put together exceeding the cost
of the asset and both to be offset under section 51 on cost of acquisition --
was it a case of planned tax planning of receiving money without adequate
consideration or receipt of money without attracting any capital gains taxes --
needs pondering.
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