INCOME TAX ACT, 1961

Sections 14 and 2(14)

Head of income - Business income or Capital Gains - Gain on relingnishments of right in property proposed to be developed - Assessee was not in the business of real estate and not a trader in acquiring rights under an agreement and relinquishing the same

Assessee made payment to developer toards cost of acquiring undividend share of land of property and built-up space in proposed development to be carried out by developer. On 5-1-2016, the assessee, owners of property and developer entered into a MoU, whereby agreement to sell between owners of property, Developer and the assessee, and the Construction Agreement between assessee and Developer were cancelled. The assessee in full and final settlement relinquished all his rights under the agreement and received a sum of Rs. 2 crores in excess of what he paid to developer and declared gain on surrendering his rights as long-term capital gains. According to AO, assessee did not acquire undivided share of land or the built up area and hence there was no capital asset that was transferred by assessee and hence, gain in question could not be considered 'capital gain' but had to be considered income from business. Held: Right to obtain conveyance of immovable property falls within the expression 'property of any kind' used in section 2(14) and consequently it is a capital asset. It is because expression 'property of any kind' is of wide import and when this expression is read along with expression defined in section 2(47)(ii) i.e., 'extinguishment of any rights therein', giving up of a right of specific performance by the assessee to get conveyance of immovable property in lieu of receiving consideration, amounted to transfer of capital asset. And any amount received in lieu of giving up said right constituted capital gain especially when assessee was not in the business of real estate and was not a trader in acquiring rights under an agreement and relinquishing the same.

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