HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.703 OF 2014 DATED:11.12.2014 Between:
Commissioner of Income Tax – III I.T. Towers, A.C. Guards Hyderabad … Appellant And Sri Ramesh Gelli 8-2-268/2/B/3, Road No.2 Banjara Hills Hyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.703 OF 2014 JUDGMENT: (per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred and admitted against the judgment and order of the learned Tribunal dt.27.11.2013, in relation to assessment year 2008-2009, on the following suggested questions of law:
i. In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in holding that the compensation amount received by the respondent – assessee due to cancellation of business deal falls under Section 28 of the Income Tax Act, 1961 and there is no capital asset acquired in terms of Section 2(14) of the Income Tax Act 1961 or there is any transfer of asset as mentioned in Section 2(47) of the Income Tax Act, 1961, when relinquishment of right is a capital asset under Section 2(14) and the transaction is covered within the meaning of transfer under Section 2(47) of the Income Tax Act, 1961?
ii. In the facts and circumstances of the case, whether the Hon’ble Tribunal is correct in law in holding [in para 14 of its order] that there is no capital asset as per Section 2(14) of the Income Tax Act 1961 and therefore there is no transfer of capital asset as per Section 2(47) of the Income Tax Act, 1961, whereas relinquishment of right is a capital asset under Section 2(14) of the Income Tax Act, 1961 and is covered within the meaning of transfer under Section 2(47) of the Income Tax Act, 1961?
iii. In the facts and circumstances of the case and in law, whether the Hon’ble ITAT is right in not remitting the issue to the file of the Assessing Officer to verify the veracity of the documentary proof submitted to the ITAT alone, for substantiating that the moneys received by the assessee had the characteristic of business?”
We have heard Sri B. Narasimha Sarma, learned counsel for the appellant, and gone through the impugned judgment and order of the learned Tribunal. It appears that the assessee had advanced a sum of Rs.257 lakhs towards participation in business of M/s. Golden Gate Properties. In support thereof documents were produced. An agreement was entered into and in lieu of the advance, initially it was thought of that above payment would be adjusted against allotment of shares to the assessee in the new company. Ultimately the agreement was cancelled and in lieu thereof the assessee was paid compensation of Rs.290 lakhs. After analyzing all these facts, the learned Tribunal came to a fact finding that the compensation was derived in the business transaction and the same falls under Section 28 of the Income Tax Act and it is not under the head ‘capital gains’ as there is no capital asset transferred and the compensation received is ‘business income’. In view of the aforesaid fact finding, we do not find any element of law to decide in this appeal.
Hence, the appeal is dismissed. There will be no order as to costs.
K.J. SENGUPTA, CJ SANJAY KUMAR, J 11.12.2014 bnr