By K. B. Bhujle
Advocate
Pr.
CIT vs. Aeren R Infrastructure Ltd.; 404 ITR 318 (Del): Date of Order : 25th
April, 2018
The
assessee, engaged in the business of real estate, entered into a consortium
agreement with its associates which defined the role, rights and
responsibilities of the parties thereto. This consortium entered into an
agreement to sell with JMA, the seller, for purchase of 10 acres of land for a
consideration of Rs. 15 crores. The seller, JMA, defaulted in its commitment
within the prescribed and extended time limit. Ultimately, upon the parties
resorting to the arbitration, a settlement was arrived at and an award was made
based upon the parties eventual settlement. The amount received by the assessee
as a part of its entitlement as consortium was credited in its books of account
as a capital receipt. The Assessing Officer held that the amounts were revenue
in nature as the land would have been part of the stock-in-trade.
The
Tribunal held that the amount which was intended to be ultimately used as
stock-in-trade purposes was immobile and sterilized, rendered non-offerable and
therefore when received as part of the arbitration award, fell into the capital
stream. The Tribunal held that the only inference that can be drawn is that the
compensation received by way of reward due to non-supply of land by JMA under
the agreement was capital receipt.
On appeal
by the Revenue, the Delhi High Court upheld the decision of the Tribunal and
held as under:
“The
purpose of the ultimate use of the assessee’s land when acquired was rendered
irrelevant on account of the seller defaulting in its commitment. This rendered
the amount expended by the assessee immobile. The eventual receipt of the
amounts determined as compensation or damages, therefore, fell into the capital
stream and not revenue as was contended by the Revenue/appellant in this case.”
