Itta/703/2014 Of Commissioner Of Income Tax-Iii v. Sri Ramesh Gelli

HIGH COURT OF JUDICATURE AT HYDERABADFOR THE STATE OF TELANGANA AND THE STATE OF ANDHRAPRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA 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 – IIII.T. Towers, A.C. GuardsHyderabad … Appellant And Sri Ramesh Gelli8-2-268/2/B/3, Road No.2Banjara HillsHyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA ANDTHE 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 thejudgment and order of the learned Tribunal dt.27.11.2013, in relation toassessment year 2008-2009, on the following suggested questions oflaw: i. In the facts and circumstances of the case, whether theHon’ble Tribunal (ITAT) is correct in law in holding that thecompensation amount received by the respondent – assesseedue to cancellation of business deal falls under Section 28 of theIncome Tax Act, 1961 and there is no capital asset acquired interms of Section 2(14) of the Income Tax Act 1961 or there is anytransfer of asset as mentioned in Section 2(47) of the Income TaxAct, 1961, when relinquishment of right is a capital asset underSection 2(14) and the transaction is covered within the meaningof transfer under Section 2(47) of the Income Tax Act, 1961? ii.In the facts and circumstances of the case, whether theHon’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 IncomeTax Act 1961 and therefore there is no transfer of capital asset asper Section 2(47) of the Income Tax Act, 1961, whereasrelinquishment of right is a capital asset under Section 2(14) ofthe Income Tax Act, 1961 and is covered within the meaning oftransfer under Section 2(47) of the Income Tax Act, 1961? iii.In the facts and circumstances of the case and in law, whetherthe Hon’ble ITAT is right in not remitting the issue to the file of theAssessing Officer to verify the veracity of the documentary proofsubmitted to the ITAT alone, for substantiating that the moneysreceived 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 thelearned Tribunal. It appears that the assessee had advanced a sum ofRs.257 lakhs towards participation in business of M/s. Golden GateProperties. In support thereof documents were produced. Anagreement was entered into and in lieu of the advance, initially it wasthought of that above payment would be adjusted against allotment ofshares to the assessee in the new company. Ultimately the agreementwas cancelled and in lieu thereof the assessee was paidcompensation of Rs.290 lakhs. After analyzing all these facts, thelearned Tribunal came to a fact finding that the compensation wasderived in the business transaction and the same falls under Section28 of the Income Tax Act and it is not under the head ‘capital gains’ asthere is no capital asset transferred and the compensation received is‘business income’. In view of the aforesaid fact finding, we do not findany element of law to decide in this appeal. Hence, the appeal is dismissed. There will be no order as tocosts. ________________________ K.J. SENGUPTA, CJ _______________________ SANJAY KUMAR, J 11.12.2014 bnr