COMMISSIONER OF INCOME TAX Vs. H. ANIL KUMAR

JUDGEMENT

(1.) THESE two appeals are preferred by the Revenue challenging the order passed by the Tribunal which held that the amount received by the assessees is a capital receipt and not a capital gain and as such not exigible to tax under the head, capital gains.

(2.) AS the question involved in both these appeals are one and the same and respondents are father and son, they are taken up for consideration together and disposed of by this common order.

(3.) ON scrutiny of the material, it was disclosed that both the assessees had entered into an agreement of sale by a deed dt. 14th Oct., 1992 with one Sri Paramananda G. Hemdev for the purchase of a residential property bearing No. 125, Vivekananda Road Cross, Yadavagiri, Mysore. They paid an advance of Rs. one lakh, which was equally contributed by both the assessees. The sale deed was expected to be executed on or before 30th June, 1993. The vendor did not execute the sale deed within the time stipulated. During the subsistence of the said agreement, the vendor entered into an agreement with the aforesaid two purchasers. Therefore, the assessees filed a civil suit for specific performance of the contract of sale before the Civil Judge, Mysore. During the pendency of the civil suit, a settlement was arrived at outside the Court. In terms of the settlement entered into, the purchasers paid a sum of Rs. 7,50,000 to the assessees subject to the condition that the assessees shall withdraw the suit for specific performance and hand over all the documents relating to the property to the purchasers. The said agreement came to be executed on 7th Dec., 1997. In terms of the agreement the aforesaid amount of Rs. 7,50,000 was paid to both the assessees and in turn they withdrew the suit for specific performance. The assessee contended that the aforesaid amount of Rs. 7,50,000 is not a capital gain, which could be taxed under the Act. There is no capital asset. There is no transfer of such a capital asset and therefore what they received is not a capital gain exigible to tax.