KAMALA C Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) At the instance of the assessee, the Income Tax Appellate Tribunal, Bangalore Bench, Bangalore has referred under Sec.256(1) of the Income Tax Act (hereinafter referred to as the Act) the following question of law for the opinion of this Court: "On the facts and in the circumstances of the assessee's case, whether the Tribunal was justified in law in holding that the receipt of Rs.20,000 represented the assesse's long term capital gain liable to tax?"

(2.) The following facts are disclosed in the statement of the case submitted by the Tribunal. The assessee was declared as a purchaser of a certain immovable property for Rs.125 at a Court auction held in 1962. The judgment debtors filed an application under Rule 90 of Order 21 of CPC, to get the sale set aside. That application was dismissed by the executing Court. Against the order of the executing Court, the judgment debtors filed an appeal under Order 43, Rule 1(j) CPC, in RA.47 of 1967 on the file of the I Addl Civil Judge, Civil Station, Bangalore. During the pendency of that appeal, the dispute between the parties was compromised. Under the compromise the assessee agreed to the sale being set-aside on payment of Rs.20,000 by the person in whose favour the judgment-debtors had agreed to execute a sale deed conveying the property in question. The compromise was recorded by the learned Civil Judge and the sale was set-aside by him. During the assessment year 1968-69 the question of taxability of the sum of Rs. 20,000 received by the assessee arose for consideration before the Income-Tax Officer. The Income-Tax Officer held that the entire sum of Rs. 20,000 represented long term capital gain and was liable 10 be taxed under the Act. Aggrieved by the Order of the Income-Tax Officer, the assessee filed an appeal before the Appellate Assistant Commissioner of Income-Tax and that appeal was dismissed. On further appeal to the Income-Tax Appellate Tribunal, it was again held that the sum of Rs.20,000 was an item of capital gain which attracted tax. At the instance of the assessee, the Tribunal has made this reference.

(3.) The contention of the assesses before the Income-Tax Officer, the Appellate Assistant Commissioner and the Tribunal was that since she had not acquired any title to the property in question, it could not be said that she had interest in it and that she had transferred the same for a consideration of Rs. 20,000. The contention of the Department has been that because the assessee could receive the sum of Rs. 20,000 only in lieu of an Interest she had in the property in question, which became crystallised by the confirmation of sale by the executing Court, the receipt in question should be treated as consideration for relinquishment of her interest in capital asset.