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Tax Publishers Meera Goyal v. ITO [I.T.A. Nos. 8239, 1198/Del/2019, dt. 14-12-2020] : 2020 TaxPub(DT) 5380 (Del-Trib) Forfeiture of advances on agreement to sell -- Application of section 56(2)(ix) (inserted w.e.f. 1-4-2015) for prior assessment years *Facts:* Assessee entered into an agreement to sell a property on which Rs. 12.5 crores was taken as advance from the buyer. Subsequently the said deal fell through with the amount of Rs. 12.5 crores being forfeited. Then in financial year 2006-07 also the assessee was in receipt of Rs. 18 crores which was forfeited. It was the case of the assessing officer that these should be taxed as income from other sources under section 56(2)(ix). On appeal by the assessee the FAA held that it was a capital receipt and fell in the scope of section 51 and cannot be taxed under section 56(2)(ix) especially when the said section did not exist in the year of assessment. Subsequently the Commissioner (Appeals) passed a rectification order under section 154 taxing the same alleging that the Rs. 18 lakhs and the Rs. 12.5 lakhs was more than the cost of the property and thus the amount received was receipt of money without adequate consideration also squarely hit by section 56(2)(ix). On this rectification order there was the appeal of the assessee and the cross objections by the revenue -- Held in favour of the assessee that the rectification order of the Commissioner (Appeals) was incorrect as the amount cannot be taxed under section 56(2)(ix) when there was no section 56(2)(ix) in the said year of assessment. The Rs. 18 crore receipt was also upheld in favour of the assessee in a separate order of the Delhi high court that it will need to go to offset the cost of acquisition under section 51. *Editorial Note:* The receipt of two consideration as advances both put together exceeding the cost of the asset and both to be offset under section 51 on cost of acquisition -- was it a case of planned tax planning of receiving money without adequate consideration or receipt of money without attracting any capital gains taxes -- needs pondering.

Tax Publishers

Meera Goyal v. ITO [I.T.A. Nos. 8239, 1198/Del/2019, dt. 14-12-2020] : 2020 TaxPub(DT) 5380 (Del-Trib)

Forfeiture of advances on agreement to sell -- Application of section 56(2)(ix) (inserted w.e.f. 1-4-2015) for prior assessment years

Facts:

Assessee entered into an agreement to sell a property on which Rs. 12.5 crores was taken as advance from the buyer. Subsequently the said deal fell through with the amount of Rs. 12.5 crores being forfeited. Then in financial year 2006-07 also the assessee was in receipt of Rs. 18 crores which was forfeited. It was the case of the assessing officer that these should be taxed as income from other sources under section 56(2)(ix). On appeal by the assessee the FAA held that it was a capital receipt and fell in the scope of section 51 and cannot be taxed under section 56(2)(ix) especially when the said section did not exist in the year of assessment. Subsequently the Commissioner (Appeals) passed a rectification order under section 154 taxing the same alleging that the Rs. 18 lakhs and the Rs. 12.5 lakhs was more than the cost of the property and thus the amount received was receipt of money without adequate consideration also squarely hit by section 56(2)(ix). On this rectification order there was the appeal of the assessee and the cross objections by the revenue --

Held in favour of the assessee that the rectification order of the Commissioner (Appeals) was incorrect as the amount cannot be taxed under section 56(2)(ix) when there was no section 56(2)(ix) in the said year of assessment. The Rs. 18 crore receipt was also upheld in favour of the assessee in a separate order of the Delhi high court that it will need to go to offset the cost of acquisition under section 51.

Editorial Note: The receipt of two consideration as advances both put together exceeding the cost of the asset and both to be offset under section 51 on cost of acquisition -- was it a case of planned tax planning of receiving money without adequate consideration or receipt of money without attracting any capital gains taxes -- needs pondering.