What is right of pre-emption whether it exists -  Right to sue is it a transferable right - Adjudicated award for right to sue whether a capital gain arising out of relinquishment/extinguishment of an asset?

Facts:

Assessee had taken a property on lease. One of the condition of the lease agreement was a right of pre-emption for purchase of the said premises if at all the lessor sold at any date. It so happened that the lessor sold to a third party for Rs. 6 crores. Assessee claimed the right of pre-emption by filing a suit for specific performance as they had no interest in the property nor were they owners. Meanwhile the subsequent buyer/lessor applied to the court seeking possession of the sold premises which was granted by the court and possession was also thus given as per court orders by the assessee. Post facto arising out of an mediation the prospective buyer/lessor agreed to pay Rs. 20.4 crores as compensation to the assessee for giving up his right to sue/right of pre-emption. This compensation was read to be arising out of an extinguishment/relinquishment of a capital asset i.e. the right to sue and the right of pre-emption in the said property and was subject in entirety to capital gains with cost of acquisition also taken as NIL. On appeal CIT(A) upheld the views of the AO. On further appeal by the assessee -

Held in favour of the assessee that the right of pre-emption was not an enforceable right it merely gave an offer to the assessee. The same accordingly could not be read as one creating extinguishing/relinquishing rights in rem on a property. The right to sue is not a transferable right as per section 6(e) of the Transfer of Property Act, 1882. The amount of Rs. 20.4 crores received was not subject to capital gains as there was no transfer of any asset nor of any rights. The right of pre-emption also got extinguished in the mediation process as there was no court judgment holding that the compensation arose out of cancellation of such rights of pre-emption.

Ed. Note: The decision is a one off worth reading any number of times for the fine prints that it has propounded. Right to sue is not a transferable right but if money is received in lieu of right to sue then that receipt is to be seen as a revenue receipt or a capital receipt certainly. If it arises out of an income earning apparatus then it is a capital receipt and if in the normal course of the business is a revenue receipt subject to tax. The issue when it comes to right to sue is - it is not a capital asset as it does not have any interest in any property in the first place it is for this reason why it was held as a compensation akin to a capital receipt. It may also necessarily also need to see if the right to sue extinguished/relinquished any right in a property/asset per se in which case it would fall into capital gains tax. 

Case: Ishvakoo Grand Plaza v. DCIT 2023 TaxPub(DT) 2550 (Del-Trib)