Krishnamachari Rangarajan,, v. ITO, New Delhi

ITA 3851/DEL/2009 | 2004-2005
Pronouncement Date: 28-01-2010 | Result: Allowed

Appeal Details

RSA Number 385120114 RSA 2009
Assessee PAN AAIPR6000K
Bench Delhi
Appeal Number ITA 3851/DEL/2009
Duration Of Justice 4 month(s) 18 day(s)
Appellant Krishnamachari Rangarajan,,
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 28-01-2010
Date Of Final Hearing 28-01-2010
Next Hearing Date 28-01-2010
Assessment Year 2004-2005
Appeal Filed On 10-09-2009
Judgment Text
ITA NO. 3851/DEL/2009 A.Y. 2004-05 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 3851/DEL/2009 A.Y. : 2004-05 SHRI KRISHNAMACHARI RANGARAJAN VS. ITO WARD 4 8(1) 3-A MARVEL APPARTMENTS NEW DELHI FIRST AVENUE INDIRA NAGAR ADYAR CHENNAI [PAN: AAIPR6000K] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJAT JAIN ADV. DEPARTMENT BY : SHRI P.C. CANCHOLY DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDERS OF THE LD. CIT(A) DATED 26.6.2009 PERTAINING TO ASSESSMENT YEA R 2004-05. 2. THE ISSUE RAISED IS THAT LD. CIT(A) HAS ERRED I N UPHOLDING THAT A SUM OF RS. 2 22 493/- RECEIVED AS COMPENSATION FROM INSURANCE COMPANY IS NOT A CAPITAL RECEIPT. 3. DURING THE COURSE OF ASSESSMENT IN THIS CASE THE AO NOTED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS. 2 22 493/- F ROM INSURANCE COMPANY AS COMPENSATION FOR LOSS OF LICENCE BUT TH E SAME WAS NOT INCLUDED IN THE INCOME FOR TAXATION. ASSESSEE EXP LAINED THAT HE WAS A PILOT AND CAN FLY THE AIRCRAFT ONLY WHEN HIS IS HOL DING LICENCE AND THIS WAS THE SOURCE OF INCOME AND IF THE LICENCE IS CAN CELLED HIS EARNING ITA NO. 3851/DEL/2009 A.Y. 2004-05 2 CAPACITY IS SUBSTANTIALLY EFFECTED. HOWEVER AO DI D NOT ACCEPT THIS. HE HELD THAT COMPENSATION RECEIVED WAS NOT AGAINST LOS S OF CAPITAL ASSET. THE EMPLOYER HAD PAID THE CONTRIBUTION OF THE ABOVE POLICY. THE ABOVE COMPENSATION WAS PAID TO THE EMPLOYER AND NOT TO AS SESSEE. HENCE IT WAS THE PAYMENT FROM EMPLOYER TO EMPLOYEE AND THE A SSESSEE WAS NOT PERMANENTLY DISQUALIFIED AS PILOT DUE TO CANCELLATI ON OF LICENCE. ACCORDINGLY AO TREATED THE SAME RECEIPT AS COMPENS ATION FROM EMPLOYER AND ADDED TO THE TAXABLE INCOME. 4. BEFORE THE LD. CIT(A) ASSESSEE SUBMITTED AS UN DER:- (I) THE ACT DOES NOT SPECIFY AS DEFINE THE TERM CA PITAL RECEIPT. MOREOVER THE ABOVE RECEIPT DOES NOT FALL WITHIN T HE TERM AND MEANING CAPITAL GAIN. (II) IT DOES NOT FALL UNDER PROFIT IN LIEU OF SALAR Y U/S. 17(23)(I) EITHER. IT NOT A COMPENSATION FOR ANY LOSS OR MODI FICATION OR EMPLOYMENT AND OTHER. THE ABOVE COMPENSATION WAS PAID FOR MEDICAL GRANT AND HAS BEEN WORKED OUT AS 2% OF THE CAPITAL SUM ASSURED I.E . THE LICENCE OF THE PILOT FOR RS. 18 00 000/- ON PRO-RAT A ON THE BASIS OF NUMBER OF DAYS THE PILOT WAS GROUNDED. THE RECEIPT FROM A GENERAL INSURANCE POLICY IS A C APITAL RECEIPT IF IT IS PAID IN SETTLEMENT OF A CLAIM TOWA RDS TEMPORARY OR PERMANENT LOSS OF A SOURCE OF INCOME. IN THIS CASE THE LICENSE IS ON ASSET FOR THE ASSESSEE WHICH GIVES HI M A SOURCE OF INCOME AND A REGULAR INCOME. - REFERENCE : FR ECH VS. VOLF. (160 80 396 181 LA 733) 2) ALTERNATIVELY THE ASSESSEE MAY BE GRANTED THE FO LLOWING EXEMPTIONS/DEDUCTIONS WHICH WERE NOT CONSIDERED BY THE LD. AO:- STANDARD DEDUCTION RS. 20 000/- SPECIAL TRAVELLING ALLOWANCE RS. 72 000/- INTT. ON BORROWED CAPITAL RS. 50 000/- TOWARDS HOUSING LOAN REPAYMENT OF PRINCIPAL TOWARDS RS. 1 00 000/- HOUSING LOAN (U/S. 80-C) ITA NO. 3851/DEL/2009 A.Y. 2004-05 3 4.1 HOWEVER CIT(A) DID NOT ACCEPT THESE CONTENTION S AND CONFIRMED THE AOS ORDER. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT THE IMPUGNED AMOUNT HAS BEEN RECEIVED FRO M INSURANCE COMPANY WHICH IS ON ACCOUNT OF SETTLEMENT OF CLAIM TOWARDS TEMPORARY CANCELLATION OF THE LICENCE AS A PILOT. THE LICEN CE TO FLY ALLOWED THE ASSESSEE TO FLY A PLANE AND THIS WAS INCOME EARNING APPARATUS. HENCE THE COMPENSATION FOR LOSS OF LICENCE WAS FOR COMPE NSATION TOWARDS LOSS OF SOURCE OF INCOME. IT IS ALSO EMANATING THAT THE ABOVE COMPENSATION WAS PAID FOR MEDICAL GRANT AND WAS WORKED OUT AS 2% OF THE CAPITAL SUM ASSURED I.E. THE LICENCE OF THE PILOT FOR RS. 18 00 000/- ON PRO-RATA ON THE BASIS OF NUMBER OF DAYS THE PILOT WAS GROUNDED. UPO N CAREFUL CONSIDERATION WE FIND THAT IT IS A SETTLED LAW THA T COMPENSATION RECEIVED FOR IMPAIRMENT OF SOURCE OF INCOME OR LOSS OF INCOM E EARNING APPARATUS IS CAPITAL RECEIPT. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSE E. 7. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/01/2010 UPON CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI) [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 28/01/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT DEPUTY REGISTRAR ITAT DELHI BENCHES