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The assessee received a sum of Rs. 145 Lacs from a multi-national company namely M/sCoca Cola India Limited [in Short referred to as CCIL / company]but offered only a part of the same i.e. Rs. 50 Lacs to tax and claimed the balance Rs. 95 Lacs to be capital receipts in nature in view of the fact that the same represented compensation received by assessee towards damages caused to assessee’s reputation. However, the failure to substantiate the same with sufficient documentary evidences and for want of proper justification thereof resulted into impugned addition in the hands of the assessee. Undisputedly, the appellant had received compensation for termination of a contract but such contract was one of many which the appellant held including, inter-alia, professional contracts for acting in films, professional contracts for stage shows and professional contracts for commercial endorsement. The termination of contract with M/s.Coca Cola India Ltd. did not impair the profit-making structure of the appellant, but was within the framework of appellant's business and profession, it being a necessary incident of the business that the contract may be terminated and fresh commercial endorsements and fresh professional contracts for acting in films and stage shows etc. Hon'ble Supreme Court in the case ofCIT vs. Rai Bahadur Jairam Valji (1959) 35 ITR 148, 163 (SC)has held that once it is found that a contract was entered into in the ordinary course of business, any compensation received for its termination would be a revenue receipt, irrespective of whether its performance was to consist of a single act or a series of acts spread over a period. Therefore, the entire receipt of Rs. 1.45 crores and not only Rs. 50 lacs, is a revenue receipt.may be taken The perusal of documents leads us to believe that the said compensation did not accrue / arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Income Tax Act, 1961. The compensation could not be termed as any benefit, perquisites arising to the assessee out of exercise of profession. The Ld. first appellate authority, in our opinion, fell in error to adjudicate the same on the threshold of impact of the compensation on profit making apparatus without understating the true nature of the receipts. This being so, we have no hesitation in deleting the impugned addition of Rs. 95 Lacs. We order so.

Shanti Prime Publication Pvt. Ltd.

Section 2(24), 28, 45, 271 of Income Tax Act, 1961—In the instant case, assessee raised the following grounds of appeal—

The CIT has erred, in law and the fact and circumstances of the case in confirming certain additions of the order of the learned ACIT 11(1) Mumbai.
The CIT(A) has erred, in law and facts and circumstances of the case in considering the Capital receipt of 95,00,000/- received from M/s. Coca Cola India Ltd. as income liable to tax.

Held that—Only an amount of 50 Lakh was due to the assessee and as per the terms of the contract, the assessee had a right to receive only that much of amount in case of default by CCIL and nothing more. As against this, the assessee has received an amount of 145 Lakh out of which 50 Lakh has been offered to tax by the assessee. The balance amount of 95 Lakh is stated to be received for loss of reputation etc. under the circumstances as discussed by us in the preceding paragraphs and therefore, being capital in nature, claimed to be not taxable. The factual matrix leads us to believe so in view of the fact that the contract did not envisage any additional payment over and above the amount of 150 Lakh to the assessee. The perusal of documents leads us to believe that the said compensation did not accrue /arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Income Tax Act, 1961.

The compensation could not be termed as any benefit, perquisites arising to the assessee out of exercise of profession. The Ld. first appellate authority, in our opinion, fell in error to adjudicate the same on the threshold of impact of the compensation on profit making apparatus without understating the true nature of the receipts. This being so, we have no hesitation in deleting the impugned addition of 95 Lakh. We order so.

Penalty u/s 271(1)(c) —Since, we have allowed assessee’s appeal against quantum addition, the consequential penalty do not survive. Even otherwise, upon consideration of factual matrix, we are of the opinion that there was no concealment of income or furnishing of inaccurate particulars on the part of the assessee. It was the case where the assessee made certain claim which has not been accepted by the revenue. Viewed from any angle, the impugned penalty could not survive.[SUSHMITA SEN VERSUS ASSISTANT COMMISSIONER OF INCOME TAX-11 (1) , MUMBAI] [2018] [7] [ITCD Online] [36] [ ITAT MUMBAI]

The assessee received a sum of Rs. 145 Lacs from a multi-national company namely M/sCoca Cola India Limited [in Short referred to as CCIL / company]but offered only a part of the same i.e. Rs. 50 Lacs to tax and claimed the balance Rs. 95 Lacs to be capital receipts in nature in view of the fact that the same represented compensation received by assessee towards damages caused to assessee’s reputation. However, the failure to substantiate the same with sufficient documentary evidences and for want of proper justification thereof resulted into impugned addition in the hands of the assessee. Undisputedly, the appellant had received compensation for termination of a contract but such contract was one of many which the appellant held including, inter-alia, professional contracts for acting in films, professional contracts for stage shows and professional contracts for commercial endorsement. The termination of contract with M/s.Coca Cola India Ltd. did not impair the profit-making structure of the appellant, but was within the framework of appellant's business and profession, it being a necessary incident of the business that the contract may be terminated and fresh commercial endorsements and fresh professional contracts for acting in films and stage shows etc. Hon'ble Supreme Court in the case ofCIT vs. Rai Bahadur Jairam Valji (1959) 35 ITR 148, 163 (SC)has held that once it is found that a contract was entered into in the ordinary course of business, any compensation received for its termination would be a revenue receipt, irrespective of whether its performance was to consist of a single act or a series of acts spread over a period. Therefore, the entire receipt of Rs. 1.45 crores and not only Rs. 50 lacs, is a revenue receipt.may be taken The perusal of documents leads us to believe that the said compensation did not accrue / arise out of exercise of profession by the assessee and could not be construed to be the income of the assessee or profits and gains of profession within the meaning of Section 2(24) and Section 28 of the Income Tax Act, 1961. The compensation could not be termed as any benefit, perquisites arising to the assessee out of exercise of profession. The Ld. first appellate authority, in our opinion, fell in error to adjudicate the same on the threshold of impact of the compensation on profit making apparatus without understating the true nature of the receipts. This being so, we have no hesitation in deleting the impugned addition of Rs. 95 Lacs. We order so.

Shanti Prime Publication Pvt. Ltd.

Section 2(24), 28, 45, 271 of Income Tax Act, 1961—In the instant case, assessee raised the following grounds of appeal—

The CIT has erred, in law and the fact and circumstances of the case in confirming certain additions of the order of the learned ACIT 11(1) Mumbai.
The CIT(A) has erred, in law and facts and circumstances of the case in considering the Capital receipt of 95,00,000/- received from M/s. Coca Cola India Ltd. as income liable to tax.