Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business income - In 1956, assessee made an agreement with MK for purchase of property and paid earnest money of Rs. 50,000 - On account of repeated failure to execute conveyance deed, agreement was renewed periodically - MK paid damages of Rs. 8,000 (21-12-1964) and Rs. 8,000 (8-9-1965) for breach of agreement - Assessee finally obtained compromise decree for Rs. 85,431 - For assessment year 1965-66, ITO's order to tax first payment of Rs. 80,000 set aside by AAC - For assessment year 1966-67, ITO allowed exemption of second payment of Rs. 8,000, ITO taxed Rs. 24,431 (Rs. 16,000 plus Rs. 8,431 representing further damages) as business income - Whether assessee was not a dealer in immovable property and impugned amount of Rs. 24,431 was not includible in taxable income for assessment year 1969- 70 - Held, on facts, yes - Whether impugned receipts of Rs. 16,000, dealt with in assessment years 1965-66 and 1966-67 could not be included inassessee's total income - Held, on facts, yes - Whether impugned receipts of Rs. 24,431, having been received as damages on account of vendors' breach of agreement, could not be treated as assessee's income for assessment year 1969-70 - Held, on facts, yes Facts In 1956, the assessee had entered into an agreement with MK for purchase of an immovable property for Rs. 2,00,000 and paid Rs. 50,000 as earnest money and the balance was to be paid at the time of execution of deed of conveyance MK repeatedly devoted in executing the required deed of conveyance which was renewed from time to time and ultimately the assessee was obliged to obtain a compromise decree towards final settlement whereby MK agreed to pay Rs. 85,431, consisting of: Rs. 50,000 paid as earnest money, Rs. 16,000 [Rs. 8,000 paid on 21-12-1964 and Rs. 8,000 paid on 8-9-1965] payable by way of damages, which was credited towards the purchase consideration, Rs. 10,000, being further amount paid by the assessee, Rs. 8,431, paid as further damages and Rs. 1,000, being the cost to the suit. For the assessment year 1965-66, the ITO assessed the initial damages of Rs. 8,000 as income from other sources but the same was deleted by…

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