Deputy Commissioner of Income-tax, V. Madanlal Chunilal Dakle (HUF), Pune

ITA 2211/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0994 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL PATHAK
• Assessee Lawyers: SUNIL PATHAK SHRI RAJESH DAMOR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Capital receipt
• Section: 45(2); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . . , , , BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 2211 /PN/201 3 / ASSESSMENT YEAR : 20 0 6 - 07 DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, PUNE ....... / APPELLANT / V/S. MADANLAL CHUNILAL DAKLE (HUF), 1184/4, SHIVAJINAGAR, B WING, 2 ND FLOOR, F.C. ROAD, PUNE - 411005 PAN : AADHM4527R / RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SHRI RAJESH DAMOR / DATE OF HEARING : 28 - 07 - 2015 / DATE OF PRONOUNCEMENT : - 10 - 2015 / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - I I , PUNE DATED 1 9 - 08 - 2013 FOR THE ASSESSMENT YEAR 2006 - 07. 2. IN APPEAL, THE DEPARTMENT HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THE NON - REFUNDABLE PREMIUM/PAGRE E OF RS.61,00,000/ - RECEIVED BY THE ASSESSEE FROM THE TENANT AS LONG TERM CAPITAL GAINS. 2 ITA NO. 2211/PN/2013, A.Y. 20 06 - 07 3. THE BRIEF FACTS OF THE CASE ARE: T HE ASSESSEE - HUF FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 20 0 6 - 07 ON 26 - 07 - 2006 DECLARING TOTAL INCOME OF RS. 61,32,128/ - . THE ASSESSEE OWNS A HOUSE PROPERTY KNOWN AS BHAGIRATHI BHAVAN AT MUMBAI. IN THE SAID BUILDING, T HE ASSESSEE RENTED OUT FLAT NO. 1A WITH GARAGE NO. 1A TO SHRI I N DRAVADAN BHAILAL MAZUMDAR ON A MONTHLY RENT OF RS.1516.22/ - AND RS.80.71/ - , RESP ECTIVELY VIDE REGISTERED AGREEMENT OF TENANCY . APART FROM THE ABOVE SAID MONTHLY RENT, THE ASSESSEE RECEIVED RS.61,00,000/ - AS NON - REFUNDABLE PREMIUM FROM THE SAID TENANT. IN THE RETURN OF INCOME THE ASSESSEE DECLARED THE AMOUNT OF RS.61,00,000/ - AS LONG TERM CAPITAL R ECEIPT. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER HELD THAT THE AMOUNT OVER AND ABOVE RENTAL INCOME RECEIVED BY THE ASSESSEE HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES . AGGRIEVED BY THE ASSESSMENT ORDE R DATED 26 - 11 - 2008, THE AGGRIEVED BY THE ASSESSMENT ORDE R DATED 26 - 11 - 2008, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER HELD THE TENANCY RIGHTS AS CAPITAL ASSET . S URRENDER OF SUCH RIGHTS WOULD CONSTITUTE A TRANSFER AND THUS , PREMIUM RECEIVED ON TRANSFER OF TENANCY RIGHTS IS LIABLE TO BE ASSESSED AS A LONG TERM CAPITAL G AIN. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE COME TO SUCH A CONCLUSION COMMISSIONER OF INCOME TAX (APPEALS) WHILE COME TO SUCH A CONCLUSION DRAWS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT O F INDIA IN THE CASE OF CIT VS. D.P. SANDU BROS. CHEMBUR P. LTD. REPORTED AS 273 ITR 1 (SC). AGAINST THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS NOW, IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI RAJESH DAMOR REPRESENTING THE DEPAR TMENT SUBMITTED THAT 4. SHRI RAJESH DAMOR REPRESENTING THE DEPAR TMENT SUBMITTED THAT THE AMOUNT OF RS.61,00,000/ - RECEIVED BY THE ASSESSEE AS NON - REFUNDABLE PREMIUM ON TRANSFER OF TENANCY RIGHTS IS TO BE ASSESSED 3 ITA NO. 2211/PN/2013, A.Y. 20 06 - 07 UNDER THE HEAD INCOME FROM OTHER SOURCES . THE PREMIUM RECEIVED BY THE ASSESSEE IS OVER AND ABOVE THE MON THLY RENT RECEIVED BY THE ASSESSEE. THE RATIO OF THE JUDGMENT RENDERED IN THE CASE OF CIT VS. D.P. SANDU BROS. CHEMBUR P. LTD. (SUPRA) WILL NOT APPLY IN THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE, THE TENANCY RIGHTS ARE TRANSFERRED BY THE LANDLOR D TO THE TENANT . WHEREAS, IN THE CASE OF CIT VS. D.P. SANDU BROS. CHEMBUR P. LTD. (SUPRA) THE TENANT HAD SURRENDERED THE TENANCY RIGHTS PREMATURE LY FOR WHICH THE LANDLORD HAD PAID RS.35,00,000/ - AS CONSIDERATION FOR PREMATURE TERMINATION OF LEASE AGREEMENT . THE LD. DR SUBMITTED THAT THE AMOUNT RECEIVED BY THE ASSESSEE AS NON REFUNDABLE PREMIUM ON LETTING OUT OF PREMISES DOES NOT AMOUNT TO TRANSFER OF ANY CAPITAL ASSET. THE PREMIUM AMOUNT RECEIVED BY THE ASSESSEE IS OVER AND ABOVE THE AGREED MONTHLY RENT, TH EREFORE, IT HAS TO BE ASSESSED UNDER THE HEAD, INCOME FROM OTHER SOURCES. IN SUPPORT OF HIS SUBMISSIONS, THE LD. DR PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VINOD V. CHHAPIA VS. ITO REPORTED AS 56 SOT 465 (MUM). THE LD. DR VEHEMENTLY SUPPORTED THE FINDINGS OF ASSESSING OFFICER AND PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER. 5. SHRI SUNIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT , THE ASSESSEE HAD PERMANENTLY TRANSFERRED THE TENANCY RIGHTS IN THE P REMISES OWNED BY IT. A PERUSAL OF THE AGREEMENT OF TENANCY WOULD SHOW THERE IS NO MENTION OF THE PERIOD FOR WHICH THE TENANT WILL ENJOY THE DEMISE PREMISES. THE TENANCY RIGHTS ARE PART OF BUNDLE OF RIGHTS ATTACHED TO ANY BUILDING OR LAND. THE ASSESSEE H AS TRANSFERRED TENANCY RIGHTS IN THE CAPITAL ASSET WHICH ARE ALSO CAPITAL IN NATURE. TH US, THE PREMIUM RECEIVED BY THE ASSESSEE ON TRANSFER OF TENANCY RIGHTS IS ALSO CAPITAL IN NATURE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED 4 ITA NO. 2211/PN/2013, A.Y. 20 06 - 07 RELIANCE ON THE DECI SION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. D.P. SANDU BROS. CHEMBUR P. LTD. (SUPRA) AND THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF ACIT VS. G.C. SHAH & CO. REPORTED AS 369 ITR 323 (GUJ). THE LD. AR FURTHER SUBMITTED THAT IN THE AFORESAID CASE IT HAS BEEN HELD THAT A TENANCY RIGHT IS A CAPITAL ASSET AND ITS SURRENDER WOULD ATTRACT SECTION 45 AND, GAINS DERIVED WOULD BE ASSESSABLE UNDER THE HEAD CAPITAL GAINS AND NOT UNDER ANY OTHER HEAD. THE LD. AR FURTHER CONTENDED THAT HEADS OF THE INCOME ARE MUTUALLY EXCLUSIVE. THE PREMIUM RECEIVED BY THE ASSESSEE ON TRANSFER OF TENANCY RIGHTS BEING CAPITAL IN NATURE HAS TO BE TAXED UNDER CAPITAL GAINS AND NOT UNDER RESI DU AL CLAUSE. THE PROVISIONS OF SECTION 45(2) OF THE ACT SHALL APPLY ON TENANCY RIGHTS BEING CAPITAL ASSET. THE LD. AR CONTENDED THAT THE DECISION RENDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VINOD V. CHHAPIA VS. ITO (SUPRA) IS NOT APPLICAB LE IN THE PRESENT CASE. THE LD. AR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 50C APPLY ON TRANSFER OF LAND AND BUILDING AND NOT ON TRANSFER OF TENANCY RIGHTS. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE DECISION IN THE CASE OF ATUL G. PURANIK VS. ITO REPORTED AS 132 ITD 499. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . THE RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . THE ASSESSEE HAS TRANSFERRED TENANCY RIGHTS IN LIEU OF CONSIDERATION IN TH E FORM OF NON - REFUNDABLE PREMIUM/PAGREE. THE ASSESSEE HAS TREATED THE AMOUNT OF PREMIUM AS CAPITAL RECEIPT WHEREAS THE REVENUE HAS HELD THAT THE AMOUNT A S LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES . 7. THE CONTENTION OF THE ASSESSEE I S THAT THE TENANCY RIGHTS ARE PART OF BUNDLE OF RIGHTS ATTACHED TO THE BUILDING OR ANY CAPITAL ASSET AND 5 ITA NO. 2211/PN/2013, A.Y. 20 06 - 07 THUS, THE BUNDLE OF RIGHTS ATTACHED TO THE CAPITAL ASSET PARTAKE THE CHARACTER OF CAPITAL ASSET. THE ASSESSEE HAS TRANSFERRED TENANCY RIGHTS AND THE CONSIDERATION RECEIVED IN LIEU THEREOF IS A CAPITAL RECEIPT. WE FIND MERIT IN THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE. EVERY CAPITAL ASSET CARRIES WITH IT SOME RIGHTS WHICH ARE ENJOYED BY ITS OWNER. IF SOME RIGHTS ARE SEVER ED FROM THE CAPITAL ASSET PERMANENTLY AND ARE TRANSFERRED IN LIEU OF CONSIDERATION THE SAID CONSIDERATION SHALL BE IN THE NATURE OF CAPITAL RECEIPT. 8. I N THE CASE OF ACIT VS. G.C. SHAH & CO. (SUPRA) , THE ASSESSEE HAD SURRENDERED HIS SUB - TENANCY RIGHT AN D RECEIVED CERTAIN SUM AS CONSIDERATION FROM LESSOR . THE ASSESSEE TREATED THE SUM RECEIVED AS CAPITAL GAIN , WHEREAS, THE ASSESSING OFFICER HELD THE AMOUNT TO BE TAXABLE UNDER THE HEAD I NCOME FROM OTHER S OURCES . THE HON'BLE GUJARAT HIGH COURT AFFIRMIN G THE FINDINGS OF TRIBUNAL HELD , THAT THE TENANCY RIGHT IS A CAPITAL ASSET AND ITS SURRENDER WOULD ATTRACT SECTION 45, THEREFORE, GAINS DERIVED WOULD BE ASSESSABLE UNDER HEAD CAPITAL GAINS. 9. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. D.P. SANDU BROS. CHEMBUR P. LTD. (SUPRA) IN A SIMILAR CIRCUMSTANCES HAD HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE/TENANT FROM THE LESSOR ON SURRENDER OF PREMATURE TERMINATION OF TENANCY RIGHTS IS CAPITAL RECEIPT AND IS LIABLE TO BE TAXED UNDER THE HEAD CAPITAL GAINS. 10. WE DO NOT AGREE WITH THE SUBMISSIONS OF THE LD. DR THAT THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. D.P. SANDU BROS. CHEMBUR P. LTD. (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. THE HON'BLE APEX COURT HAS UNEQUIVOCALLY HELD 6 ITA NO. 2211/PN/2013, A.Y. 20 06 - 07 THAT THE TENANCY RIGHTS ARE A CAPITAL ASSET AND CONSIDERATION RECEIVED IN LIEU OF TRANSFER OF TENANCY RIGHTS IS CAPITAL RECEIPT WITHIN THE MEANING OF SECTION 45. WE ARE OF THE CONSIDERED VIEW THAT WHETHER THE TRANSFER OF TENANCY RIGHTS IS FROM LAND OWNER TO THE TENANTS OR VICE VERSA IN CASE OF PREMATURE TERMINATION OF TENANCY , T HE NATURE OF TENANCY RIGHTS WOULD NOT CHANGE. THE TENANCY RIGHTS ARE WITH RESPECT TO THE CAPITAL ASSET AND THUS, ARE CAPITAL IN NATURE. WE DO NOT FIND ANY INFIR MITY IN THE IMPUGNED ORDER THUS, THE SAME IS UPHELD . 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON F R I D A Y , THE 1 6 T H DAY OF OCTOBER, 2015. SD/ - SD/ - ( . . / R.K. PANDA) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 1 6 T H OCTOBER, 2015 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT . 2. / THE RESPONDENT . 3. ( ) / THE CIT(A) - I I , PUNE 3. ( ) / THE CIT(A) - I I , PUNE 4. / THE CIT - I I, PUNE 5. , , , / DR, ITAT, A BENCH, PUNE . 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, // TRUE COPY // / PRIVATE SECRETARY, , / ITAT, PUNE