TMI Blog2010 (6) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... s with tenancy rights ignoring and disregarding the facts and the law that lease, rights and maintainable rights are neither synonymous nor akin but are totally different, both under the Transfer of Property Act and under the IT Act, 1961; 3. Saying that the method of computation and acceptance of the cost of acquisition of the property which has been adopted by the AO is erroneous and prejudicial to the interests of Revenue; 4. Observing that the cost of acquisition in the hands of the previous owner is a sum of ₹ 2,74,725 as against the fact that the previous owner has actually acquired it on lease for a period of 999 years on a lease rent of ₹ 275 per annum; 5. Rejecting the claim of the appellant that the expenditure incurred by an assessee to get any encumbrances removed or to get a clear marketable title on the property is an allowable expenditure under s. 48 and has to be taken into account for the purpose of working out the capital gains. 4. In ITA No. 739/Pn/2008 (asst. yr. 2003-04) the revisional order has been impugned on the ground that the learned CIT(A) has erred in:- 1. Assuming jurisdiction under s. 263 of the Act and ignoring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is possible to determine on transfer of part of the leasehold rights during the year in favour of M/s Aditya Developers and M/s Mahalaxmi Enterprises, as computation provisions fail and consequently, the long-term capital gains as calculated and taxed by the AO and confirmed by the learned CIT(A) on transfer of part of leasehold rights in the said land may please be deleted. The contents which the assessee proposes to raise as additional ground now are actually arguments in support of the issue raised in ground No. 1 of the memo of appeal. The assessee, in our view is always at liberty to advance such argument in support of the issue raised in ground No. 1, hence there is no need to raise additional ground in question by way of argument to support ground No. I. The prayer in this regard made in the application is thus rejected. 6. We find that in all the appeals one common issue as to what would be the cost of acquisition of land for the purpose of computation of capital gains has been raised. Related grounds are ground Nos. 1 to 4 in ITA Nos. 606 and 607/Pn/2008; ground Nos. 1 to 3 in ITA No. 625/Pn/2008 and ground No. 1 in ITA No. 625/Pn/2008. Ground Nos. 1 to 4 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of acquisition of tenancy rights cannot be determined, then the cost has to be taken as nil. The learned CIT observed that the assessees have surrendered their tenancy rights on the leasehold property for which they have received consideration and such consideration is a capital receipt within the meaning of s. 55 of the IT Act. The decision of the Hon'ble Supreme Court in the case of CIT vs. D.P. Sandu Bros. Chembur (P) Ltd. (2005) 193 CTR (SC) 578 : (2005) 273 ITR 1 (SC) and others have been followed. The learned CIT has mentioned that till the amendment in 1995, the law was that if the cost of acquisition could not in fact be determined, the transfer of such capital assets could not attribute capital gain, but the position has been changed with the amendment brought in s. 55(2)(a) of Act w.e.f. asst. yr. 1995-96. The assessees have questioned this action of the learned CIT under s. 263 of the Act in ITA Nos. 606, 607 and 739/Pn/2008. 6.3 In ITA No. 625/Pn/2008 (asst. yr. 2004-05) preferred by Smt. Seema Hemant Shirali for asst. yr. 2004-05, the learned CIT(A) has upheld the action of AO in treating the leasehold rights at par with tenancy rights for working out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative while questioning s. 263 order. In the said return, the cost of acquisition as on 11th July, 1989 with indexation was shown. The learned Authorised Representative pleaded that in tenancy right, the tenant has no right of interest in the land, whereas in lease, the lessee has inherent interest in the land. The tenancy rights are not transferable whereas leasehold rights are transferable. The leasehold rights can be acquired/transferred either on payment of premium or without the payment of premium whereas leasehold rights are acquired without payment in any premium; it tantamounts to gift by the lessor to the lessee. In such circumstance, the provisions of s. 49(ii) and s. 55(3) are clearly attracted, submitted the learned Authorised Representative. The learned Authorised Representative placed reliance on the following decisions of the Hon'ble Supreme Court in the cases of V. Dhanapal Chettiar vs. Yesodai Ammal AIR 1979 SC 1745 and Rajbir Kaur vs. Chokosiri and Co. AIR 1988 SC 1845. 6.5 The learned Departmental Representative on the other hand, tried to justify the revisional order under s. 263 of the Act and referred the contents of para Nos. 6 to 12 of the revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, hence these are of no assistance on the issue raised before us, in reference to the provisions of IT Act. In cases of Rent Control Act, the terms 'lease', 'licence' etc. are very material to decide an issue in relation to an instrument to see the extent of transfer of interest in the property by the landlord to the tenant/lessee. Having gone through the above cited decisions of the Hon'ble Supreme Court, we find that in the case of V. Dhanpal Chettiar vs. Yesodai Ammal (supra), the issue remained about the requirement of issuance of notice under s. 106 of Transfer of Property Act, 1882 for the termination of a lease either by the lessor or by the lessee. In this case, Hon'ble Supreme Court has discussed the related provisions of different States Rent Acts. In some States' Acts, the definition of 'tenant' also includes any person continuing in possession after the termination of his tenancy . It was observed that tenancy actually terminates on the passing of the order or decree for its eviction. The giving of notice, therefore, is a mere surplusage and unlike the law, under the Transfer of Property Act, it does not entitle the landlord to ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence 'turns on the operative intention of the parties', and that there is no single, simple litmus-test to distinguish one from the other. The 'solution that would seem to have been found is, as one would expect, that it must depend on the intention of the parties'. See Cobb vs. Lane (1952) 1 All ER 1199. As per Black's Law Dictionary (737) tenant means:- (i) One who holds or possess lands or tenaments by any kind of right or title; (ii) One who pays rent for temporary use of occupation of another's land under a lease or similar arrangement. In the same dictionary, the word lease has been defined as:- (i) to grant the possession, and use of (land, buildings, rooms, movable property etc.) to another in return for rent or for other consideration; (ii) to take a lease of; to hold by a lease. The term leasehold has been defined as tenants possessory state in land or premises. In Judicial Dictionary (8th Edition) by K.J. Aiyer's tenancy has been defined as the condition of estate of a tenant. The word is also used for the term of the holding as also the property which the tenant holds. The tenant is a word which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownership of the land was actually transferred to the assessees by Shri Avinash Wardekar. Undisputedly, before the amendment in s. 55, in 1995, the law was that if the cost of acquisition could not in fact be determined, the transfer of such capital assets, will not attract capital gain tax. After amendment to s. 55(2) w.e.f. 1st April, 1995 as applicable in relation to the asst. yr. 1995-96 and subsequent years, the position is different. As per this amendment in s. 55(2) for the purpose of ss. 48 and 49 cost of acquisition in relation to a capital asset being tenancy rights:- (i) in the case of acquisition of such asset by the assessee by purchase from a previous owner means the amount of the purchase price; and (ii) in any other case not being a case falling under cls. (i) to (iv) of sub-s. (1) of s. 49 shall be taken to be 'nil'. In the present case, before us, the asset has not been acquired by the assessees by purchase from a previous owner, hence cl. (i) of s. 55(2)(a) is not applicable. In the present case, cl. (ii) of the said section is applicable wherein, the cost of acquisition shall be taken to be 'nil'. In the case of Cadell Weaving M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative. There is also no substance in the argument of the learned Authorised Representative that non-charging of premium which is generally charged in such type of lease agreement, the amount may be treated as gifts by Shri Avinash Wardekar to the assessees since in our view, a gift cannot be of double nature, i.e. gift as well as leasehold right at the same time. Either it will be a gift or a lease. Without considering the above material aspect of the ratio and the law as on the date on the issue the AO has committed error of law in accepting the stand of the assessees that in the present case it was not possible to determine the cost of acquisition to compute the capital gains in the hands of the assessees, hence, provisions of s. 55(2) are not attracted nor the value of the land in question as on 11th July, 1989, with indexation rate or the fair market value as per s. 55(3) of the Act should have been accepted by the AO for determining the cost of acquisition. The assessment orders under consideration have thus rightly been held by the learned CIT as erroneous as well as prejudicial to the interest of Revenue within the provisions of s. 263 of the IT Act. The same is upheld. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the arguments advanced by the parties, we find that the assessee claimed ₹ 4.20 lakhs as her share of brokerage payment which was denied by the AO on the basis that the part of land was sold earlier to the same party through the same broker. As per the learned Authorised Representative, brokerage is to be paid on transaction basis and not on party basis. It appears that the total brokerage of ₹ 21 lakhs was paid, 20 per cent whereof i.e., ₹ 4.20 lakhs was claimed by the assessee. The AO has denied the same that the assessee had transferred property to M/s Aditya Developers during the previous year 2003-04 and claimed brokerage payment for this transaction. The AO noted further that the assesseee had during the financial years 2001-02 and 2002-03 had also transferred property to the same party. Under these circumstances, we do not find infirmity in the further observation of the AO that brokerage is paid for finding a buyer, who can give good price for the property. When there was no change of buyer, in our view, there was no question of involvement of brokerage for the transaction between the same party in succeeding year. The learned CIT(A) was therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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