9911796707
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Issues:
1. Whether the compensation received for surrendering leasehold rights is of capital nature? 2. Whether the Appellate Assistant Commissioner can direct the assessment of the compensation as capital gains assessable to tax? Analysis: The case involved a reference under section 256 of the Income-tax Act, 1961, where the Tribunal referred two questions of law to the High Court. The first question was whether the compensation received for surrendering leasehold rights was of capital nature. The second question was about the authority of the Appellate Assistant Commissioner to assess the compensation as capital gains for tax purposes. The facts of the case revolved around a partnership firm leasing a property and receiving compensation in monthly instalments for surrendering the leasehold rights. The Income-tax Officer initially treated the receipt as revenue, but the Appellate Assistant Commissioner and the Tribunal held it to be a capital receipt. Regarding the first question, the High Court upheld the Tribunal's decision that the compensation received was a capital receipt. The court emphasized that the nature of the receipt as capital or revenue cannot solely be determined by the mode of payment in instalments. The court found no error in the Tribunal's conclusion and ruled in favor of the assessee. On the second question, the High Court relied on a previous Division Bench ruling and held that the matter was settled, directing the answer in the affirmative in favor of the assessee. In conclusion, the High Court answered both questions in favor of the assessee, affirming that the compensation for surrendering leasehold rights was of capital nature and that the Appellate Assistant Commissioner could not direct the assessment of the amount as capital gains for tax purposes. The parties were directed to bear their own costs in the circumstances of the case.
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