2015 (12) TMI 983 - HC - Income Tax

Surrender of tenancy rights - ITAT treating not as capital assets liable for tax as long term capital gain - whether the assessee was tenant of the said property and surrender of tenancy rights amounts to Transfer u/s 2(47)? - Held that - We find that on examination of the agreements, both CIT(A) as well as Tribunal have categorically rendered a finding that there was, in fact, no surrender of tenancy under the two agreements dated 9th May, 2007 and 25th July, 2007. Thus, no transfer for the purposes of capital gains. This finding on the basis of the examination of various clauses of the agreement coupled with the inspection report of the Inspector who visited the premises, concludes as a fact that the Appellant continues to occupy the tenanted property and the entire process of redevelopment is stalled because of a legal dispute. Further, Documents on record such as rent receipt, addresses in bank account etc., indicated that tenancy continued. In this case, the Respondent-Assessess disputes the surrender of tenancy and/or any transfer and on examination of the clauses of the Agreements, the CIT(A) and the Tribunal accept the fact that no surrender/transfer took place. - Decided against revenue

Summary

Issues:
- Appeal challenging order dismissing long term capital gains tax on account of surrender of tenancy.
- Questions raised regarding treatment of surrender of tenancy rights as capital assets, date of transfer, and relief under section 54F.
- Dispute over surrender of tenancy rights and transfer of property.
- Tribunal's decision on no surrender of tenancy under agreements dated 9th May, 2007 and 25th July, 2007.
- Court's analysis of agreements, inspection report, and documents indicating continued tenancy.
- Relevance of previous court decision on transfer of property.
- Tribunal's decision not to consider issue regarding relief under section 54F due to no transfer of tenancy rights.
- Final decision dismissing appeal.

Analysis:

The High Court of Bombay heard an appeal challenging the Income Tax Appellate Tribunal's order regarding long term capital gains tax on surrender of tenancy rights for the Assessment Year 2008-09. The Revenue questioned whether the surrender of tenancy rights should be treated as capital assets liable for tax and the date of transfer for assessment. Additionally, the issue of relief under section 54F was raised. The Respondent, a tenant of a residential premises, had entered into agreements with a developer for redevelopment, but the Assessing Officer held that surrender of tenancy rights attracted capital gain tax. The Respondent argued that no surrender or transfer took place as per the agreements. The CIT(A) and Tribunal found no surrender of tenancy under the agreements, supported by inspection reports and documents showing continued tenancy. The Court distinguished a previous case where property transfer was undisputed. Consequently, Questions (a) and (b) were not entertained due to no substantial legal issue.

Regarding Question (c) on relief under section 54F, since the Tribunal's order already determined no surrender of tenancy rights, the Court did not address this issue. The final decision of the Court was to dismiss the appeal, stating that no substantial legal question arose for consideration. Therefore, the appeal was rejected without any costs imposed.