2020 (2) TMI 165 - HC - Income Tax

Income from other sources OR Long term capital gain - tenancy rights - surrender of rights by the assessee vis-a-vis the property - assessee submits that he was the tenant of the property in question - whether the property in question was under the occupation of the tenant i.e. the present assessee? - HELD THAT - We feel that the stand taken by the revenue authorities in respect of the land in question vis-a-vis tenancy of the assessee is not justified. The assessee had disclosed the amount of 50 lakhs received from M/s. Carlton Coats Pvt. Ltd. for settlement of its claim to the property and had further disclosed that the said amount was invested in capital bonds. Thus the said amount was received by the assessee as long term capital gains in view of surrender of rights by the assessee vis-a-vis the property in question. In the circumstances merely on the basis of suspicion the revenue authorities ought not to have rejected the claim of the assessee that the said amount was received as long term capital gains but to treat the said amount as income from other sources . Substantial question of law as framed above is accordingly answered in favour of the assessee

Summary

Issues involved:
Interpretation of Income Tax Act, 1961 - Addition of income under "Income from other sources" - Disallowance of deduction under Section 54EC - Proof of tenancy over property - Appeal against Tribunal's order.

Analysis:
1. Interpretation of Income Tax Act, 1961:
The appeal under Section 260A of the Income Tax Act, 1961 was filed against the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2009-10. The main question of law was whether the Tribunal was justified in confirming the addition of ?50 lakhs to the taxable income of the assessee under the head "Income from other sources."

2. Addition of income under "Income from other sources":
The appellant, a Hindu Undivided Family, disclosed receiving ?50 lakhs from M/s. Carlton Coats Pvt. Ltd. on surrendering rights to a property. The appellant claimed a deduction under Section 54EC of the Act, stating the amount was invested in capital bonds. However, the Assessing Officer added back the amount as "income from other sources," leading to a dispute.

3. Disallowance of deduction under Section 54EC:
The Assessing Officer's decision to disallow the deduction claimed by the appellant under Section 54EC was a crucial aspect of the case. This disallowance resulted in the addition of ?50 lakhs to the appellant's taxable income, which was a key contention in the appeal.

4. Proof of tenancy over property:
The appellant argued that they were the tenant of the property in question and received the amount as a settlement. The Tribunal noted that the property was under the occupation of the appellant, which was also confirmed in the appeal of M/S. Carlton Coats Pvt. Ltd. The issue of proving tenancy was crucial in determining the nature of the income received by the appellant.

5. Appeal against Tribunal's order:
The Tribunal had dismissed the appeal of the assessee, leading to the appeal before the High Court. The High Court, after considering the submissions and perusing the records, found merit in the appellant's contentions. The Court held that the appellant received the amount as long-term capital gains and not as income from other sources, disagreeing with the Tribunal's decision.

In conclusion, the High Court allowed the appeal, ruling in favor of the assessee and against the revenue authorities. The Court held that the appellant's claim of receiving the amount as long-term capital gains was justified, and the orders of all authorities below were interfered with based on this finding.