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TMI Blog2001 (5) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... after referred to as the "Act") on the plea that net consideration was received on account of transfer of long-term capital assets being in the nature of tenancy rights acquired during the financial year 1972-73. The Assessing Officer looked into all the details and noted that assessee-company acquired tenancy rights inJeewanViharBuildingon the basis of an agreement of lease deed dated2-8-1972from Life Insurance Corporation ofIndiafor occupation of that property for a period of three years commencing from15-3-1973. It is also admitted fact that said agreement came to an end on14-3-1976and was not renewed but assessee-company continued to occupy property on the same terms and conditions. The Assessing Officer further noted that on 24-1-1997 the assessee-company entered into a Memorandum of Understanding ("MOU" in short) with the Bank of Tokyo Mitsubishi Whereby it was agreed that assessee-company shall receive a sum of Rs. 6.78 crores subject to the condition that: "(i) It shall deliver or cause to be delivered to LIC a letter (draft enclosed as per annexure-C to the MOU) intimating its decision to vacate the tenanted area, (ii) Surrender the tenancy in respect of the tenanted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MOU dated24-1-1997to the assessee-company and the Bank of Tokyo. Assessing Officer proceeded to examine the definition of 'transfer' as given in section 2(47) and was of the view that either it was surrender of the tenancy right or the right to enforce the MOU that there had been a transfer within the meaning of the Act. Then, the Assessing Officer proceeded to examine the nature of capital assets. According to Assessing Officer MOU was entered on 24-1-1997 and right was extinguished on 18-2-1997 on the fulfilment of the terms and conditions thereof the capital asset was held for a period less than 36 months. On this basis he concluded that capital asset was in the nature of a short term capital asset. In Alternative the Assessing Officer examine the plea of the assessee and noted that even if it is taken that capital asset was in the nature of tenancy rights, the asset was a short term capital asset as assessee-company entered into lease agreement for occupation of a property for a period of three years ending on 14-3-1976. Thereafter the assessee was in occupation of the property on month to month basis. Assessing Officer opined that assessee always acquired a new right of tenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d taken any step to take possession which remained uninterrupted for 23 years 11 months and 3 days before it was surrendered. On the basis of these facts the contention of the learned counsel for the assessee before the CIT(A) was that tenancy right was a capital asset as held in the case of Bawa Shiv Charan Singh v. CIT [1980] 149 ITR 29. He submitted that in the instant case the assessee had surrendered the possession and LIC issued the certificate of taking possession back in the year under consideration. The amount of Rs. 6.78 crores was for surrender of tenancy rights to LIC. The possession of the assessee was for a period of 23 years and more and thus the capital asset was held for more than 36 months and the capital gains which arose in the year under consideration were long-term capital gains. 5. It appears that CIT(Appeals) called for remand report from Assessing Officer who placed reliance on some case laws and submitted that tenancy of the assessee used to commence on first of each month and coming to an end on last of each calendar month. In the month of February 1997 it started on1-2-1997and came to an end on18-2-1997and thus capital gain should be treated as shot te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Transfer of Property Act raises a fiction and indicates a deeming provision in respect of leases which did not fall within the ambit of section 107. Allease under section 106 is known as a periodic lease which continues from one moth to another and as per reading thereof shall show that this section provides that such a lease is of uncertain duration. In absence of any written contract or local usage if the lease is for immovable property then it shall be deemed to be a lease for moth to moth terminable of the part of either lessor or lessee. The learned counsel submitted that this fiction cannot be extended further more and tenancy of the assessee no doubt was month to month but it remained in existence till 18-2-1997 the date of surrender. Apart from it learned counsel submitted that word 'terminable' had been used in section 106 which provides that existence of tenancy will be there though it may be month to month but it will remain till it is determined by the lessor. Reference to the case of State of J K v. Mst. Fazal Bibi AIR 1986 J K 27 was made to in which Their Lordships have laid down that a monthly tenancy does not come to an end by mere afflux of time as in a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 106 of the Act. The contention of the learned D.R. is that Assessing Officer as well as CIT(Appeals) have rightly decided the issue in favour of the assessee and no interference is called for. 9. We have considered the rival submissions and perused the record carefully as well as gone through the case law referred to by the learned representative of the parties. So far as facts of the case axe concerned, it is not in dispute that assessee-company occupied the premises owned by LIC through lease deed executed on15-3-1973for a period of 3 years. It is also a fact that after expiry of 3 years' period the lease deed was not reduced to writing but assessee-company continue to occupy the premises in question and had been paying rent therefor as agreed upon in the above referred to lease-deed. LIC of India also recognised the assessee as tenant of the said premises and had been receiving the rent and issuing the rent receipt. On 24-1-1997 MOU between the assessee and the Bank of Tokyo Mitsubishi Ltd. was executed by which the assessee-company was to receive a sum of Rs. 6.78 crores if it delivers a letter to LIC of India intimating its decision to vacate the tenanted area and to surrend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find no merit in this contention of learned counsel. As is clear from a bare reading of section 2(42A) of the Act, the word 'owner" has designedly not been used by the Legislature. The word 'hold', as per dictionary meaning, means to possess, be the owner, holder or tenant of property, stock, land ... ). Thus, a person can be said to be holding the property as an owner, as a lessee, as a mortgage or on account of part performance of an agreement, etc.' 12. Their Lordships concluded that assessee was put in possession in May 1970 and remained in occupation as of right and thus for all intent and purposes the assessee was beneficial owner from the start and Tribunal was right in holding that the capital was a long-term capital gain. 13. Now we shall examine the case of the assessee in view of the above observation of Their Lordships and admittedly assessee had been in possession of property from15-3-1973to18-2-1997when tenancy rights were surrendered. The case of the Revenue is based on the interpretation of section 106 of Transfer of Property Act which reads as under: "106. Duration of certain leases in absence of written contract or local usage - in the absence of a contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses in question and LIC of India continued to accept same rent as was being paid before14-3-1976and had been showing the assessee-company as the tenant in their record. The term 'Possession' consists of two ingredients viz., 'animus' Le., mental element like intention of holding or possessing and 'corpus' ie., effective control. In the case in hand assessee never lost either the animus or corpus or both between15-3-1976to18-2-1997nor LIC had made any effort to take possession of the property from assessee-company prior to 18-21997. Accordingly, the status of the assessee was that of tenant holding over. The case of the assessee is fully supported by the decision of Hon'ble Allahabad High Court in the case of Smt. Munni Devi 386 in which Their Lordships have laid down as under: "Where a lessee remains in possession of immovable property leased even after the expiry of the term of the lease and the lessor accepts rent from him or otherwise assents to his continuing in possession, he would become by reason of the provisions of section 116, Transfer of Property Act a tenant holding over. The tenancy created by the tenant holding over is a statutory tenancy which enables the tenant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , LIC of India to determine the said tenancy. Accordingly possession of the assessee was statutory one and that extended from15-3-1976to18-2-1977. 18. The other plea of the Department is that tenancy of the assessee in respect of premises in question was month to month basis which used to start from 15th of each month and used to come to an end on 14th of next month. This plea of the Revenue is also not well founded and for this we can refer to the decision of Hon'ble Bombay High Court in the case of Utility Articles Mfg. Co. in which Their Lordships, while discussing the provisions of Sections 105 and 106 of the I.T. Act, have observed as under : 'A characteristic of a periodical tenancy is that as each period commences, it is not a new tenancy; it is really an accretion to the old tenancy, a monthly tenancy that is a tenancy subject to a month's notice, creates in the first instance a tenancy for two months certain. But as soon as the third month commences, that is not a new tenancy; it turns the original tenancy into a three months tenancy, and when the fourth month begins, the tenancy becomes a four months' tenancy, and so on so long as the tenancy continues, until, that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable to the assessee particularly for application of provisions of Section 2(42A) of the I.T. Act as it is settled preposition of law that a fiction created by statute cannot be extended for another statute unless provided under that Act. Here we are concerned with the specific provision of Section 2(42A) which requires that assessee must be holding property for more than 36 months and here assessee was possessing tenancy right for more than 23 years and thus the case of the assessee was just one in claiming long-terms capital gain. So far as exemption under section 54EA is concerned, the same had been denied to the assessee simply on the ground that assessee had not been able to prove that capital gains were long-term capital gains but as per our findings assessee's case is that of long term capital gains and thus he was entitled for exemption claimed under section 54EA. All the grounds stand decided in favour of the assessee. 21. So far as ground no. 1 is concerned that is in respect of disallowance of subscription paid to club. This was not seriously pressed by the learned counsel for the assessee at the time of hearing of the appeal. Accordingly, ground is rejected as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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