9911796707
TMI Blog2005 (8) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... Tools (I) Ltd. not to obstruct the surrender of premises to 8hri T.R. Anand, who had purchased the property from original owner Mrs. N.D. Khanna and had stepped into the shoes of the owner in eviction proceeding initiated before the Court in Delhi. A surrender deed was accordingly submitted in the Court based on an understanding recorded in the memorandum dt. 3rd April, 1997. A copy of above memorandum is available at pp. 33 to 36 of paper book. Copy of surrender deed between M/s Jhalani Tools (I) Ltd. and the landlord dt. 3rd April, 1997 is available at pp. 29 to 32 of the paper book. 3. The assessee filed return for the relevant period 1998-99 declaring total income at Rs. 22,72,814. In the course of assessment proceedings, a question relating to receipt of Rs. 30 lakhs in respect of Golf Links property was raised and assessee had claimed that above amount was received as compensation for discomfort and inconvenience caused to the assessee. The AO, after taking into account terms and conditions of the agreement, dt. 5th Aug., 1977 as also the submission of the assessee held that assessee was a sub-tenant of the premises for monetary consideration paid to the tenant and also in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rupees twenty-four thousand only) per annum, respectively to the company, preferably in four quarterly instalments of Rs. 9,000 (Rupees nine thousand only) and Rs. 6,000 (Rupees six thousand only) each, respectively. (v) In consideration of the furniture, fittings, library and other materials provided to you by the company, Shri G.C. Sharma shall keep a sum of Rs. 30,000 as a fixed deposit with the company, to serve as security, on which he shall be entitled to receive interest @ 15 per cent per annum." 5. The assessee also drew attention of the learned CIT(A) to the tripartite agreement between the landlord, tenant M/s Jhalani Tools (I) Ltd. and the assessee dt. 3rd April, 1997 under which physical possession of the premises was handed over to the landlord and Rs. 30 lakhs were paid. The parties thereafter filed an application under Order 23, r. 1 of the. CPC before the Court to confirm the agreement and pass a decree accordingly. 6. The contentions of the assessee in short noted by the CIT(A) are as under: "(a) I was neither a tenant or a sub-tenant of the said premises at any time within the true meaning of the expression. I never paid any rent to anybody. (b) I was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rather than by making payment. This way it was argued that there was a contradiction in the finding of the AO relating to payments made by the assessee and termed as "rent" by the AO. Actually the payment agreed to be made was partial reimbursement of expenditure incurred by the company in providing necessities for carrying on professional services and other facilities like use of furniture, secretarial services, telephone, library, etc. It was accordingly submitted that agreement between the company and the assessee could not be termed as agreement of sub-tenancy rather than an agreement of retainership. It was further submitted that assessee had no interest which could be held to be capital asset in terms of s. 2(14) or was capable of transfer in terms of s. 45 of the IT Act. 7. The submission advanced on behalf of the assessee, terms of agreement dt. 5th Aug., 1977 under which the assessee was permitted to occupy the premises, settlement deed under which Rs. 30 lakhs were paid to the assessee on surrender of possession were noted and reproduced in the impugned order up to page 18 of the impugned order. After considering submissions of the assessee in detail in the light of mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been placed by the AO is not a sub-tenancy agreement rather it is a retainership agreement. The payment made by the appellant is not consideration for occupying the premises but for using services provided to the appellant like telephone, furniture, fixture, etc. Therefore, on the strength of the fact that a nominal amount has been paid by the appellant annually to the tenant it cannot be held to have acquired any right and interest in the subject property. The right, interest and possession was always with the tenant and not with the appellant which is clear from the various clauses of the agreement between the appellant and the tenant. To sum up the appellant has worked as a retainer of the tenant and has worked on priority basis for the tenant, thereby the appellant has obliged the tenant by rendering specialized services in the field of legal matters. In process, the appellant has not acquired any interest or right in the subject property which can be termed as a 'capital asset' as defined under s. 2(14) of the IT Act, 1961. Therefore, the receipt of money of Rs. 30,00,000 can be treated as a capital receipt which is not taxable." 8. The Revenue is aggrieved and has brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st in the ground floor of 152, Golf Links, New Delhi as a sub-tenant albeit without a formal tenancy agreement. (ii) That the assessee remained in actual possession of the property for 20 years by paying consideration partly in money and partly in terms of professional services. (c) That the learned Jt. CIT had ignored from relevant consideration the following facts: (i) That the assessee was regularly receiving fees for appearances, opinions and consultations from Gedore Tools for the professional services rendered being much more than the fee receivable as "retainer". The representative occupation was not for any consideration paid by the assessee. It was an obligation imposed on him by Gedore Tools (I) Ltd. Gedore Tools who never recognized the assessee as a "sub-tenant". No enquiry was made from Gedore Tools in this behalf. (ii) That there was no evidence of the assessee having paid any rent at any time to the tenant, i.e., Gedore Tools (I) Ltd. to obtain the rights of a sub-tenant. (iii) That the ad hoc payment of Rs. 36,000 per annum was subsidized for availing of facilities, furniture, library, telephone, etc. And not for any rent for occupation of the premises. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises paid the sum in question to the assessee only for removing a nuisance or obstruction in getting the possession of the premises swiftly, when Gedore had agreed to surrender it. (v) The assessee's licence to occupy the premises on behalf of, and for the purposes of, M/s Gedore Tools became ineffective with the termination of tenancy rights of M/s Gedore Tools Ltd. in the said property. (vi) The assessee obviously had no right or interest in the premises which he could assign to anyone else. It was only a personal right not creating any right in the property. (vii) There has never been any agreement/arrangement/understanding between the assessee and the landlord, particularly at the time of granting tenancy rights to M/s Gedore Tools, who were tenants of the premises since much earlier than the assessee came into picture. The surrender deed dt. 3rd April, 1997 is only between the parties named in the preamble of the surrender deed filed in Court that is M/s Gedore Tools/Jhalani Tools and the owner Dr. (Mrs.) N.D. Khanna. This surrender deed clearly mentions at p. 30 of the paper book that M/s Gedore Tools, the lessee is in full occupation of the ground floor of the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was only for availing some subsidized facilities like library, secretarial assistance, furniture and fittings, etc. which would have provided necessary infrastructure to the assessee to render proper services as a lawyer to the Gedore Tools. There is only one agreement between the assessee and M/s Gedore Tools and that is with regard to the terms of retainership of assessee's professional services to be rendered by the assessee. This agreement read as a whole by no stretch of imagination can be construed as an agreement between the assessee and Gedore Tools as one establishing the relationship of the subtenant between the assessee and M/s Gedore Tools. No reliance could be placed as sought by the Departmental Representative on the decision of the Delhi High Court in the case of Hindustan Times Ltd. 11. We have given careful thought to the rival submissions of the parties and also examined material available on record. On perusal of letters/agreement dt. 5th Aug., 1977 and other facts and circumstances of the case, we are of view that Revenue has failed to establish that assessee owned any capital asset, particularly in the form of sub-tenancy rights allegedly granted by M/s Jha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in London. He was paying 25 per month as rent which was being reimbursed by the assessee to Mr. Martin since he was representing the assessee in London. The assessee transferred the property by way of sale on February, 1973 to M/s Salisbury Square Investment Ltd. The sale was subject to the condition that Mr. Martin would continue to occupy the portion which was occupied by him earlier as a monthly tenant. The right of Mr. Martin to continue as a tenant was protected by a deed executed on 1st Feb., 1973 in favour of the assessee. It was clear from the record that Mr. Martin agreed to vacate the premises and Salisbury agreed to pay a sum of 24,000 as compensation. Salisbury wrote a letter in that behalf in which it was promised that he would be paid a sum of 24,000 as contribution towards rent for five years on the alternative accommodation which he will be occupying and further a sum of 24,000 towards rent and outgoing. Such sum to be paid five years after the first payment. However, it appears that the assessee received 24,000 and credited them to his P L a/c stating that the same represented compensation for termination of tenancy in London office. The assessee, i.e., Hindus ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
