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TMI Blog2010 (1) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... Daya Shankar, Adv. for the Respondent ORDER A.L. Gehlot, Accountant Member.- This appeal filed by the assessee is directed against the order of CIT(A)-XXVII, Mumbai, passed on 26-11-2008 for the assessment year 2004-05 wherein the assessee has raised the following grounds of appeal:- "1. The learned CIT(A), Mumbai erred in rejecting the claim of long-term capital loss amounting to Rs. 3,69,08,837 being loss incurred on part surrender of leasehold land to MIDC and part transfer to Lucas TVS Ltd. on the ground that the assessee had never owned the capital asset. 2. Without prejudice to above, it is submitted that the learned CIT(A) should have considered the loss on transfer of leasehold rights to Lucas TVS Ltd. as allowable long-term capital loss. 3. The learned CIT(A) erred in disallowing a sum of Rs. 1,17,818 being 10 per cent of exempt income under section 14A of the Income-tax Act, 1961. 4. The learned CIT(A) erred in disallowing a sum of Rs. 20,60,000 under section 36(1)(iii) being entire interest on fund borrowed during the year." 2. At the time of hearing before us, the learned AR has not pressed Ground No. 3; therefore, the same is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th MIDC in accordance with the aforesaid MoU, the transaction of lease of the land to the assessee never took place. The Assessing Officer further noticed that when the assessee never owned an asset, he could not have transferred it. A capital gain or loss arises on the transfer of capital asset. The Assessing Officer held that the assessee never owned the capital asset, which he could transfer. Therefore, there is no capital gain/loss. The CIT(A) confirmed the order of the Assessing Officer by observing as under:- "1.71 have gone through the facts of the case, submission made and also the order of the Assessing Officer. From the facts narrated by the Assessing Officer in the assessment order and also from the submission made by the appellant before the Assessing Officer and also at the stage of appeal proceedings, I have noted that on 27-1 -1999 relevant to assessment year 1999-2000, the appellant had entered into an agreement with Maharashtra Industrial Development Corpn. for grant of lease of the land and premises for a period of 95 years after paying a consideration of Rs. 10 crores. As per the agreement, the appellant had to pay such recurring fees in the nature of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land to MIDC the appellant had incurred a capital loss amounting to Rs. 3,69,08,817 This ground is dismissed." 5. The learned AR submitted that lease or right is in the nature of capital assets. The land was acquired by the assessee by an agreement. The possession of the land was taken. Consideration was paid. This valuable right was surrendered by the assessee, therefore, there is Transfer of a capital asset, which is liable to capital gains or loss'. The land claimed by the assessee is in respect of long-term capital assets, therefore, the same is allowable as long-term capital loss. The learned AR in support of his contention relied upon the following judgments:- (a) A. Gasper v. CIT[1979] 117 ITR 581 (Cal). (b) CIT v. Pramia Engg. (P.) Ltd [1993] 202 ITR 298 (Cal). (c) CIT v. Sujatha Jewellers [2007] 290 ITR 631 (Mad.). (d) CIT v. A.R. Damodara Mudaliar and Co. [1979] 119 ITR 583 (Mad.). 5.1 The alternate submission of the learned AR is that without prejudice to the main argument, the loss pertaining to transfer of leasehold right to Lucas TVS Ltd. is allowable as long-term capital loss. 6. The learned DR, on the other hand, relied upon the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;] [(iv) 6 1/2 per cent Gold Bonds, 1977 [or 7 per cent Gold Bonds, 1980,] [or National Defence Gold Bonds, 1980,] issued by the Central Government;] [(v) Special Bearer Bonds, 1991, issued by the Central Government;] [(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government;] "(47) ['transfer', in relation to a capital asset, includes,-(i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment;] [or] [(iva) the maturity pr r ..... 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