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TMI Blog2011 (11) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... INCOME TAX APPEAL NO. 122/2003 - - - Dated:- 9-11-2011 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V.EASWAR, JJ. For Appellant: Mr. Kamal Sawhney, Sr. Standing Counsel. SANJIV KHANNA, J.: By order dated 13th April, 2004, the following substantial question of law was framed: Whether the Tribunal was right in holding that Section 10(3) of the Income-tax Act, 1961 was not applicable and that the amount received for surrender of tenancy right was not assessable to tax under the Income-tax Act, 1961? 2. The assessment year in question is 1993-94 and the respondent assessee is an individual. The question of law raised pertains to taxation of Rs.1 crore received by the assessee on surrender of tenancy rights in property No. 15, Motilal Nehru Marg, New Delhi from Bennet Coleman and Company Limited. The Assessing Officer following the directions under Section 144A of the Income Tax Act, 1961 (Act, for short) held that the said amount was taxable as income from other sources. According to the Assessing Officer, as the assessee has no tenancy right to transfer, the income cannot possibly be charged under the head of Capital Gains . 3. On appeal filed by the assessee, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enancy rights and whether the respondent assessee was a tenant. He referred to the provisions of the Delhi Rent Control Act, concept of statutory tenant etc. and held that the respondent assessee was in fact a tenant and the consideration amount received was on account of surrender of tenancy rights and, therefore, Section 10(3) was not applicable. 8. It is not disputed by the Revenue that Ram Krishan Dalmia was originally the tenant of the property and the property had been taken on rent from Bennet Coleman and Company Limited. Tenancy rights, it is well settled, are inheritable under the general law, unless there is specific statute or a contract to the contrary. 9. In Gian Devi Anand (supra), Bhagwati J. on the question of inheritance of tenancy, whether contractual or statutory in nature, has elucidated the same, observing: 2. The distinction between contractual tenancy and statutory tenancy is thus completely obliterated by the rent control legislation. Though genetically the parentage of these two legal concepts is different, one owing its origin to contract and the other to rent control legislation, they are equated with each other and their incidents are the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver possession of the premises from the tenant in due process of law and the tenant under the general law of the land is hardly in a position to resist eviction, once the contractual tenancy has been duly determined... 11. There is no evidence/material to show that the tenancy of Ram Krishan Dalmia, which continued from month to month, was terminated. The agreement dated 17th November, 1992 indicates that the month to month tenancy was not terminated by issuance of notice under Section 106 the Transfer of Property Act, 1882. The month to month tenancy is recognised and permitted by law. The doctrine of tenant hold over is well recognised. The CIT(A) has held that the respondent assessee was a tenant. No eviction or ejectment proceedings were initiated. On the question of difference amongst the terms, a tenant by sufferance, tenant holding over and a trespasser, it has been observed in Badrilal v. Municipal Corporation of Indore, (1973) 2 SCC 380, as under:- 8. It was then urged by Mr Gupte that the appellant having deposited the rent up to March 31, 1954 and the Municipal Commissioner having accepted it he should be deemed to be a tenant holding over. Leaving aside for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over after the expiration of the term does not create a tenancy of any kind. If a tenant remains in possession after the determination of the lease, the common law rule is that he is a tenant on sufferance. A distinction should be drawn between a tenant continuing in possession after the determination of the term with the consent of the landlord and a tenant doing so without his consent. The former is a tenant at sufferance is English Law and the latter a tenant holding over or a tenant at will. In view of the concluding words of Section 116 of the Transfer of Property Act, a lessee holding over is in a better position than a tenant at will. The assent of the landlord to the continuance of possession after the determination of the tenancy will create a new tenancy. What the section contemplates is that on one side there should be an offer of taking a new lease evidenced by the lessee or sub-lessee remaining in possession of the property after his term was over and on the other side there must be a definite consent to the continuance of possession by the landlord expressed by acceptance of rent or otherwise. In Kai Khushroo Bezonjee Capadia v. Bai Jerbai Hirjibhoy Warden case the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired at a cost. It is ultimately a question of fact. In A.R. Krishnamurthy and Ors, vs. Commissioner of Income Tax, Madras 1989 (176) ITR 417 this Court held that it cannot be said conceptually that there is no cost of acquisition of the grant of the lease. It held that the cost of acquisition of leasehold rights can be determined. In the present case however, the Department's stand before the High Court was that the cost of acquisition of the tenancy was incapable of being ascertained. In view of the stand taken by the Department before the High Court, we uphold the decision of the High Court on this issue. 13. Were it not for the inability to compute the cost of acquisition under Section 48, there is, as we have said, no doubt that a monthly tenancy or leasehold right is a capital asset and that the amount received on its surrender was a capital receipt. But because we have held that Section 45 cannot be applied, it is not open to the Department to impose tax on such capital receipt by the assessee under any other section. This Court, as early as in 1957 had, in United Commercial Bank Ltd. v. CIT held that the heads of income provided for in the sections of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axed as a casual or non-recurring receipt under Section 10(3) read with Section 56. We are fortified in our view by a similar argument being rejected in Nalinikant Ambalal Mody v. S.A.L. Narayan Row, ITR at pp. 432, 435. 18. The appeal is accordingly dismissed without any order as to costs. 14. Thus, once it is held that the income received was of capital nature, it cannot be brought to taxibility under Section 10(3) as income of casual and non-recurring nature. Further, in order to tax the income received from the surrender of tenancy rights, the Assessing Officer must first compute and calculate the cost of acquisition of tenancy rights. 15. In the present case, the Assessing Officer has not held that it is possible to compute and calculate the cost of acquisition of the tenancy rights in the hands of the original tenant Ram Krishan Dalmia. The said exercise was not undertaken by him in the assessment order. In view of the aforesaid position, we are not required to determine, decide and compute income from capital gains under Section 45 of the Act. A similar situation had arisen in the case of D.P. Sandu Bros. Chembur (P) Ltd. (supra) and the Supreme Court had refused to e ..... 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