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TMI Blog2013 (2) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... movable property, are transferred to the new tenant does not hold water. There is no time gap between the vacation of the property by the old tenant and grant of rental rights to the new tenant. - there is no evidence to infer that the house is in vacant possession of the assessee even after the alleged end of the tenancy - Therefore, the views of the AO as well as the CIT(A) on this issue require to be sustained as the amount of Rs 7.26 lakhs, the consideration for consent, does not involve any transfer of capital rights attached to the property on the facts of this case and the amount constitutes a windfall gain to the assessee. Amount is taxable as Income from other sources - decided against the assessee. - ITA No.3178/Mum/2010 - - - Dated:- 21-11-2012 - D. Manmohan and D. Karunakara Rao, JJ. Appellant Rep by: Shri Chetan A Karia Respondent Rep by: Shri Om Prakash Meena, Sr. AR ORDER Per: D. Karunakara Rao: This appeal filed by the assessee on 23.4.2010 is directed against the order of CIT (A)-32, Mumbai dated 9.2.2010 for the assessment year 2006-2007. 2. In this appeal, assessee raised the following grounds read as under: 1. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs 7,26,000/- is not a capital receipt , therefore, held that the said investment in NABARD Bonds is not an allowable claim of the exemption u/s 54EC of the Act. However, as per the assesse, the said amount when received towards surrender of a right, which is part of the bundle of the rights owned by the assessee in respect of the said property, the assessee received the impugned consideration of Rs 7.26 lakhs in lieu of the extinguishment of the said rights and therefore, the claim is validly allowable. In this regard, assessee relied on the various decisions to suggest that the amount received on surrender of tenancy right was a capital receipt which is taxable under the head capital gains . After considering the assessee s submissions, AO debated the conceptual variation in meanings between the expressions transfer of tenancy rights vis- -vis surrender of the tenancy rights . As per the AO, there was no surrender of the tenancy rights to the hands of the assessee and it was a transfer of right of residence to the new tenants by the existing tenant. AO also discussed fact of payment of consideration by the new tenant to both original tenant and the land lord. Further, as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsent for such transfer and for that he received a sum of Rs. 7,26,000/-, which cannot be termed as a receipt for surrender of tenancy rights. As per the revenue, it is the original tenant who owns the tenancy right and surrender of the same is done by the said tenant and in such surrender, the consideration is paid by the land lord. Thus, in the present case the original tenant merely surrendered the right of residence in favour of the new tenant and therefore, it is not case of surrender of tenancy rights and consequently, the case laws relied upon by the assesse are distinguishable. Therefore, so far as the assessee is concerned, it is the case of encashment of the power of consent for transfer of the tenancy rights to the new tenant. Further, he discussed that if a new tenant (Akshita B. Haria and Shri Bhavesh K. Haria) again transferred the property to some other tenant, the assessee would be entitled to receive similar amount. Otherwise the ownership rights on the property continue to vest with the assessee. Therefore, the CIT (A) dismissed the assessee s claim that Smt. Damyanti S. Shah surrendered tenancy rights in full to the assessee. This is a case of getting windfall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly taxed as income from other sources . Ld DR mentioned that assessee continuous to hold the right of ownership in the property and the tenancy rights cannot be said to have been fully surrendered as the assessee. The original tenant continuous to hold the tenancy rights and she shall continue to enjoy the windfall gains as and when the tenants were changed. Further, Ld DR filed a couple of decisions i.e. one in the case of Manoj B. Joshi vs. Income Tax Officer Ors (2009) 224 CTR (Bom) 481 for the proposition that amount received by the assessee indemnifying developer against any possible legal action is not a capital gain but income from other sources and the second one in the case of Bharat Forge Co. Ltd. vs. CIT (1994) 205 ITR 339 (Bom) for the proposition that compensation received for breach of contract since, there is no extinguishment of any asset for which the assessee received compensation the same cannot be considered as a capital gain . 8. We have heard both the parties and perused the orders of the Revenue. We have also gone through the citations by Ld Counsel before the Revenue Authorities as well as the decisions cited by the Ld DR before us. On perusal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration to Smt. Damayanti S. Shah vide the cheques dated 21.6.2005. They also paid a sum of Rs 7.26 lakhs to the assesse vide two cheques dated 21.6.2005 for Rs. 2,63,000/- each. Assessee accepted to surrender of the tenancy rights and possession of the said property by the new tenants for a monthly rent of Rs.129.34 paisa. Assessee received the same as consideration for granting them monthly tenancy of the said flat and accepting from them a sum of Rs. 390/-only as interest from security deposit in respect of the said flat and also for executing the receipt in their favour as mentioned in Clause 4 of the said agreement. From the dates mentioned above, so far as the assessee is concerned, the tenancy continues ceaselessly since 1962. The amount of rent and the deposit payable by the new tenant towards the rented property appears nominal. The amount paid by the new tenant to the landlord cannot be termed as payment for surrender of tenancy rights in view of its very definition as in the transaction of surrender of tenancy rights, the lands makes the payment to the holder of the tenancy rights. The new tenants who made the payment of Rs 7.26 lakhs on the 21.6 2005 to the land lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r towards the rental advance. Further also, considering the rent-oriented terms and conditions specified in the tripartite agreement, it cannot be inferred that the new tenant received merely rental rights and there is no transfer of any capital rights to the new tenant by the land lord. Therefore Rs 7.26 lakhs is neither a capital receipt nor a rental receipt. In that sense, the argument of the Ld Counsel that some of the capital rights, out of the bundle of rights relating to the immovable property, are transferred to the new tenant does not hold water. 12. Further, it is pertinent to note that there is no time gap between the vacation of the property by the old tenant and grant of rental rights to the new tenant. There is continuity of renting of the property and there is no evidence to infer that the house is in vacant possession of the assessee even after the alleged end of the tenancy of Smt Shah and therefore, it can be stated that the assessee has never got the property in vacant condition. Therefore, it cannot be stated that the impugned house property is entirely free from any tenancy rights vis a vis Smt Shah but for the commitment in the said tripartite agreement and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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