9911796707
TMI Blog2013 (9) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the lease deed, transfer the lease hold rights of the property with the consent of the lessor. The conversion of the rights of the lessee in the property from having lease hold right into free hold is only by way of improvement of her rights over the property - It would not have any effect on the taxability of gain from such property, which is related to the period over which the property is held. If the period is less than 36 months, the gain arising from such transfer would be of short-term capital gain. In the present case, the property was held by the assessee as a lessee since 1984, and the same was transferred on 31.03.2004, after the lease hold rights were converted into free hold rights on the same property which was in her pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in law in ignoring the D.V.Os report regarding the Stamp Valuation." 3. We find that only question Nos. 1 and 2 are relevant, for the purpose of consideration. 4. Brief facts of the case are that the assessee is a senior citizen. She had never filed income-tax return, as her income was below maximum exemption limit. During the year in question, the assessee sold immovable property i.e. a Shop No. 26/7 M.G. Marg, Civil Lines, Allahabad, built at Nazul Plot No. 30/4 (being a part portion of Nazul Plot No. 30, Civil Station, Allahabad). She did not file return of income on the advice of the then C.A., but filed it in compliance to the notice u/s 148 of the Income Tax 1961, declaring income of Rs.70,430/-. During the assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was the difference between the total sale consideration as per stamp authority and net sale consideration of the property, and thus worked out total Capital Gain of Rs.43,36,706/-, and assessed the total income of the assessee at Rs.44,07,140/-. 7. The CIT (Appeal) allowed the appeal partly, with the findings that the assessee did not have any short- term capital gain in the property. Relying on several orders of ITAT, the CIT (A) held that the conversion of property into free hold property, is nothing but improvement of the title over the property, as the fact remains that the assessee was owner, prior to conversion. The relevant paragraphs of the order of the CIT (A) are quoted as under:- "5.2 So far as, the sole ground of appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would amount to transfer of capital asset viz. Lease rights. It was held that the assessee had acquired interest in the property by having a lease in its favour and by sub leasing the property, it had transferred, the interest in property in favour of a third party which is liable to be taxed under the head 'Capital Gains'. By sub leasing of property, the interest of the transferor i.e. lessor is extinguished and this extinguishment of right is covered u/s 2(47) of the Act. Therefore, it was held that the transaction of sub-lease constitutes transfer and the gains arising there from were assessable as Capital Gains. While deciding this case, the decisions rendered in A.R. Krishnamurty & A.R. Raja Goptal Vs. CIT [1982] 133 ITR 922 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of transfer, and does not rule out other mode of transfer subject to fulfillment of conditions regarding taxability under the head 'Capital Gain' vide CIT Vs. Narang Dairy Products [(1996) 219 ITR 478 (SC). He also relied on CIT Vs. Dr. V.V. Modi [ 218 ITR (1996) Kar.] where the assessee was allotted a site by the Bangalore Development Authority in 1972. He secured a conveyance on payment of entire sale consideration at the end of 10th year, and a sale deed was executed in his favour by the Development Authority registered on 13.5.1982. Thereafter on 27.11.1982, the assessee sold the site to a third person. In the said case, the Tribunal found that in such case 50 % should be considered as short-term gain and 50 % as long term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may, subject to covenants of the lease deed, transfer the lease hold rights of the property with the consent of the lessor. The conversion of the rights of the lessee in the property from having lease hold right into free hold is only by way of improvement of her rights over the property, which she enjoyed. It would not have any effect on the taxability of gain from such property, which is related to the period over which the property is held. If the period is less than 36 months, the gain arising from such transfer would be of short-term capital gain. 12. In the present case, the property was held by the assessee as a lessee since 1984, and the same was transferred on 31.03.2004, after the lease hold rights were converted into free hold r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
