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TMI Blog2007 (6) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusive definition of income in section 2 and section 10(3) which takes into its ambit all receipts which are not chargeable under the head 'Capital gains' ?" 2 The facts and the proceedings that gave rise to the questions under reference in brief are as follows : 3 The assessee was carrying on the hotel business by acquiring leasehold rights in premises bearing No. 44/1, Residency Road, Bangalore. Incidentally. it is necessary to state that M/s. Ramana Associates of Delhi was on the hotel business in the said premises under the name and style "Corner House". M/s. Ramana Associates discontinued business and it to the assessee on November 1, 1983. However, the documents of transfer dated November 1, 1983, make no reference to any consideration for the capital value. The assessee carried on the hotel business from October 30, 1983, to March 31, 1984. On April 1, 1984, under a deed of licence, the assessee granted licence to carry on the business in the said premises to M/s. Corner House Fun Food Cafe on licence fee of Rs. 60,000 per quarter. On March 31, 1987, the assessee transferred its interest in the business and leasehold rights to M/s. Corner House Fun Food Cafe for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider whether the first appellate Commissioner and the Tribunal were justified in holding "that since the cost of acquisition of capital gain cannot be determined and the same be subjected to tax under section 45 of the Act." 8 Shri M. V. Seshachala, learned counsel for the Revenue, relying on the decision of the Supreme Court reported in A. R. Krishnamurthy v. CIT [1989] 176 ITR 417, has contended that the cost of acquisition of leasehold rights is capable of ascertainment and it can be determined. In the aforesaid decision, at page 421 it is held: "... So far as the apportionment of the cost of acquisition is concerned, it is a question of fact to be determined by the Income-tax Officer in each case on the basis of evidence . . ." It is further held (page 421) The value of lease hold rights in the cost of acquisition of land being determinable, the computation provisions under the Act are applicable and section 45 would be attracted . . . 9 Per contra, Sir Sarangan, learned senior counsel for the assessee has contended that the observations made in the aforesaid decision are with reference to the facts of that case and from a reading of the facts it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to tax. In the case of B. C. Srinivasa Setty reported in [1981] 128 ITR 294, the Supreme Court while considering the transfer of self-generated goodwill, has held that cost of acquisition of self-generated goodwill cannot be determined. Therefore, we hold that what has been held in the said decision is not applicable to the facts of the• present case. 14 Learned senior counsel for the assessee next contended that after the judgment in B. C. Srinivasa Setty's case [1981]128 1TR 294 (SC), section 55 of the Act has been amended with effect from April 1, 1995, to provide for determination of cost of acquisition of goodwill, tenancy rights, stage carriage permits or loom hours. Learned senior counsel would contend that these amendments being prospective in nature have no application to this case, which relates to the assessment year 1987-88. We are unable to accept these submissions for more than one reason. 15 By the aforesaid amendment, a deeming provision is introduced to determine the cost of acquisition of goodwill, tenancy rights, stage carriage permits or loom hours failing under section 55(2) (a) (ii) of the Act. 16 The position prevalent prior to the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that the view taken by us in this case is consistent with what has been held by this court therein. This court in Joy Ice-cream's case[1993] 201 ITR 894 has held that income derived from surrender of tenancyis a capital gain. However, since no money or expenditure was involvedin acquiring tenancy right, the same cannot be subjected to tax under section 45 of the Act. 21 In the instant case, we have held that the assessee had not taken the premises for lease from the landlord nor surrendered possession of the premises to the landlord. On the other hand, the assessee had acquired by transfer, the leasehold rights and running the hotel business from M/s. Ramana Associates during the year 1983. The assessee carried on the hotel business for a period of 5 months and thereafter granted licence rights M/s. Corner House Fun Food Cafe to carry on the business as licensee. Subsequently, the assessee transferred the leasehold rights and all the interest to M/s. Corner House Fun Food Cafe for a consideration of Rs. 5,53,166. Though it is recited in the deed that a sum of Rs. 5,00,000 was paid towards goodwill and a sum of Rs. 53,166 was paid for tangible articles, there has been con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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