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TMI Blog2003 (3) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law is referred by the Income-tax Appellate Tribunal, Cochin Bench, to this court pursuant to the direction issued by this court in the judgment dated November 11, 1998, in O.P.No. 11138 of 1998, at the instance of the Commissioner of Income-tax, Cochin. "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in interfering with the order of the Commissioner of Income-tax (Appeals)?" The brief facts necessary for decision of this case are as follows. The assessee is a company in which the public are not substantially interested. The assessee obtained a leasehold right in respect of a piece of land from the Cochin Port Trust and the assessee had constructed a building therein for the purpose of his business. The assessee sold the building during the accounting period relevant to the assessment year 1986-87 to M/s. Ram Bahadur Thakur Pvt. Ltd. for a consideration of Rs. 2,34,000. The Assessing Officer computed the capital gains on the transfer of the property at Rs. 1,37,120. According to the assessee, there cannot be an assessment to capital gains in respect of this transaction. Therefore, the assessee took up the matter in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer was not only in respect of the building, but also in respect of the leasehold right, and the consideration received was in respect of both. Counsel also took us to the various correspondences between the assessee and the Cochin Port Trust, and the conditions specified in the communication issued by the Cochin Port Trust as also in the registered document, and submitted that the Tribunal had considered all the relevant documents and had come to the conclusion as a fact that the transfer was a composite one both in respect of the leasehold right and in respect of the building, and, therefore, the consideration in respect of the land has to be separately taken, and the same cannot be subjected to capital gains tax in view of the decision of the Supreme Court in B.C. Srinivasa Shetty's case mentioned above. We have considered the rival submissions and have also perused the three orders of the authorities. It is seen from the assessment order that the assessee had deducted a sum of Rs. 1 lakh from the sale consideration claiming that this portion is for the transfer of leasehold right, as the building was constructed on the land obtained on lease from the Cochin Port Trust. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 31, 1984, to the Cochin Port Trust for their permission. In answer to the said request, the estate manager of the Cochin Port Trust wrote to the assessee on January 11, 1985, expressing consent subject to certain conditions stipulated in the said letter. The said letter is extracted, in paragraph 7 of the appellate order. It is specifically stated therein that the chairman has accorded sanction to transfer the lease of 50.11 cents of land in plot No. 10 leased to the assessee in Cat. II to M/s. Ram Bahadur Thakur (Kerala) P. Ltd., Cochin-3, subject to the assessee agreeing to abide by the following terms and conditions. Clauses (i) to (vi) contain the modus operandi to be followed for such grant. The first condition is that the assessee should transfer the structures constructed by it on the leasehold land by a sale deed executed in favour of the transferee. The second condition is that the assessee should surrender the land to the Port Trust to enable the Port to allot the land to the transferee. The third condition is that the transferee would be getting the lease only for the remaining period of lease, i.e., up to March 13, 1987. The fourth condition is that the transferee sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chairman of the Cochin Port had accorded sanction to transfer the leasehold right in respect of the land to M/s. Ram Bahadur Thakur (Kerala) P. Ltd. Thus clause (5), in turn, refers to the contents of the said letter which contains the various conditions also. From a reading of the lease agreement executed between the assessee and the Cochin Port, the communication dated January 11, 1985, issued by the estate manager of the Cochin Port, and clause (5) of the agreement executed between the assessee and M/s. Ram Bahadur Thakur (Kerala) P. Ltd., it is very clear that what is transferred by the assessee in favour of Ms. Ram Bahadur Thakur is the building together with the leasehold right which vested in the assessee under the agreement executed dated March 14, 1957, executed between the assessee and the Cochin Port Trust, and the permission granted by the Cochin Port in the communication dated January 11, 1985, is in terms of clause (b) of the lease agreement. The reason for non-inclusion of the leasehold right in the sale deed executed by the assessee in favour of M/s. Ram Bahadur Thakur Pvt. Ltd., is that the Cochin Port Trust in the letter dated January 11, 1985, had specifically s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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