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TMI Blog2006 (3) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... al asset and therefore tax is leviable as capital gains. Thus, it is clear that the transfer by way of lease is treated as transfer of a capital asset on the principle that the lease creates an interest in the land and therefore to that extent, it extinguishes the right of the transferor. If the facts of the present case are analysed in the context of the law laid down by the Supreme Court and the various sections of the Income-tax Act, we have no difficulty at all in holding that when the assessee transfers his leasehold rights in the land in his occupation by way of a sub-lease to another person, it amounts to extinguishing his rights in the property and since his leasehold rights had created an interest in the land, i.e., enjoyment and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se deed dated September 10, 1985 in favour of another company for a period of 20 years; under that sub-lease agreement, the sub-lessee has to pay a sum of Rs. 10 lakhs as interest-free advance to the assessee; the rent payable for the first 15 years is Rs. 77,500/- per month and for the remaining period, the rent payable is Rs. 92,500/- per month. 3. On the above noted admitted facts, the question that was raised before the Deputy Commissioner of Income-tax was, whether transfer of leasehold rights in the land by the assessee in favour of the sub-lessee would amount to transfer of a capital asset at the hands of the assessee and if so, the consideration paid by the sub-lessee to the assessee would partake of the character of capital gains a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act. A reading of that section shows that any profits or gains arising from the transfer of a capital asset effected in the previous year shall,... be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place . She also took us through section 2(47) of the Income-tax Act highlighting as to what transfer means. The expression transfer is defined in section 2(47) of the Income-tax Act, among other things, as hereunder: the extinguishment of any rights therein (sub-clause (ii) of clause 47 of section 2). 5. Therefore, her submission is that, the assessee had acquired an interest in the land by having the lease in his favour; by sub-leasing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty which the assessee owned by himself alone would come within the meaning of capital asset . In A. R. Krishnamurthy and A. R. Rajagopal v. CIT [1982] 133 ITR 922 (Mad) referred to above, a point arose before this court at the instance of the assessee as to whether the transfer by way of a lease would amount to transfer of a capital asset . In that case, the assessee was a body of individuals, who had purchased various extents of properties in the year 1966 for a stated consideration. Thereafter, the assessee, by an instrument dated September 10, 1970, styled as lease-cum-licence, granted a mining lease in favour of a company. A question arose whether such a transaction would amount to transferring a capital asset thereby attracting ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived as salami. A question arose as to whether the transaction effected by the assessee would amount to transferring a capital asset warranting capital gains tax. The Supreme Court held that the transfer by way of lease would amount to transfer of a capital asset and therefore tax is leviable as capital gains. From a reading of the above referred judgment, it is clear that the transfer by way of lease is treated as transfer of a capital asset on the principle that the lease creates an interest in the land and therefore to that extent, it extinguishes the right of the transferor. If the facts of the present case are analysed in the context of the law laid down by the Supreme Court and the various sections of the Income-tax Act, we have no d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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