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TMI Blog2007 (6) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... brief are as follows: The assessee was carrying on the hotel business by acquiring leasehold rights in premises bearing No. 4411, Residency Road, Bangalore. Incidentally, it is necessary to state that M/s. Ramana Associates of Delhi was carrying on the hotel business in the said premises under the name and style "Corner House". M/s. Ramana Associates discontinued business and sold 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 consideration of Rs. 5,53,166., In the document of transfer it is recited that a sum of Rs. 5,00,000 is received as consideration for transfer of goodwill and the remaining sum of Rs. 53,166 for sale of tangible articles. In the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "...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..." 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 clear that the assessee in that case had acquired the property for a sum of Rs. 27,260. On the basis of the cost of acquisition the leasehold right was determined. After going through the decision of the Supreme Court in A. R. Krishnamurthy's case [1989] 176 ITR 417, we find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the present case. Learned senior counsel for the assessee next contended that after the judgment in B. C. Srinivasa Setty's case [1981] 128 ITR 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. 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 falling under section 55(2)(a)(ii) of the Act. The position prevalent prior to the amendments and prospective applicability of the amended provision has been considered by the Supreme Court in the case of CIT v. D. P. Sandu Bros. Chembur P. Ltd. [2005] 273 ITR 1 at paragraph 11 it is held: "11. The amendment took effect from April 1, 1995, and accordingly applied in relation to the assessment year 1995-96 and subsequent years. But ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 to 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 concurrent findings against the assessee by the Assessing Officer, the first appellate authority and also by the Tribunal that the assessee had not acquired any goodwill worth the name. It is also pertinent to note that the assessee carried on business for a period of 5 months, thereafter granted licence rights to M/s. Corner House Fun Food Cafe to run the hotel, which carried on the business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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