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TMI Blog2018 (7) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.Y 2012-13. AO is directed to consider the above amount and collect the taxes on the same. In view of the above, the appellant’s appeal is dismissed. As the entire consideration received has been brought to tax in the A.Y 2012-13 under the head LTCGs, the appeal filed for A.Y. 2014-15 is treated as allowed in respect of the grounds raised on the taxation of the balance consideration received in lieu of granting of perpetual easementary right of way and license to ingress and egress land measuring 30 feet wide for reaching the licensee landlocked property by entering into an agreement with M/s. Skyline Construction & Housing Pvt. Ltd. - ITA No.1384/Bang/2017 - - - Dated:- 31-5-2018 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri K.Balasubramanian Harsha Chandra, CAs For The Respondent : Dr. P.V.Pradeep Kumar, Addl.CIT(DR) ORDER Per INTURI RAMA RAO, AM : This is an appeal filed by the assessee directed against the order of the learned Commissioner of Income-tax (Appeals)-5, Bengaluru [CIT(A)] dated 31/03/2017 for the assessment year 2012-13. 2. Briefly the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, it be held that the receipt of money from Skyline Construction Housing Ltd., although is a capital receipts but it is not chargeable to tax under any provisions of the law because right of easement being an intangible assets having no cost thereof is not to be taxed. Hence the addition made by the A.O. at ₹ 1 50 crores and enhanced by the CIT (A) to ₹ 3.50 crores may kindly be deleted. 2. That on the facts and in the circumstances of the case and in law, that the findings and the decision of the learned CIT (A), that the entire amount of ₹ 3.50 crores received by the assessee from Skyline Construction Housing Ltd., is in the nature of income chargeable to tax as long-term capital gain u/s.45 of the IT. Act, are wholly wrong and unlawful and, therefore, such findings be quashed and the claim of the assessee be kindly accepted. 3. That on the facts and in the circumstances of the case and in law, the learned CIT (A) grossly erred and was not justified in enhancing the income assessed by the Assessing Officer. 4. The assessee craves leave to add/alter any of the grounds of appeal before or at the time of hearing. 5. We heard rival submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh ; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation For the purposes of this sub-clause, population means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year; (iv) 6 per cent. Gold Bonds, 1977, or 7 per cent. Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government; (v) Special Bearer Bonds, 1991, issued by the Central Government; (vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999, notified by the Central Government; Explanation 1. - For the removal of doubts, it is hereby clarified that property includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever; Explanation 2.- For the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e right to insist that-the-other perform land related duty and an equitable servitude the right to control the use to which the other may put his land. Examples are a right of way to cross over a neighbour s land, a right that a neighbor s share the cost of maintaining, boundary fence and a right that a neighbour should not use his land for commercial purposes. The ownership of easement is a mere right which confers certain rights over the land but never any exclusive right to possession. An easement came to be treated as a property right in itself and is still treated as a kind of property. An easement right is often described as a right to use land of another for a special purpose. Unlike a lease, an easement does not give the holder a right of possession of property but only a right of use. The title to easement may be by grant, by custom, by prescription or necessity. A grant is given by an agreement executed by a grantor in favour of a grantee for a consideration. The grant becomes effective when the grantee has a right to enter upon the grantor s land. Easement by virtue of custom is a legal right acquired by the operation of law through continuous use of a land over a long p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .- For the purposes of sub-clauses (v) and (vi), immovable property shall have the same meaning as in clause (d) of section 269UA.acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero coupon bond ; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other Explanation 2. - For the removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in a capital asset independent of transfer is sufficient. Thus the argument of the appellant that there is no transfer on account of the extinguishment of right in asset is not correct as the appellant for a consideration has transferred the rights in the land for a consideration. Therefore the Supreme Court decision is fully applicable to the facts of the case. The Supreme Court in the case of Kartikeya V Sarabhai v. CIT 228 ITR 163 has held that, In the case of Section 2(47) of the Income-tax Act, 1961, defines transfer in relation to a capital asset It is an inclusive definition which, inter alia, provides that relinquishment of an asset or extinguishment of any right therein amounts to a transfer of a capital asset. It is not necessary for a capital gain to arise, that there must be a sale of a capital asset. Sale is only one of the modes of transfer envisaged by section 2(47) of the Act. Relinquishment of the asset or extinguishment of any right in it, which may not amount to a sale, can also be considered as a transfer and any profit or gain which arises from the transfer of a capital asset is liable to be taxed under section 45. A company, under section 100(l)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the above, the appellant in fact has transferred the easement rights which is a valuable right for a consideration. Thus, there is a transfer, of capital asset which is chargeable to tax. The only contention raised by the appellant is that it did not receive full payment during the year under consideration, hence not taxable in this year. From the perusal of various clauses of the agreement as mentioned above, it is clear that the appellant in fact, has allowed the licensee easement rights for ingress and egress from the date of agreement itself. There is no clause in the agreement to show or demonstrate that the right is not being transferred to the licensee in the current year. The Assessing Officer is correct to note that there is no termination clause and also repayment clause in case of failure. However, the taxation of the consideration as other income by the Assessing Officer is not correct and should have been taxed in the year under appeal. Further, the Assessing Officer has taxed only the money received during the year under consideration instead of the entire consideration of ₹ 3.5 Crores as capital gains. Therefore, in order to bring the entire consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egress land measuring 30 feet wide for reaching the licensee s landlocked property. However the: Ownership of the land/property would always remain with the assessee. In case assessee ever sells the property to any 3rd party, the right of easement will still continue with the licensee and the assessee will sell the property along with that encumbrance. As per the agreement assessee will be entitled to use and consume the FAR of the scheduled property in development and licensee will not have any right to any FAR. Assessee has not sold, exchanged, extinguished, or relinquished its rights in favour of any third party any part of the property and continues to be the owner of the scheduled property. There is no extinguishment of any right over the property by the assessee. The assessee continues to enjoy all the rights over the impugned property as before as well as after the grant of the easementary rights, to enable ease of access to the landlocked property, without diminishing its right of ownership or access to its property. We have to further state that: Since there is no transfer of property, section 2(47) (ii) of the Income-tax Act,1961- does not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire amount received of ₹ 3.5 crores as consideration and compute the LTCGs in the A.Y 2012-13. The Assessing Officer is directed to consider the above amount and collect the taxes on the same. In view of the above, the appellant s appeal is dismissed. As the entire consideration received has been brought to tax in the A.Y 2012-13 under the head LTCGs, the appeal filed for A.Y. 2014-15 is treated as allowed in respect of the grounds raised on the taxation of the balance consideration received in lieu of granting of perpetual easementary right of way and license to ingress and egress land measuring 30 feet wide for reaching the licensee landlocked property by entering into an agreement with M/s. Skyline Construction Housing Pvt. Ltd. 7. In the result, the appeal for A.Y. 2012-13 stands dismissed enhanced and for appeal for A.Y.2014-15 treated as allowed. The order of the ld.CIT(A) is well-reasoned and in consonance with the settled proposition of law. We don't find any reason to interfere with the order of the ld.CIT(A). 6. In the result, appeal filed by the assessee is dismissed. Order pronounced in the open court on 31st May, 2018 - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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