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TMI Blog1995 (10) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and in the circumstances of the case, the Tribunal is right in law in holding that 50 per cent. of the selling price of Rs. 1,69,200 received by the assessee on account of sale made on November 27, 1982, be taken as consideration received by him on account of sale of short-term capital asset and the remaining 50 per cent. shall be treated as consideration received on transfer of a long-term capital asset ?" The assessee, an individual, was allotted a site by the Bangalore Development Authority on May 25, 1972, in accordance with the relevant rules of allotment. A lease-cum-sale agreement was executed according to which the assessee was required to pay a certain amount to the Bangalore Development Authority and at the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the lease-cum-sale agreement, were also in the nature of an asset held by the assessee and directed that out of the total sale price of Rs. 1,69,200, 50 per cent. should be considered to be a short-term while the remaining 50 per cent. as a long-term capital gain. On the same analogy, the Tribunal further held that the amount paid to the Bangalore Development Authority should be divided in a similar fashion and that 50 per cent. of the same should be taken as cost of acquisition of a short-term and the remaining 50 per cent. as of a long-term capital gain. We have heard counsel for the parties. Two questions fall for consideration. They are : (1) What was the asset that was transferred by the assessee giving rise to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the lessee thereof. This approach of the Tribunal in our opinion is not legally sound and ignores the legal effect of the transfer of absolute title in favour of the assessee who was till March 29, 1982, holding the site in question only on the basis of the lease-cum-sale agreement. The significance of this transfer is that the same brings about a merger of the lesser interest held by the assessee in the bigger estate acquired by him under the sale deed in his favour. Merger implies the vesting of lesser rights held by an individual in the larger estate that he may acquire qua the property in question. It postulates the extinction of the lesser estate whenever the person holding any such estate acquires a greater estate in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he party, the court will have regard also to his conduct. " In the instant case, the assessee held the site in question under an agreement of lease-cum-sale. It is not in dispute that in so far as an agreement to sell is concerned the same does not create any right in the property agreed to be sold. The assessee, however, had a valuable interest in the site in question in his capacity as a lessee of the same and the terms of the agreement of lease-cum-sale clearly entitled him to enjoy the possession of the site in question as a lessee on payment of the amount fixed under the said agreement. Assuming therefore that the lease rights which the assessee held under the aforesaid agreement was a "capital asset" within the meaning of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of the sale in favour of the assessee, the assessee had only one capacity to describe himself qua the land in question and that was the capacity of being the absolute owner of the same. It is in that capacity alone that the assessee transferred his title over the site in question in favour of the purchaser. The sale deed did not, and could not possibly, describe the transfer made in favour of the purchaser to be one of the rights which the assessee held in respect of the site prior to the sale thereof in his favour. All such rights had sunk or drowned in the larger estate and, therefore, stood extinguished. That being so, the Tribunal was not, in our opinion, justified in holding that the transfer made by the assessee in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had held the said rights for more than the period prescribed the same qualified for being treated as a long-term capital gain. The term "capital asset" as defined by section 2(14) of the Act means property of any kind held by the assessee, whether or not connected with his business or profession, but does not include the specified items of property. Leasehold rights held by an assessee do not fall under any one of the exclusions contemplated by the definition. The expression "property" is of the widest import, and subject to any limitations which the context may require, it signifies every possible interest which a person can acquire, hold and enjoy--refer to Ahmed G. H. Ariff v. CWT [1970] 76 ITR 471 (SC). It is, therefore, tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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