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TMI Blog2019 (7) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... the land are capital in nature and as such the premium paid by the assessee could not be considered as advance payment of rent. Tribunal in case of ITO vs. Shri Hari Om Gupta [ 2016 (1) TMI 486 - ITAT LUCKNOW] while deciding the identical issue held that lease right for the period of 99 years is also capital assets to which provisions of section 50C are applicable. Assessee s leasehold rights for 90 years in the property in question are capital in nature and not tenancy rights and he is entitled for benefit of FMV. FMV valuation as on 01.04.1981 - HELD THAT:- When it is established that the property in question was acquired by the assessee firm on 02.07.1977 as per registered lease deed for the period of 90 years i.e. prior to 01.04.1981 assessee is entitled for benefit of valuing the property in question on the basis of fair market value as on 01.04.1981 and the cost of acquisition is not to be taken into account for computing the capital gain particularly when the assessee has opted for use the fair market value. So, the second question framed is also answered in affirmative in favour of the assessee. We are of the considered view that assessee s leasehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2)(b) as he is not a tenant and has submitted all the desired documents required for the purpose of computing LTCG at the time of assessment. 5. That the Ld AO has wrongly denied the deduction on account of brokerage to agents of ₹ 2,00,000/- even after providing all the proofs like bills/bank statement/confirmations and the payments have been made after deduction of due TDS @10%. 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : from the return of income filed by the assessee for AY 2011-12 claiming total income of ₹ 4,85,000/- after setting of its brought forward losses of ₹ 1,15,480/- from AY 2005-06, Assessing Officer (AO) noticed that the assessee has sold his assets of ₹ 60,05,000/- and computed the Long Term Capital Gain (LTCG) of ₹ 6,00,480/- in respect of this transfer. Assessee taken cost of acquisition after indexation at ₹ 52,04,520/- which the AO found incorrect. AO proceeded to hold that as per computation of assessee, the book value of the assets transferred during the year was ₹ 25,139/- only and after indexation, the indexed value of the said assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he valuation of the approved valuer in order to assess the FMV of the property in question as on 01.04.1981, which is valued at ₹ 7,32,000/-. 9. In the backdrop of the aforesaid facts and circumstances of the case, arguments addressed by the ld. Authorized Representations of the parties to the appeal and case laws relied upon, the first question arises for determination in this case is :- as to whether leasehold rights of the assessee for 90 years in the property in question are capital in nature or mere tenancy rights and that assessee is entitled for benefit of Fair Market Value (FMV) so as to compute the capital gains? 10. When we examine covenants of the lease deed, available at pages 48 to 62 of the appeal file, it is proved on record inter alia :- (i) that assessee being a lessee has paid the provisional premium of ₹ 22,575/- which can be enhanced by the lessor; (ii) that assessee has been made to bear the additional cost of electrification or development; (iii) that in case, the lessor is required to contribute towards any development or the provision of facilities ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee for acquisition of the leasehold rights for 99 years in the land are capital in nature and as such the premium paid by the assessee could not be considered as advance payment of rent. 13. In the totality of the facts and circumstances of the case, property in question is to be treated as land and not tenancy rights. Since the word land has not been included in section 55(2)(a), fair market value is liable to compute the capital gain. 14. Coordinate Bench of the Tribunal in case cited as ITO vs. Shri Hari Om Gupta in ITA No.222/LKW/2013 order dated 11.04.2014 while deciding the identical issue wherein ld. CIT (A) has held leasehold right as not a capital asset so as to apply provisions contained u/s 55C of the Act and the said findings returned by the ld. CIT (A) has been set aside by the coordinate Bench of the Tribunal by holding lease right for the period of 99 years is also capital assets to which provisions of section 50C Are applicable. So, in view of what has been discussed above in the light of the decision discussed in preceding paras, we are of the considered view that the assessee s leasehold rights for 90 y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et value of the land as on 1.4.1981 and the index cost of acquisition has to be determined in order to assess long term capital gains in the hands of the assessee. 17. When it is established that the property in question was acquired by the assessee firm on 02.07.1977 as per registered lease deed for the period of 90 years i.e. prior to 01.04.1981 assessee is entitled for benefit of valuing the property in question on the basis of fair market value as on 01.04.1981 and the cost of acquisition is not to be taken into account for computing the capital gain particularly when the assessee has opted for use the fair market value. So, the second question framed is also answered in affirmative in favour of the assessee. 18. In view of what has been discussed above, we are of the considered view that in view of the findings returned in the preceding paras, assessee s leasehold right for a period of 90 years in question is a capital asset and not tenancy rights to which provisions contained u/s 50C are applicable and assessee is entitled for benefit of fair market value as on 01.04.1981 in order to compute the capital gain. So, the findings returned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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