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TMI Blog2022 (3) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed by several High Courts and held that if the cost of acquisition of tenancy right cannot be determined, the consideration received by reason of surrender of such tenancy right could not be subjected to capital gains tax - The Court took note of the circular issued by the CBDT being Circular No. 684 dated 10th June, 1994, which was issued to meet the situation created by the decision in B. C. Srinivasa Setty (supra). By Finance Act, 1994, Section 55(2) was amended to provide the cost of acquisition, inter alia, the tenancy right could be taken as nil. By this amendment the judicial interpretation put on capital assets for the purposes of the provisions relating to capital gains was met. - Decided in favour of assessee. - IA NO.GA/2/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notices under Section 143(2) and 142(1), the case was discussed with the authorised representative of the assessee. The assessing officer noted that the assessee had shown income from rent from house property and long-term capital gains (LTCG) on sale of tenancy right and interest from fixed deposits during the year. The assessing officer noted that the assessee sold a tenancy right for a total consideration of ₹ 10 crores out of which she had claimed deduction under Section 54EC to the tune of ₹ 50 lakhs and deduction under Section 54F to the tune of ₹ 4,77,95,168/-. The assessee was called upon to produce necessary documents and an agreement dated 8th December, 1994 was executed by the assesseee and her son with the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 1994 was not a registered document. Further, the assessing officer held that the tenancy right was not purchased by the assessee nor any consideration was given for the purchase of tenancy right and a sum of ₹ 8 lakhs was given as a loan to the landlord for the construction which was refundable to the assessee with interest and, therefore, could not be taken as cost of acquisition of the said flat. Therefore, the assessing officer concluded that the amount of ₹ 10 crores paid has to be treated as compensation for vacating the tenancy. The assessee filed an appeal before the Principal Commissioner of Income Tax (PCIT). The PCIT noted that certain documents could not be produced by the assessee at the time of completing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Teant with interest of 4 per cent per annum on the expiry of 10 years from the date of commencement of the tenancy of the said flat. BY a Supplemental Agreement dated 08.12.1994 a copy of which was enclosed during hearing, the Tenant was permitted by the Landlord to sub-let the said Flat at such rent as agreed upon. The Tenant, i.e. the assessee was also permitted to assign the tenancy of the said Flat to any other person. Furthermore, by an Agreement dated 08.02.2016, a cpy of which was enclosed, between Smt. Shikha Roy and Shri Jayanta Roy of the one part and Vaishali Arpan Thanawala on the other part, the tenancy rights over the said Juhu Flat was transferred to the later for a total consideration of ₹ 10,00,00,000/-. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 1979 (117) ITR 581 (Cal) wherein it was held that the monthly tenancy of the assessee was a capital asset as defined under Section 2(14) of the Act. Further, it was held that the assessee s monthly tenancy right or the leasehold right is a capital asset and on such transfer his rights in it stood extinguished and the amount received by the assessee must be held to be assessable to tax as capital gains in the hands of the assessee. In the decision of CIT Vs. D.P. Sandu Bros. Chembur (P) Ltd. (2005) 142 Taxman 713 (SC) it was held that the tenancy right was a capital asset, surrender of tenancy right was a transfer and the consideration received thereof was a capital receipt within the meaning of Section 45 of the Act. Further, the Court no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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