9911796707
TMI Blog1990 (8) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... rtue of which it owned the first floor of Majithia Chambers, admeasuring 3,200 sq. ft.; (4) by an agreement dated 1-11-1974 entered into between the assessee and M/s. Chimanlal Paper Co. (C.P.C.), the assessee allotted 2,200 sq. ft. of the first floor to C.P.C. for a period of five years with effect from 1-5-1974. In consideration thereof C.P.C., which had agencies of number of well known paper mills, agreed to pay compensation to the assessee by way of rebate/commission at the rate of 5% on the value of the net sales; (5) by another leave and licence agreement dated 24-4-1975 entered into between the assessee and M/s. Chimanlal Pvt. Ltd. (CPL), the assessee allotted 400 sq. ft. of the first floor to CPL for a period of 5 years with effect from 1-11-1974. In consideration thereof CPL agreed to pay compensation of ₹ 1,500 per month and a deposit of ₹ 3,00,000 with the assessee as security for due performance/ observance of the terms/conditions of the licence; (6) sometime during the relevant previous year the assessee had thought of transferring the first floor to the Trustees of eight trusts, viz.;.- (i) Chandiwala Trusts; (ii) Furniturewala Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties are sister concerns of the assessee Co. This group is inter-connected. From this fact and very close reading of the agreements, dated 1-11-74 and 24-4-1975 filed before me allowing the said two parties to use premises. It is clear and beyond doubt that the assessee merely allowed them to use the premises and no right to them in any form was transferred. Thus there was no enforceable right for those parties in respect of the premises in any form. Thus the assessee s claim for payment of compensation is not used on any reason. It can only be construed as a device or adjustment to reduce the tax liability. The recipient can claim an exemption for such receipts in their hands. Under these circumstances, I hold that the assessee s claim of the payments of compensation as detailed above is out of place and is not allowable. The capital gain arising out of the sale is computed accordingly. The ITO worked out the capital gain at ₹ 45,22,030 as under: II. Capital Gains: Rs. Rs. Sale price 55,00,000 Less: Original cost 641000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum as a deduction for computing the capital gains on the sale of the office premises. Similar is the position with regard to letter dated 30-5-1983 of the other occupier, i.e., Chimanlal Pvt. Ltd., for payment of compensation of ₹ 6 lakhs. The ITO s conclusion in denying the claim of the appellant is also based on the facts that the said two concerns are closely inter-connected with the appellant company and the payment of compensation was clearly a device to reduce the tax liability. In view of the discussion above, I am in full agreement with the conclusion so arrived at by the ITO since admittedly the concerns are closely inter-connected and legally there was no enforceable right of the occupiers to claim for compensation for vacating the premises owned by the appellant company. Further, the CIT(A) was of the view that the reported decisions relied on behalf of the assessee would not be of much help to it, as the facts and circumstances obtaining in those cases are clearly distinguishable from the one obtaining in the case of the assessee. 8. Being aggrieved by the order of the CIT(A), the assessee has come up in appeal before the Tribunal. The learned Counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e involved objectively as if the entire dealing had taken place at arms length. Viewed in this context, it is of no consequence that the period of leave and licence had expired or that CPC and CPL had no vested right in the space occupied by them. According to the learned Counsel for the assessee, if the facts and circumstances obtaining in the instant case are appreciated in proper perspective, there is no doubt that in computing the capital gain the assessee would be entitled to the deduction of ₹ 43,00,000 out of the consideration of ₹ 55 lakhs received from the Trustees of the aforesaid 8 Trusts. He once again relied on the aforesaid two decisions in A. Venkataraman s case (supra) and C.V. Soundararajan s case (supra) which, according to him, directly support the stand taken up by the assessee. In the later case, the amount was paid to the mother for vacating the premises which was a case of much more close relationship than that obtaining in the instant case. He also relied on the order of the Tribunal, Madras Bench C in the case of ITO v. C. Thangavel Gounder 1981 12 TTJ 273, wherein on identical facts/ circumstances obtaining in that case the Tribunal was ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct for working out capital gain. On the facts narrated above, it cannot be denied that over the years CPC and CPL had acquired right - whether legally supportable or not - over the area occupied by them which could not be terminated without the help of costly litigation, which could drag on for years and years. The assessee had already arrived at some sort of understanding with the Trustees of the aforesaid eight Trusts for transferring vacant possession of the first floor. In fact, the time was the essence of such understanding. Under the circumstances, the assessee had no alternative but to arrive at certain arrangements with CPC and CPL to obtain vacant possession of the first floor in a peaceful and orderly manner. Again it is not in dispute that the payments made to CPC and CPL were fair and reasonable, as ₹ 55 lakhs were shared by the assessee, CPC and CPL according to the area occupied/utilised by them. Therefore, it is difficult to concur with the conclusion arrived at by the IT authorities that the payment of compensation was clearly a device to reduce the tax liability . In our view, the ratio laid down in the cases of A. Venkataraman (supra) and C.V. Soundararajan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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