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TMI Blog1982 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... the industrial estate were expected to pay a portion of the premium at a rate stipulated per metre to the GIDC along with the application, the balance of the premium was payable quarterly over the next 10 years with specified rate of interest. After the entire premium was paid, the land was allotted to the applicant for 99 years lease at the rate of Re. 1 per 836 sq. metres. The assessee applied to the GIDC on 29-11-1972 for the allotment of plot Nos. 43 and 50 in the scheme measuring 44,724 sq. metres. The premium for the plot, alternatively called 'cost' in the correspondence, was determined at Rs. 6,34,823 out of which the assessee paid an amount of Rs. 1,61,006 along with the application. The balance of Rs. 4,73,870 was payable in 40 quarterly instalments over a period of 10 years with interest at the rate of 9 1/2 per cent. The GIDC acknowledged the assessee's application by its letter dated 2-3-1973 and informed the assessee that before taking possession of the plot, the assessee would have to execute a licence agreement. The assessee executed the agreement on 17-4-1973. Thereafter, the Deputy Engineer of the GIDC at Nandesari was instructed to hand over the plot to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings before the ITO, the assessee claimed the amount of Rs. 1,15,422 referred to above received from the GIDC as a capital receipt not in the nature of income and, therefore, according to the assessee it was not taxable. The ITO, however, did not accept the assessee's contention in this respect for the detailed reasons mentioned by him in the assessment order. 4. On an appeal by the assessee before the Commissioner (Appeals), considering the fact that the amount was described as 'paid' by the GIDC to the assessee towards 50 per cent of the difference in the enhanced value of the land, the Commissioner (Appeals) upheld the decision of the ITO to treat this money as money received for the release of right in the leasehold land. He observed that the decision of the Bombay High Court in the case of CIT v. Tata Services Ltd. [1980] 122 ITR 594 supported the revenue's case more than that of the assessee. The Commissioner (Appeals) has observed that in clause (k) of paragraph 4 of the agreement between the assessee and the GIDC, which reads as under, indicated the real nature of the amount paid by the GIDC to the assessee : " (k) ... If the licensee has been able to get increased va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gains. As the ITO had not deducted any cost while computing the capital gains and taxed the entire amount of Rs. 1,15,422, consistent with the action of the ITO that the cost of the asset would be taken at nil, what was refunded to the assessee was the deposit of the lease. It was submitted that whatever was deducted by the GIDC while making up of accounts was the charges for the user of the land, interest, etc. The deductions were not for grant of licence and as such they were not the cost of the licence. As per the terms of the agreement, the assessee was not eligible for any payment on termination of the licence. The amount received had, therefore, not accrued to the assessee as a result of any contractual enforceable covenant. 6. On behalf of the revenue, reliance was placed on the Tribunal Bombay Bench 'B's decision in the case of Fourth ITO v. S.P. Sharma [IT Appeal No. 2547 (Bom.) of 1980 decided on 12-8-1981], wherein the learned members of the Bench relied on the following quotation from the Bombay High Court decision in the case of Tata Services Ltd. and decided the issue in favour of the revenue : "......We have in this case an agreement of sale in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the Executive Engineer and in accordance with the building conditions of the licensor, build and completely finish fit for occupation a building to be used as industrial factory with all requisite drains and other conveniences thereto as may be necessary under the Factories Act. 4(j) The licensee will not directly or indirectly transfer, assign, sell, sublet, encumber or part with his interest under or the benefit of this agreement or any part thereof or part with possession of the whole or a part of the said land in any manner whatsoever without the previous consent in writing of the Chief Executive Officer and it shall be open to the Chief Executive Officer to refuse such consent or grant the same subject to such conditions as be may in his absolute discretion think fit. The Chief Executive Officer shall not be bound to give reasons for his refusing to grant consent. For the purpose of this covenant any change in the constitution of the licensee shall be deemed to be a transfer of the interest of the licensee under this agreement in favour of another person provided that where the licensee is a body corporate, a change in its Board of Directors or Managing Committee, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to be extended by a further period of 99 years at his option. In our opinion, by virtue of the licence agreement, the assessee did acquire a bundle of a very valuable rights in the nature of right of occupancy of the land till the terms of licence were complied with and the further right to a perpetual lease. 8. Now what we have to considered is whether the assessee acquired any asset by this agreement. In this connection, reference may be made to the Supreme Court decision in the case of Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471 and the Bombay High Court decision in the case of CIT v. Home Industries & Co. [1977] 107 ITR 609 relied upon by the learned departmental representative. What the assessee acquired was a bundle of rights which are very precious and, therefore, they have to be treated as assets as explained by the learned Judges of the Supreme Court and the Bombay High Court in the cases referred to above. 9. As to the argument on behalf of the assessee that the assessee did not pay any cost and, therefore, as explained by the learned Judges of the Supreme Court in the case of B.C. Srinivasa Setty, the assessee's licence for the land was not an asset, to our mind, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rey Manners & Co. Ltd. v. ITO [IT Appeal No. 1296 (Bom.) of 1976-77] [since reported in [1983] 3 SOT 40 (Bom.)]. Since we are in complete agreement with the Special Bench decision referred to above, we see no reason to interfere with the order of the Commissioner (Appeals) in this respect. 13. The next ground in the appeal filed by the revenue is concerning the Commissioner (Appeals)' order deleting the disallowance of Rs. 3,810 being the amount of fees paid to the Registrar of Companies in connection with the increase in the authorised share capital of the company. During the course of the assessment proceedings, the ITO disallowed the amount of Rs. 3,810 being the fees paid by the assessee to the Registrar of Companies in connection with the increase in the authorised share capital, as he considered the same to have been incurred by the assessee not for the daily running of the business but for raising extra capital. On an appeal by the assessee before the Commissioner (Appeals), the Commissioner (Appeals) relied on the Bombay High Court decision in the case of CIT v. Elphinstone Spg. & Wvg. Mills Co. Ltd. [1975] 100 ITR 139 and allowed the assessee's claim in this respect. We, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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