9911796707
TMI Blog1983 (11) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... nants jointly paid Rs. 46,287 towards the purchase price of the flat and became its owners. The flat has been sold by the assessee and his mother to Mr. V. B. Dalal and Mrs. B. V. Dalal for Rs. 1,80,000 with vacant possession in May 1976. 2. The ITO computed the surplus at Rs. 1,31,213 by deducting Rs. 46,287 being the purchase price and Rs. 2,500 being the legal expenses incurred in connection therewith from the sale consideration. The assessee's share in the flat being half and the sale having taken place within four, five months of the purchase, he included Rs. 65,606 (half of Rs. 1,31,213) as the assessee's income from short-term capital gains. Before the Commissioner (Appeals), the assessee's contention was that the assessee had sold the flat with vacant possession, that this comprised of two 'capital assets', namely, occupancy right and the remaining rights of the owner including title, that these two capital assets were acquired by the assessee in 1962-63 and in January 1976, and that, therefore, both the computation of the profits and gains and its treatment as income from short-term capital gains were not justified. However, the Commissioner (Appeals) rejected the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset' as the rights of ownership over a property other than occupancy rights and both are capable of being transferred separately. In support, he has relied on the following decisions---Ahmed G. H. Ariff v. CWT [1970] 76 ITR 471 (SC), Municipal Corpn. v. Lala Pancham AIR 1965 SC 1008, A. Gasper v. CIT [1979] 117 ITR 581 (Cal.), Arshad Waliullah v. CED [1972] 83 ITR 150 (All.), A. R. Krishnamurthy and A. R. Rajagopalan V. CIT [1982] 133 ITR 922 (Mad.), Baijnath Chaturbhuj v. CIT [1957] 31 ITR 643 (Bom.) and Traders & Miners Ltd. v. CIT [1955] 27 ITR 341 (Pat.). According to Shri Patil, full ownership in case of immovable property means acquisition of bundle of rights which, in turn, means a number of rights culminating into full ownership. This bundle of rights can be purchased or acquired by a person ordinarily by means of one transaction. It can also be purchased/acquired in stages, i. e., by means of more than one transaction so much so that when ultimately the full ownership is transferred, what is transferred is the bundle of rights acquired/purchased in stages which blossomed into the full ownership over the property. Reference in this context has been made to a Tribunal's dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,285 only because he was a tenant in possession and to say that at the time of purchase the tenancy rights had no value would be most unrealistic and inequitable. In other words, his contention is that if it is held that after the fusion of the tenancy right into the ownership right what is transferred is the ownership of the flat which, of course, included the tenancy right, i. e., the right, of occupation, the value of the right of occupation will have to be estimated and then only the short-term capital gain should be computed. 8. In order to appreciate the rival contentions, it is desirable to refer to section 45, which reads as under : "(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53, 54, 54B, 54D and 54E, be chargeable to income-tax under the head 'capital gains' and shall be deemed to be the income of the previous year in which the transfer took place." The section evidently makes the profits or gains arising from the transfer of a capital asset chargeable to income-tax under the head 'capital gains' in certain circumstances. The crucial expression used in the section is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant importance and acquires under the law a stamp of transferability in furtherance of the interest of commerce. We have seen no fetter under any of the legal provisions against such a conclusion. The attachment and the sale of the property in this case in execution of the decree are valid under the law." In view of so may authorities, it must be stated in fairness to Shri Joshi, the learned counsel for the revenue, that he did not seriously dispute the proposition that the right of occupation as a tenant is a valuable right and, therefore, is a property and is a capital asset within the meaning of section 2(14). 10. Ordinarily, therefore, there should be no difficulty in accepting that the assessee acquired one 'capital asset' in the shape of right of occupation as a tenant in the year 1962-63. He acquired another 'capital asset' in January 1976, when he purchased the remaining rights of the landlord over the flat including the title and these two capital assets representing a flat with vacant possession, he sold in May 1976. As a natural corollary, there should be no difficulty in further holding that the surplus of sale consideration over the cost of acquisition of the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been sold by the assessee in May 1976 11. The next question that arises for consideration is whether the sale consideration for the aforesaid composite or full estate is one sum. It can be apportioned into what is attributable towards the smaller estate. i. e., the right of occupation as a tenant, and the bigger estate, i. e., the remaining interest of the landlord over the flat. In this connection, it is desirable to refer to the decision of the apportionment of the sale price does not appear to be legally possible in view of what the Supreme Court has held in the cases of CIT v. Mugneeram Bangur & Co. [1965] 57 ITR 299, CIT v. West Coast Chemicals & Industries Ltd. [1962] 46 ITR 135 and Associated Clothiers Ltd. v. CIT [1967] 63 ITR 224. These were cases of slump sale, i. e., where the business was sold lock, stock, and barrel. Separate values for each asset were not fixed in the agreement of sale. A question was posed whether any portion of the sale consideration was attributable or can be attributed to any individual asset of the business. The question was answered in the negative. The Bombay High Court decision in the case of Baijnath Chaturbhuj where a different view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of assessment and direct the ITO to recompute the surplus liable to short-term capital gain afresh after allowing the assessee an opportunity of being heard. 15. In our above view, we find support from a Calcutta High Court decision in the case of Mrs. A. Ghosh. The assessee in that case held debenture bonds of a company in December 1962. Under the second mortgage debenture trust deed executed in September 1963, the debenture holders had an option to exchange the debentures into fully paid-up equity shares. The assessee exercised her option on 1-10-1963 and exchanged the debentures for equity shares. In March 1964, she sold the equity shares. The ITO treated the surplus of such sale as a short-term capital gain and this was upheld by the Tribunal. However, it was held, by the Hon'ble High Court that the cost of acquisition of the debentures could not be taken as the cost of acquisition of the shares and, therefore, when the assessee gave up the debentures and acquired the shares on 1-10-1963, the assessee acquired an asset which was distinct and separate from the debentures. Accordingly, the cost of acquisition of the shares must be the price the debentures would have fe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
