9911796707
TMI Blog1992 (2) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. The facts in brief are the assessee had taken a factory premises on lease from M/s. Somabhai Desai Others as per lease agreement dated 27-1-1970 and was paying rent thereof from year to year. M/s Somabhai Desai Ors. sold the said premises to P.C.S. Date Products Ltd., as per the sale deed dated 17-9-1986. As M/s. Somabhai Desai Ors. wanted vacant possession of the said premises, they had agreed to pay Rs. 20,00,000 to the assessee under an Agreement dated 3-6-1986. 4. On the aforesaid facts, in the return of income as well as it the time of assessment proceedings, the assessee claimed that Rs. 20,00,000 was not chargeable to tax as the same was to be treated as capital receipts in its hands. Further it was submitted that even a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore in nature of a revenue receipt. Since assessee had entered into agreement and received the amount in lieu of giving up business premises which was during the course of its business, it cannot be considered as revenue receipt earned even by way of adventure in nature of trade. Moreover the cash receipt is kept by the assessee in its business and books by way of reserve which indicated that it was earned during the course of business and was in nature of revenue receipt. The benefit derived by assessee by entering into agreement clearly takes the character of income as defined u/s 2(24). Also as per charging sec. 4 and 5 of the Act, income chargeable to tax included any income from whatsoever source it is derived. In this case, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey receipt as consideration for vacating the premises cannot be taxed for capital gains in view of the Supreme Court judgment in Srinivasa Setty's case (128 ITR 294) which was followed by Bombay High Court in the case of Shirinbai P. Pundole (129 ITR 448) wherein, the Hon'ble High Court of Bombay applied ratio of Shetty's case to tenancy and such like cases. This issue had recently come up before the Hon'ble Tribunal in the case of M. Electrical Mechanical Appliances (P.) Ltd. [ITA 4493 (Bom.) of 1986, Bench-B]. After reviewing the entire case law on the subject the Hon'ble Tribunal observed in para 10 of its order dt. 17th December 1990 :---- 'From the above it would be seen that the assessee cannot be permitted to say that there could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed reasons as to why the decision of the Hon'ble High Court could not be followed keeping in view the later decision of the Supreme Court in Krishnamurthy's case (75 CTR AT). In this view of the matter, I hold that the sum of Rs. 20 lakhs received by the assessee for prematurely terminating its lease rights and in handing back the occupation of the factory premises to the lessor is subject to capital gains. The assessing officer is directed to compute long term capital gains in accordance with the provisions of the Act. For this purpose, he will give an opportunity to the assessee. " 6.The learned counsel for the assessee reiterated the submissions which were made before the I.T. authorities and strongly urged that the CIT(A) was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic ft. of clay extracted subject to a minimum of Rs. 60,000 per year. On these facts, the Hon'ble Supreme Court held that of Rs. 27,260 paid by the assessee was, not only for acquiring the land but also of acquiring a bundle of rights in the said land including the right to grant lease. It was, therefore, held that there was a cost of the right to grant lease and therefore, the assessee was liable to capital gains tax. On the contrary, in the case of B.C Srinivasa Setty, the Supreme Court has clearly held that when the assessee has paid nothing for acquiring an asset like goodwill (being a self-generated asset), the provisions of sec. 45 of the Act cannot be attracted. According to the learned counsel for the assessee, the fine distinction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar facts and circumstances obtaining the cases, relying on the aforesaid decisions of the Hon'ble Supreme Court in the cases of B.C. Srinivasa Setty and of the Hon'ble Bombay High Court in the case of Mrs. Shirinbai P. Pundole and Nila Products Ltd., the Tribunal was pleased to hold that the provisions of sec. 45 of the Act cannot be attached. He, therefore, urged that Rs. 20 lakhs should be deleted from the total income of the assessee. Faced with this position, the learned representative for the Department strongly relied on the order of the CIT(A) as well as of the Tribunal in the case of M. Electrical Mechanical Appliances (P.) Ltd. 7. We have considered the rival submission of the parties as well as perused the material alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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