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TMI Blog1993 (4) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. BEML had to pay a substantial sum to each of the lessors (assessees) as advance which was to be adjusted against the rent. The lessee, BEML, had an option to purchase the flats for the payment of a small amount at the termination of the lease. There were the other usual clauses generally found in lease deeds safeguarding the respective interests of both lessors and lessee. The lessee was put in possession of the flats. The flats, as per one of the terms of the lease deeds, were to be used for residential purposes only. 3. In the returns filed by the appellants, the rental income for the year under consideration was offered for tax and the returns were accepted by the Assessing Officer under section 143(1) of the Act. 4. The CIT thereafter initiated proceedings under section 263 for revising the assessments. In his opinion, the acceptance of the returns without scrutiny under section 143(1) was erroneous and prejudicial to the interests of the Revenue. He took the view, on an examination of the record, that the documents styled as lease deeds were in fact documents for the sale of the flats to BEML, that the advance paid by BEML represented the consideration for the sale and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed up the disposal of income-tax assessments with the manpower available and to reduce the ever increasing back-log. The recommendations made in this Conference have been examined by the Board and I am directed to say that in supersession of all existing instructions on the subject, the following procedure will now be adopted : 2. Assessments in the following types of cases will be completed under section 143(1) on the basis of the returns after linking them with the assessment records : --- All cases, other than company and trust cases with returned income/loss up to Rs. 1 lakh. --- Company cases with returned income/loss up to Rs. 25,000 and paid-up capital not exceeding Rs. 5,00,000. However, the first assessment in all new company cases will be a scrutiny assessment. --- All trust cases and cases of charitable institutions having income below Rs. 1 lakh before applying the provisions of section 11, provided the corpus of the trust does not exceed Rs. 5 lakhs. However, the first assessment in all trust cases will be a scrutiny assessment. 3. In the above cases, the arithmetical accuracy of computation of total income and taxes will be ensured and liability for penalty, int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 26th August, 1987 All Commissioners of Income-tax Sub : Summary Assessment Scheme --- Scope of remedial action Clarification regarding This Directorate had received several references from different Commissioners seeking guidance as to whether remedial action under section 263 could be taken in cases completed under 'Summary Assessment Scheme' where glaring and apparent mistakes in computation of income have been detected resulting in substantial loss of revenue. For instance, CIT Poona had cited a case where a partnership firm had claimed a wrong deduction of Rs. 2.34 lakhs in respect of medical expenses on the treatment of partner. In another case a totally incorrect deduction in respect of investment allowance was claimed by a firm and allowed under section 143(1). On a reference made by the Directorate to the Board seeking clarification as to whether provision of section 263 should be invoked in such cases th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer the loss of revenue by making summary assessments under section 143(1) on the ground that the time and effort involved in unearthing the loss is not commensurate with the benefit likely to be obtained and they may be better channelised in scrutiny of cases involving larger revenue. A monetary limit of Rs. 1 lakh has therefore been fixed and returns showing income or loss up to that limit will be accepted under section 143(1). In view of the circular, which contains the view of the Board on the matter, the proceedings under section 263 must be held to be without jurisdiction. Mr. Lahiri contended that the circular was not binding on the CIT. We do not see how such a contention can be countenanced. The circular expressly states that the observations of the Member (R & A) on the question of taking remedial action under section 263 against assessments made under section 143(1) "reflect the views of the Board on the subject". If that is the view of the Board, surely it cannot be said that the CIT is not bound by the view. The CIT is an income-tax authority under section 116 of the Act bound by the orders, instructions and directions issued by the Board for the proper administration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts executed by the parties in the present case are documents conferring the rights of a lessee on BEML or are documents by which the property in the flats can be said to have been transferred to BEML for a price so as to constitute BEML the absolute owner of the flats. The answer to the questions involves an examination of the terms and conditions of the documents from which the intention of the parties can be gathered. We may briefly refer to a few authorities on the question of construction of documents. In the case of CIT v. Motors & General Stores (P.) Ltd. [1967] 66 ITR 692, the Hon'ble Supreme Court held that in the absence of any suggestion of bad faith or fraud, the taxing statute has to be applied in consonance with the legal rights of the parties to the transactions and when the transaction is embodied in a document, the liability to tax depends upon the meaning and context of the language used in accordance with the ordinary rules of construction. In the case of Ram Laxman Sugar Mills v. CIT [1967] 66 ITR 613, the Hon'ble Supreme Court held that in ascertaining the legal effect of a transaction, the Court should in the first instance seek to ascertain the intention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petual lease has to be granted either expressly or by a presumed grant. There must be words which suffice themselves to import permanency of the lease. But a lease where the duration is fixed --- however long the duration may be --- is not a perpetual lease. Duration or the term or the period of a lease is an essential element under section 105 of the Transfer of Property Act, 1882. In the present appeals, the parties have agreed that the lease shall be for a period of 99 years. The other elements of a lease, viz., the parties thereto, the subject-matter thereof, the transfer of the right to enjoy the flats for a period of 99 years and the consideration for transfer are all present in the case. The monthly rent reserved in the document is the consideration for the transfer of the right to enjoy the property. It has not been suggested that the monthly rent fixed is too low and did not reflect the market rent. Even if it were so, that may only entitle the taxing authorities to enhance the annual let value while computing the income from property. It was however said that the advance given by BEML is the price for the flats, since it approximates to the market value of the flats at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 99 years. This term does not per se convert the document granting lease to one of sale. In the case of Narayan Prasad Vijaivargiya v. CIT [1976] 102 ITR 748, the Calcutta High Court laid down the principle to be followed in such cases. At page 754 of the report, it was held as under : "Now, the question is whether the rest of the deed must be coloured by or read in the light of the said two provisions or only the provision (ii) stated above. That is the controversy between the parties to the reference. According to the revenue provision (ii) mentioned above is the dominant clause and would govern other clauses of the deed while according to the assessee the rest of the deed must be governed by both the provisions mentioned above. In our view a deed is to be read and construed as a whole and, if possible, effect should be given to all parts thereof. In other words, the general intention is to be collected from the instrument as a whole and that intention should be inferred from the general form of the deed --- See Odger's Construction of Deeds and Statutes, fifth edition, page 55. This would be more so when a deed is to be construed reasonably. The way in which the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 'Sale' absolute. It is also confirmed that the Lessors are the legal owners of this immovable property." The above reply makes it clear that BEML, whom the CIT considers to have purchased the flats outright and not as mere lessee of the flats, does not think so. It has confirmed that the lessors are the legal owners of the flats and there was no sale of the flats in its favour. 12. The ld. Departmental Representative referred to the decision of the Hon'ble Supreme Court in the case of R.K. Palshikar (HUF) v. CIT [1988] 172 ITR 311 and submitted that the lease of the flats gives rise to liability to tax on capital gains. That decision is however distinguishable. In the case before the Hon'ble Supreme Court, the plots were leased out for 99 years and the assessee received a salami or premium for parting with the rights of the possession and enjoyment of the property. In the present case, however, there is no salami or premium received by the appellant for parting with the possession or enjoyment of the property. What was received by the assessee, was only advance rent which was to be adjusted against the monthly rent reserved by the document. There is a distinction between premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 592 p.m., that the Defendants (assessee in the appeals) cannot by notice dated 23-10-1989 put an end to the tenancy and stop supply of electricity, generator facility, use of lifts, supply of water and other benefits to which BEML was entitled to under the documents of lease. The Plaintiff (BEML) has prayed for a declaration that the appellants had no right to terminate the lease and for a perpetual injunction restraining the defendants from disturbing the peaceful possession of BEML under the Lease Deed. Nowhere in the plaint as BEML alleged that it is the owner of the flats in question and therefore the assessee have no right to put an end to the tenancy. If, as contended by the CIT, BEML is the owner of the flats, the first allegation in the plaint would naturally be that the assessee had no right to put an end to the so-called tenancy, since there was no tenancy at all as in that case BEML would be occupying the premises as owner of the flats and not as lessee of the flats. That, however, is not the allegation of BEML. Even the notice dated 23-10-1989 issued on behalf of the assessee brings out the nature of the relationship between the BEML and the assessee clearly and it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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