9911796707
TMI Blog2003 (1) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... ess Inn, Kolkata upon payment of rental charges of Rs. 18 lakhs per year and lease rent of Rs. 32 lakh per annum. The Assessing Officer was of the view that the agreements between the assessee-company and Peerless General Finance Investment Co. Ltd. dated 20-7-1992 and 1-4-1996 are for managing and running an existing hotel or at least running a hotel in a building, plant and machinery once used as a hotel, having a different name as well as different owner/user. It was also noted by him that the agreement aforementioned was not only in respect of the building, but all the plants, machinery, lifts, equipments, furniture fittings, fixture, furnishings and all other assets installed thereon. That implied according to the Assessing Officer, that the assessee-company did not fulfil the conditions prescribed under section 80-IA. Before the Assessing Officer the assessee submitted that the condition under section 80-IA was fulfilled as the hotel was not formed by splitting up, or the reconstruction of a business already in existence. It was also submitted that the company from which the present assessee undertook the running of the business i.e., Peerless General Finance Investment Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (ii) That PGFI is empowered to sublet the building to anyone only for the purpose of running a hotel, And save that, it was submitted that PGFI has not been empowered to use the building for any other purpose. 6. On 20-7-1992 the PGFI entered into an agreement of subletting the building with the assessee only for the purpose of running a Hotel. In pursuance of such conditions the assessee has occupied the building as a tenant and is carrying on hotel business on and from 14-4-1993. 7. The representative of the assessee further submitted that all the conditions prescribed under clauses (ii), (v) and (iv) of section 80-IA have been fulfilled and the dispute relates only to compliance of conditions prescribed under clause (i) which provides that: the business of the hotel is not formed by the splitting-up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose. It is submitted that the business of the hotel is not formed by the splitting-up or reconstruction of a business already in existence. In fact and in effect there was no existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been inserted in section 2(47) to prevent avoidance of capital gains liabilities by recourse to transfer of rights in the manner referred to above. Our attention was drawn to pages 436-437 of Mulla's The Transfer of Property Act, 1882, Ninth Edition which reads as under: "Section 53A: Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transfer has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract; and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght, be unlawful and such right does not amount to an easement or an interest in the property. There is no simple litmus test for distinguishing a lease from a licence. The character of the transaction turns on the operative interest of the parties. If interest in immovable property, entitling the transferee to its enjoyment, is created, it is a lease, if provision to use the land without the right to exclusive possession is alone granted, the transaction is a licence. However, exclusive possession itself is not decisive in favour of a lease and against a mere licence, for, even the grant of exclusive possession might turn out to be only a licence and not a lease where the grantor himself has no power to grant the lease. The crucial test in each case is whether the instrument is intended to create or not to create an interest in the property and the subject matter of the agreement. If it is in fact intended to create an interest in the property it is a lease, if it does not, it is a licence. 12. The Agreement dated 26-3-1992 between the State Government and PGFI only empowered the said PGFI: (i) to use the building only for running a hotel, or (ii) to sublet the building to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present business of hotel of the assessee was not formed by splitting-up or reconstruction of a business in the sense Ritz Continental Hotels Ltd. was not reconstructed into PGFI. The erstwhile business of Ritz Continental Hotels Ltd. was liquidated and with its liquidation whatever was owned by the erstwhile company i.e., Ritz Continental Hotels Ltd. came to an end with the liquidation and subsequent acquisition by the Government of West Bengal. We also find out that what the Government acquired was the building and land appurtenant thereto along with other assets as per the Schedule in terms of the agreement between the Government of West Bengal and PGFI. In the list of assets acquired by the Government of West Bengal, there was no mention of any hotel property or any equipment or any machinery or plant of the erstwhile hotel. Therefore, the finding of the Assessing Officer that there was a transfer of the hotel business within the meaning of section 80-IA(4) is not factually correct. 16. The CIT(A) has applied a logic that in this case the appellant has taken the possession of the building in which a hotel was earlier run by Ritz Continental Hotels and according to the defin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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