Deemed tenancy and capital gains on surrender of tenancy rights upheld under rent control and tax law.

A person in occupation under an agreement before 1 February 1973 was treated as a deemed tenant under the rent control scheme, and the contractual description as a licence could not override the statutory deeming provision. The tenancy right was property and therefore a capital asset; surrender of that right amounted to transfer of a capital asset, so the consideration received was chargeable as capital gains rather than income from other sources. No substantial question of law arose for admission.

---

---

Issues: (i) Whether the assessee was a deemed tenant of the premises under the rent control law on account of occupation prior to 1 February 1973. (ii) Whether the amount received on surrender of such occupation was taxable as capital gains and not as income from other sources.

Issue (i): Whether the assessee was a deemed tenant of the premises under the rent control law on account of occupation prior to 1 February 1973.

Analysis: The assessee had been in occupation of the premises under an agreement dated 13 June 1972, and the statutory scheme deemed a person in occupation as a licensee on 1 February 1973 to be the tenant of the landlord notwithstanding contrary contractual terms. The contractual description of the arrangement as a licence could not defeat the statutory deeming provision.

Conclusion: The assessee was a deemed tenant of the premises.

Issue (ii): Whether the amount received on surrender of such occupation was taxable as capital gains and not as income from other sources.

Analysis: A tenancy right is property and therefore a capital asset. Surrender of that right amounts to transfer of a capital asset, and the consideration received on such surrender is chargeable under the head capital gains. The contention that the receipt was taxable as income from other sources was rejected in view of the settled legal position.

Conclusion: The amount received on surrender of the tenancy right was taxable as capital gains.

Final Conclusion: No substantial question of law arose for admission, and the appeal was dismissed.

Ratio Decidendi: A person in occupation covered by the statutory deeming provision is a tenant notwithstanding the contract, and surrender of tenancy rights constitutes transfer of a capital asset chargeable to capital gains tax.

---