TaxTMI 
TaxTMI 
2012 (9) TMI 37
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.... Tribunal was right in not considering the applicability of the amendment to Section 55(2) of the Income Tax Act whereby the cost of acquisition of tenancy rights is stated to be nil? 4. Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the receipt on account of tenancy rights is a capital receipt, but refusing to look at the question of taxing the same as capital gains? 2. At the time of hearing, learned Standing Counsel placed before us further questions of law, which are stated to be substantial questions of law, as follows: 1. Whether in the facts and circumstances of the case the Appellate Tribunal being the highest facts finding authority, was right in not entertaining the fresh grounds raised by the department based on material evidences, which was not placed before the Commissioner in his proceedings under Section 263 of the Income Tax Act? 2. Whether in the facts and circumstances of the case the Appellate Tribunal being the highest facts finding authority, having satisfied through the lease deed dated 25.08.1978 that the assessee is not the lessee/tenant of the premises from 1978, can the same assessee clai....
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.... assessee that the tenancy rights being capital in nature, the receipt of Rs.2.60 crores as compensation for the surrender of the tenancy rights could not be assessed. In exercise of the jurisdiction under Section 263 of the Income Tax Act, the Commissioner of Income Tax (Appeals) sought to revise the order, placing reliance on the decision of the Income Tax Appellate Tribunal, Special Bench, Mumbai reported in [1996] 217 ITR ITAT Reports 51 (Cadell Weaving Mill Co. Pvt. Ltd. Vs. Assistant Commissioner of Income-tax) and the decision of the Allahabad High Court reported in [1991] 192 ITR 495 (CIT Vs. Gulab Chand). The assessee objected to the said notice on the ground that under the terms of the agreement dated 25.2.1994, the assessee was given compensation of Rs.2.60 crores for relinquishing its right on handing over vacant possession to the vendors, who agreed to pay the said sum to the assessee. Pursuant to the said agreement, the possession of the property was handed over to the vendors. Thus the said receipt could not be considered as income, nor could be included as a casual receipt. On scrutiny of the agreement, the Commissioner of Income Tax (Appeals) pointed out that in th....
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....t all of the property in question after 28.8.1978 and it had no tenancy rights at all. The Revenue further pointed out that the assessee was never in possession of the leased property to contend that it had leasehold interest to surrender and hence, was capital in nature; in the light of the above, the Revenue took the stand that the receipt was to be taxed as income under the head "income from other sources". Even assuming that the receipt was to be treated as capital receipt, going by Section 55(2)(a)(ii), which, according to the Revenue, was procedural in nature, the receipts were to be taxed to capital gains. Thus, even though the cost of acquisition was nil, the entire receipt was taxable. In considering the rival submissions, the Tribunal overruled the objection of the Revenue to the admissibility of fresh evidence, viz., the lease deed entered in 1969 and 1978 and took the view that in a revisional proceedings under Section 263, there was no question of the assessee having any opportunity to furnish a fresh document before the Assessing Authority and the lease deeds dated 06.12.1969 and 28.08.1978 were necessary to decide the issue on hand. Thus, on going through the lease d....
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.... that the said view could not be upheld, considering the admitted fact on the tenancy right of the assessee. The Tribunal held that the correctness or otherwise of the order of the Commissioner of Income Tax (Appeals) could be considered only on the grounds considered by the Commissioner for revision and nothing more. When the assessee was able to satisfy the Tribunal that the grounds for the decision given by the Commissioner were wrong on facts or not tenable in law, the Tribunal had every jurisdiction to set aside the order of the Commissioner. Thus the Tribunal viewed that when the assessee had satisfied the Tribunal that the grounds for the decision given by the Commissioner of Income Tax (Revision) could not be upheld, the appeal had to be allowed. The Tribunal pointed out that given the admitted fact that the assessee was treated as a tenant and the entire proceedings before the Commissioner went on that premise, it was no longer open to the Revenue to take a different view. Following the decision of the Karnataka High Court reported in [1991] 192 ITR 547 (Commissioner of Income-tax v. D'Silva (L.F.), which, in turn, followed the decision reported in [1983] 140 ITR 490 (Comm....
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....enancy rights under document dated 25.02.1994 as personal in nature and following the Special Bench decision, held the receipt to be taxed as a casual receipt. Thus considering the decision of the Special Bench overruled by the Bombay High Court decision and the same confirmed by the Apex Court by dismissing the Special Leave Petition, it is no longer open to the Revenue to contend that the receipts are casual in nature; hence, assessable under law. He further pointed out that Section 55(2) was amended with effect from 1.4.1995, which has no relevance to the assessment year under consideration, namely, 1994-95. In the circumstances, the capital receipt at the hands of the assessee could not be assessed as capital gains, there being no cost of acquisition. He also made serious objection to the additional grounds now taken at the time of hearing, which are different from what was originally placed before this Court. In the circumstances, going by the well reasoned order of the Tribunal, the Tax Case needs no interference. 8. Heard learned counsel appearing for both sides. 9. The contention of the assessee is two fold, viz., given the fact that the Commissioner of ....
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....sons best known to the assessee, when the memorandum of understanding was executed on 25.02.1994 between the assessee, its subsidiary company and the vendors, the assessee was recognised as a tenant under the said vendor. The Tribunal pointed out that admittedly, the documents were placed by the assessee on the premise that it being an appeal as against the revision order of the Commissioner, the assessee had no opportunity to furnish the documents before the Assessing Officer. Though the Revenue took serious objection to the reasoning of the Tribunal on this, we do not think that the acceptance of this document had, in any manner, improved the case of the assessee or had worsened the case of the Revenue, for the simple reason that the status of the assessee as on the date of memorandum of understanding dated 25.02.1994, under which compensation was paid to the assessee, was as a tenant under the vendor. As already pointed out, with the genuineness of the document dated 25.02.1994 remaining undisturbed, when the vendor had treated the assessee as a tenant, it is not for the Revenue to question it unless and until the genuineness of the document dated 25.02.1994 itself was questione....
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.... the said partner was paid a sum of Rs.9,00,000/- from the capital of the partnership and the firm was re-constituted and the share of the assessee was declared as one-ninth instead of one-sixth. There was also a variation of the share of another partner. After four years, on the re-constitution on 30.4.1985, the assessee retired from the partnership. Along with him, the other co-owners also retired. In the circumstances, the assessee was assessed to income tax for the assessment year 1981-82, which was a subject matter of revision under Section 263. The notice stated that on the reduction of the assessee's share from 1/6th to 1/9th, the assessee was paid a sum of Rs.3 lakhs by the firm. The notice further stated that when the assessee contributed the property as towards his capital, there was extinguishment of the title and hence, the same constituted "transfer" within the meaning of Section 2(47). Consequently, any profits or gains arising from such transfer of capital asset was chargeable as capital gains. Thus in the process, whatever gain was earned was liable to be assessed under Section 45 to capital gains. As against the order of the Commissioner of Income Tax (Appeals) und....
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....gadhri Electric Supply and Industrial Co.). The High Court therein pointed out that the Tribunal cannot uphold the order of the Commissioner on any other ground, which, in its opinion, was available to the Commissioner as well. It observed that if the Tribunal is allowed to find out the ground available to the Commissioner to pass an order under Section 263(1) of the Act, then it will amount to a sharing of the exclusive jurisdiction vested in the Commissioner, which is not warranted under the Act. It is all the more so, because the Revenue has not been given any right of appeal under the Act against an order of the Commissioner under Section 263(1) of the Act. In case he proceeds thereunder after hearing the assessee in pursuance of the notice given to him, then the appeal filed by the assessee under Section 253(1)(c) of the Act cannot be treated on the same footing as an appeal against the order of the Appellate Assistant Commissioner passed in the assessment proceedings, where both the parties have been given the right of appeal. In this view of the matter, the argument raised on behalf of the Revenue that, in appeal, the Tribunal may uphold the order appealed against on grounds....