TaxTMI 
TaxTMI 
2013 (9) TMI 690
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....-company craves leave to add, alter or amend the above ground of appeal." The assessee is a partnership firm. In the return of income the assessee has declared the long-term capital gains on surrender of sub-tenancy rights and claimed exemption under section 54EC of the Income-tax Act, 1961 (the Act) of Rs. 50 lakhs by making investment in NHAI bonds. The Assessing Officer did not accept such claim of the assessee on the ground that the agreement of the assessee dated June 13, 1972 with M/s. Modern Textiles and Silk Mills P. Ltd. (Modern) being the original tenant was only in respect of taking licence on looms and machinery, more particularly described in the schedule annexed to that. Thus according to the Assessing Officer clause one of the said agreement described the licence of looms and machinery ; clause 5 of the agreement describes the shed by way of permissible use on licence basis only, therefore, it was incidental to use the looms and machinery and cannot be construed as sub-lease ; clause 6 of the agreement speaks of lease of machinery and equipment only ; clause 7 of the agreement states that the original licensor, namely, Modern Textile Rayons, shall pay regularly in r....
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....n continuous occupation of the premises and had enjoyed exclusive and unfitted possession of the premises since June 13, 1972. The Assessing Officer observed that the payment received by the assessee is in the nature of nuisance value and assessee does not have any capital right. The possession of the portion of the shed was incidental to the licence granted to it for the use of machinery. Therefore, the Assessing Officer came to the conclusion that the amount received by the assessee is merely gratuitous and nothing else and is assessable as "income from other sources". The Assessing Officer also referred to the definition of tenant under the Maharashtra Rent Control Act and has denied the claim of assessee of being a sub-tenant as the assessee was not conferred with any legal right over the property at any point of time. He distinguished the decisions relied upon by the assessee and has assessed the amount received by the assessee as income from other sources and benefit of section 54EC was also denied. Arguments submitted before the Assessing Officer were reiterated before the learned Commissioner of Income-tax (Appeals). For deciding the issue against the assessee the learned ....
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....king on licensee looms and machinery more particularly described in schedule for a certain period for manufacturing cloths and licensor had agreed to that too. Clause 5 of the agreement clarifies this facts with more clarity which reads as under: "During the period of this agreement, a licensee shall be entitled to use a portion of the said shed in which looms are situated by way of permissive use on licensee basis only as incidental to using the said looms and machinery and shall never be construed as sub-lessees in any form of the said portion of the said shed." 10. Clause 6 of the agreement states that "the licensees, (M/s. Kewal Silk Mills) shall have the option to renew the 'lease of machinery and equipment' for further two years. The licensees can terminate the lease hereby given by giving to the licensors three months notice in advance in writing of their intention to terminate the lease or vis-a-vis". Thus, the licensor had categorically mentioned in the agreement that the lease is exclusively for the machinery and equipment and the renewal is exclusively for the machinery and nothing has been mentioned about the shed since the use of the shed was only incidental and the....
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....ardised. 13. As per clause 11 of the agreement the licensee, the assessee had no right for any change. The assessee had right to carry out his business with the help of looms and machineries taken on lease/licensee from MTRSMPL. In the agreement there is no involvement of the owner of the property, i.e., to say land. The licensor is the tenant of the land who had given on license/lease certain looms and machineries to the assessee. The agreement did not divulge that the assessee had any tenancy or sub-tenancy on the said land. On the contrary, the agreement clearly states that it shall never be construed as sub-lease in any form of any portion being used as incidental or permissible use. 14. As per deed of surrender of tenancy dated October 7, 2008 entered between purchaser of the land, i.e., to say Shri Pravin/Rajesh Makwana and the assessee M/s. Kewal Silk Mills, the compensation of Rs.3.75 crores was given to find out more alternative premises and also to compensate in connection with loss of business and profit as also the inconvenience and hardship caused on account of shifting elsewhere. 15. There was no agreement with the owner of the land Shri. Paresh Shah with the asses....
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....ees as are deemed to be tenants for the purposes of this Act by section 15A ;(bba) the State Government, or as the case may be, the Govern- ment allottee, referred to in sub-clause (b) of clause (1A), deemed to be a tenant, for the purposes of this Act by section 15B ; 15A. Certain licensees in occupation on February 1, 1973 to become tenants-(1) Notwithstanding anything contained elsewhere in this Act or anything contrary in any other law for the time being in force, or in any contract, where any person is on the 1st day of February 1973 in occupation of any premises, or any part thereof which is not less than a room, as a licensee, he shall on that date be deemed to have become, for the purposes of this Act, the tenant of the landlord, in respect of the premises or part thereof, in his occupation. (2) The provisions of sub-section (1) shall not affect in any manner the operation of sub-section (1) of section 15 after the date aforesaid." The learned authorised representative submitted that the aforementioned position of law of converting licensee into protective tenant and protective sub-tenant regardless of the intention of the original grant either of the lessor or of the le....
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....receipt. The learned authorised representative further referred to the decision of the hon'ble Delhi High Court in the case of Bawa Shiv Charan Singh v. CIT [1984] 149 ITR 29 (Delhi), wherein the assessee's tenancy right was held to be capital asset and surrender thereof was considered as extinguishment of the right. Thus it was held that it was a transfer of capital asset within the meaning of the Income-tax Act. The learned authorised representative also referred to the decision of the hon'ble Supreme Court in the case of Union of India v. Cadell Weaving Mill Co. P. Ltd. [2005] 273 ITR 1 (SC), wherein also tenancy rights was held to be giving rise to capital gains. Reference was also made to Narang Overseas P. Ltd. v. Asst. CIT [2008] 300 ITR (AT) 1 (Mumbai) [SB], wherein mesne profits awarded under the decree of the court by way of compensation for wrongful possession of property after termination of leave and license agreement was held to be capital receipt. Thus, the learned authorised representative pleaded that amount received by the assessee was nothing but with regard to capital asset and the Assessing Officer has wrongly assessed the same under the head "Income from o....
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.... incidental. But the fact remains that incidental right to use the premises was provided by the agreement itself. The fact also remains that assessee has been referred to as licensee in the said agreement. The provisions of section 5(11)(bb) and 15A of the Rent Control Act have already been reproduced above. By virtue of amendment in 1973, i.e., subsequent to the date of agreement of the assessee that the licensees who are deemed to be tenant under section 15A were to be considered as tenant. Therefore, in any case, the assessee had acquired the status of tenant of the landlord. As per the provisions of section 55(2) tenancy right has been considered to be capital asset. Moreover, the definition of capital asset as per section 2(14) of the Act is wide enough to cover "property of any kind" and the type of right acquired by the assessee in the property used by it cannot in any manner be said to be less than "any kind of property" held by the assessee. Apart from the above conclusion it may be mentioned here that the assessee has filed copies of some rent receipts obtained by it from Modern. The first copy of such receipt is at page 25 of the paper book vide which a sum of Rs. 39,0....