TaxTMI 
TaxTMI 
2016 (4) TMI 901
X X X X Extracts X X X X
X X X X Extracts X X X X
..... On the facts and in the circumstances of the case and in law, the order passed u/s 263 of the I.T. Act, 1961 is invalid and bad in law. 2. On the facts and in the circumstances of the case and in law, learned CIT erred in passing an order u/s 263 of the I.T. Act, 1961 and that too without giving full and proper opportunity of being heard in the matter. 3. On the facts and in the circumstances of the case and in law, the learned CIT erred in passing an order u/s 263 of the I.T. Act, 1961 and that too without appreciating fully and properly the facts of the case. 4. On the facts and in the circumstances of the case and in law, the learned CIT erred in holding that the order passed by the ITO-19(1)(2) is erroneous and prejudicial to the interest of revenue although the same was neither erroneous nor prejudicial to the interest of revenue. 5. On the facts and in the circumstances of the case and in law, the learned CIT erred in setting aside the order passed u/s 143(3) of the I.T. Act on 26.12.2011 for A.Y. 2009-10 on the issue of assessing the receipts i.e. total receipts of Rs. 65,00,000/- where the assessee's share is 1/3rd, although the same wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5.2008 , retaining the Right of termination of tenancy with the landlord. Hence, CIT was of the view that nature of income arising from the transaction is not from Long term capital gain but Income from House Property and the AO has erroneously allowed the exemption u/s 54EC of the Act. Hence, in view of the CIT, assessment order dated 26.12.2011 passed under section 143(3) is erroneous and so far as Prejudicial to the interest of the revenue. A Show cause notice was issued under section 263 to the assessee-HUF on 16.07.2012 proposing that the assessment order passed under section 143(3) of the Act dated 26.12.2011 be revised u/s 263 of the Act. 5. The assessee-HUF made a written submissions in response to notice u/s 263 of the Act and submitted that assessment order passed by the AO is not erroneous and hence, not prejudicial to the interest of the revenue. The assesee-HUF submitted that the assesee-HUF has 1/3rd share jointly alongwith his brother's HUF in the building known as Jeshtaram Building at Dadar,Mumbai. The building is fully let out and is occupied for commercial as well as residential purpose by the tenants who have occupied its tenancy since last 25 years. The asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... further claimed the receipt as capital receipt. For the receipt to be capital receipt, there has to be transfer of capital asset and there is need to examine whether the assessee-HUF had affected transfer of Capital asset in lieu of the impugned receipts. The CIT referred to the tenancy agreement para 3 at page 2 which stipulated that, "the landlords have agreed to let out to the tenants the said block as monthly tenants w.e.f. today on following terms and conditions under Maharashtra Rent Act, 2000." However, it was observed by the CIT that right of termination of tenancy has been retained with the landlord as mentioned at para 16 of the 5th page of the agreement dated 06.05.2008 which stipulated that assessee-HUF has simply let out the property without transfer of any right in property except that of occupancy by tenant, whereby there is merely the grant of right of tenancy and there is no transfer of capital assets. Even the right of re-possession has been retained by the assessee-HUF. The income thereof is not a capital gain. Thus, the CIT held that the order of the AO is erroneous in so far as the order is prejudicial to the interest of the revenue and the said receipt must b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eived on transfer of tenancy rights. The assessee-HUF submitted that long term capital gain earned by the assessee-HUF on transfer of tenancy rights was duly declared and disclosed in the return of income filed with the Revenue and our attention is drawn of return of income and computation of income filed with Revenue which is placed at pages 1-4 of paper book filed with the Tribunal to contend that the asssessee-HUF made due disclosure of long term capital gain and exemption u/s 54EC claimed thereof in the return of income filed with the Revenue. The assessee-HUF submitted that during course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act , the AO has made specific query on the claim of exemption u/s 54EC of the Act which was duly replied by the assessee-HUF vide letter dated 07-12-2011 which was filed before the AO on 08-12-2011 and the relevant extract of the said letter reads as under : " With reference to the deductions claimed u/s.54EC of the Income Tax Act, 1961 of Rs. 22,50,000/-, I have been instructed by my client to submit as under: 1. My client entered in to Tenancy agreement for transfer of tenancy rights for Block No. I and B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that Rs. 12 lakhs have been received for providing amenities and repairing etc. of the flats for which expenses have been incurred. The assessee-HUF submitted that it has 1/3 share in the said property. The assessee-HUF referred to tenancy agreements dated 06-05-2008 entered into by the assessee-HUF with respect to D-1 an D-2 block in ground floor of Jeshtaram Building , Dr Ambedkar Road, Dadar, Mumbai which are placed at pages 9-27 of paper book filed with the Tribunal. The assessee-HUF submitted that tenancy rights is a capital asset as held by the Hon'ble Supreme Court in the case of CIT v. D P Sandu Bros. Chembur Private Limited (2005) 273 ITR 1(SC) and Hon'ble Bombay High Court in the case of Cadell Weaving Mills Co. Private Limited v. CIT (2001) 249 ITR 265 (Bom. HC). The assessee-HUF also submitted that in the case of third co-owner Mr. Dushyant P Babode(HUF) with respect to the same transaction being 1/3 coowner, the CIT(A) has held the transfer of tenancy right as transfer of long term capital asset and brought the same to tax as Income from Capital gains vide orders dated 21.10.2013 which has attained finality and are placed in paper book at page 89-97. The assessee-H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and decision in the case of IPCA Laboratories Limited rendered by Hon'ble Bombay High Court and ld. CIT DR submitted that benefit which is not given by law cannot be conferred. On the other hand ld AR submitted that it is simply transfer of tenancy right and he relied upon decision of Hon'ble Bombay High Court in the case of CIT V Tip Top Typography (2014) 48 taxmann.com 191(Bom.HC) . 10. We have considered the rival contentions and perused the material on record including the case laws relied upon by both the parties. We have observed that assessee-HUF has entered into tenancy agreement dated 06.05.2008 whereby the assessee-HUF has granted monthly tenancy of the property Block D1 and D2 on the ground floor of D building known as Jestharam Baug situated at Dr. Ambedkar Road at Dadar, Mumbai. The assessee-HUF has received Rs. 53,00,000/- alongwith his brothers HUF's who are also co-owners in the said property as one time premium for allotting the tenancy right in the property in which the assessee-HUF has 1/3rd share , which is non-refundable. The tenants are also paying rent of Rs. 269 per month and the tenancy is governed by Maharashtra Rent Control Act, 2000 whereby tenants ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....situation of tenant in default of monthly rent and that too with a notice of six months to tenant whereby the tenant can always rectify the default and continue enjoying the tenancy perpetually more so the tenant is protected tenant under Maharashtra Rent Control Act, 2000. The AO has made an inquiry before granting exemption under section 54 EC of the Act with respect to the grant of the tenancy right which was replied by the assessee-HUF vide letter dated 07-12-2011 filed with AO on 08-12-2011 and has also enclosed copies of agreements and details along with the said letter, the said letter is reproduced in preceding para's and is placed at paper book at page 7-8 along with tenancy agreements dated 06-05-2008 and letter for repairs etc at pages 9-27 of paper book . The AO has duly applied his mind while granting the exemption under 54EC of the Act. The AO has taken one of the possible views which in our considered view is in-fact plausible and correct view by treating one time premium on allotment of tenancy rights by assessee-HUF in favour of tenants as capital receipts chargeable to tax as Income from capital gains u/s 45 of the Act arising from transfer of long term capital as....