TaxTMI 
TaxTMI 
1989 (2) TMI 2
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.... 14.55 acres at a price of Rs. 27,260. By an instrument of lease-cum-licence dated September 10, 1970, they granted a mining lease in favour of Sri Krishna Tiles and Potteries (Madras) P. Ltd. (hereinafter called the "company"), an allied concern of the assessee. The lease was for a period of 10 years and the lessee had to pay a premium or salami of Rs. 5 lakhs in addition to the payment of a royalty of Rs. 12 per 100 cubic feet of clay extracted subject to a minimum of Rs. 60,000 per year. The Income-tax Officer construed the lease-deed as transferring leasehold interest in the land in favour of the company and came to the conclusion that the transfer was assessable to capital gains tax. For the purpose of computing the extent of tax, t....
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....e or mortgage or the like is part of that bundle. According to the Tribunal, the purchase price paid by the assessee for the land includes therein a component of purchase price attributable to various kinds of interests embedded in the said land. The Tribunal confirmed the order of the Appellate Assistant Commissioner and dismissed the appeal. Arising from the said decision of the Tribunal, the following two questions were referred to the High Court for determination : " (i) Whether, on the facts and in the circumstances of this case, the instrument of lease dated September 10, 1970, effected the transfer of capital asset within the meaning of section 45 of the Income-tax Act, 1961, and, accordingly, liable to capital gains tax ? (....
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.... the transfer took place. " Mr. Harish Salve, learned counsel appearing for the appellant, without disputing that the grant of a lease would constitute a transfer of an asset, has raised the following two contentions : (i) That conceptually there is no "cost of acquisition" which is attributable to the right of limited enjoyment transferred by the grant of the lease. There is no nexus between the "cost of acquisition" of the free hold land and the right granted under the lease. For the same reason, it is contended that there is no question of apportionment of such " cost of acquisition ". (ii) That since the cost of acquisition of the right granted under the lease cannot be determined, the computation provisions under the Act can n....
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....in R. K. Palshikar (HUF) v. CIT [1988] 172 ITR 311 If a transfer of a capital asset in section 45 of the Act includes grant of a mining lease for any period, then, obviously, the "cost of acquisition" of the land would include the "cost of acquisition" of the mining right under the lease. Undisputedly, the grant of a lease being a transfer of an asset, there is no escape from the conclusion that there is a live nexus between the "cost of acquisition" of the land and the rights granted under the lease. The amount of Rs. 27,260 paid by the assessee was not only the cost of acquiring the land but also of acquiring a bundle of rights in the said land including the right to grant lease. There is thus no force in the contention of learned counsel....
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....e computation provisions under the Act are applicable and section 45 would be attracted. In B. C. Srinivasa Setty's case [1981] 128 ITR 294 (SC), the question was whether the transfer of the goodwill of a newly commenced business can give rise to a capital gain taxable under section 45 of the Act. This court answered the question in the negative. Referring to the charging section and the computation provisions under the Act, this court held that none of those provisions suggest the inclusion of an asset under the head "Capital gain", in the acquisition of which no cost at all can be conceived. Goodwill generated in an individual's business was held to be an asset in which no cost element can be identified or envisaged. It was also held that....