TaxTMI 
TaxTMI 
2017 (6) TMI 878
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....rder of Collector dated 10.02.2006 for a period of 10 years. This lease was valid upto 31.07.2015. The petitioner applied to the Collector for surrendering the land as the petitioner no longer required it. This land was thereafter sold by the Government to one Coastal Gujarat Private Limited ('CGPL' for short). CGPL had separately made a payment of Rs. 29.92 crores to the assessee in two installments i.e. Rs. 24 crores in the assessment year 2009-10 and Rs. 5.92 crores in the assessment year 2010-11. For the assessment year 2010-11, the assessee had showed the said sum in its return as long term capital gain received in lieu of transfer of land. 3. During the assessment proceedings, the assessee however took a slightly different stand and contended that such receipt was not in the nature of capital gain but was one time receipt which was not taxable. This stand of the petitioner could be discerned from a communication dated 15.02.2011 made by the petitioner to the Assessing Officer during the course of assessment proceedings. In such communication, the assessee contended that the transaction in question was in the nature of a capital receipt not liable to tax and not a c....
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....sequently on analyzing the facts of the case, it was noticed that the amount received by the assessee was not in lieu of transfer of any capital asset so that the profit from the same could be taxed as long term capital gain. Section 45 of the Income tax Act, 1961 specifies that any profits or gains arising from the transfer of a capital asset effected in the previous year, shall be chargeable to income tax under the head 'Capital Gains' and shall be deemed to be the income of the previous year in which transfer took place. Hence, in order to treat the profit and gains out of such receipts, it is imperative that the receipt should be in lieu of transfer of a capital asset. In this case, there is no dispute over the fact that, the land in question belonged to the Government of Gujarat and the same was given to the assessee on lease vide an order dated 10.02.2006 and a contract was made between the assessee and the representative of the State Government, the Collector of Kutch, Bhuj on 23.3.2006. As per the terms and conditions of the above agreement, the assessee was authorized to use the above land only for its own business of production of salt and its bye products and it ....
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.... the assessee to CGPL under the provisions of the Income tax Act, or under the provisions of Transfer of Properties Act. While examining this issue, it will be pertinent to refer to the decision of the Hon. Calcutta High Court in the case of A Gasper Vs CIT (1979) 117 ITR 581 and to examine whether the facts of the case of the assessee had any similarity with the facts of the above case so as to decide the applicability of the above decision of the Hon. Calcutta Court, in the case of the assessee. The facts of this case is that, the assessee was a tenant in a premises at AJC Bose road, Calcutta. He was monthly tenant in the said property since 1940 under earlier land lords as well. On March 27, 1967, the landlords entered into an agreement for leasing out the property to a company namely Associated Batteries, permitting therein to construct a building on the same premises. The assessee was also a party to the said agreement. As part of the agreement, the assessee received a sum of Rs. 4,50,000/, in consideration of which he permitted the new lessee to put up the construction. He transferred his tenancy rights to the said company and became a licensee in respect of the prem....
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....Gain', there ought to be either transfer of capital assets or transfer of any interest in capital assets by the assessee. Here the assessee had extinguished all its interest and right in land by surrendering the land to the Collector. This land was later on sold by the Collector to CGPL independently and the due amount of consideration was also paid by CGPL to the State Government authorities as stated earlier. Had the assessee got money from the government for surrender of lease or had it transferred its lease hold right in favour of the CGPL, and got consideration for that, then it would constitute transfer of capital assets or transfer of any interest in capital assets. By surrendering the leased land to government it had extinguished all its interest and right in land. As such the amount received by the assessee from CGPL as per their MOU cannot be termed as 'Income from capital gain' but it has to be taxed as 'Income from other sources'. Without prejudice to the above and for the sake of discussion, even if the receipt of the assessee from M/s. CGPL was to be considered as receipt in lieu of transfer of capital asset, it has to be seen whether the ....
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.... However, as discussed in the earlier paragraphs, the whole receipt in the hands of the assessee is taxable as income from other sources within the meaning of section 56 of the Income tax Act as the assessee has not transferred any capital asset to M/s. CGPL from whom the money has been received by the assessee, instead, the land which has been claimed as capital asset for which such money has been claimed to have been received by the assessee belongs to the state government and it was alloted to the assessee on lease for its business purposes and the same was subsequently surrendered back to the state government and the said M/s. CGPL was not at all involved in any capacity in surrendering of land. I have, therefore, reasons to believe that assessee's income to the above extent has been under assessed leading to escapement of income, within the meaning of Explanation 2(c)(ii) to section 147 of the I.T. Act, 1961, as the assessment in the present case for AY 201011 has been assessed at too low a rate. Hence, notice u/s. 148 is being issued." 6. To briefly summarize the long reasons recorded by the Assessing Officer, in his opinion, the receipt was not in the ....
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....other sources. Even if the Assessing Officer was not fully convinced about this element of taxability, he had independently recorded the reason of the receipt being in the nature of shortterm capital gain. III. Counsel lastly contended that the question whether the assessee enjoyed lease for a period of less than three years or more was never subject matter of appeal proceedings. 10. Facts are not seriously in dispute and may be summarized thus. The assessee was granted lease of land by the Government for a period of 10 years. CGPL was interested in purchasing such land and therefore privately negotiated with the petitioner to give up its rights prematurely. For such purpose, CGPL paid Rs. 29.92 crores for the assessee. According to the assessee this receipt was in the nature of capital gain and offered to tax after adjusting to the cost of acquisition. During the assessment proceedings, the assessee in fact went a step further and tried to urge that the receipt is not taxable at all being capital receipt. The Assessing Officer did not accept the contention and taxed the same as long term capital gain. 11. The assessee had filed appeal on this issue before the Commissioner....
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....ssessment. Had material particulars concerning the income been withheld by the assessee, issue perhaps would stand on a different footing. Since such facts are not presented before us, we would not comment any further in this respect. 15. Appeal against an order of assessment at the hands by the assessee would lie before the Commissioner (Appeals) in terms of section 246A of the Act. Section 250 of the Act lays down procedure in such appeal. Section 251 concerns the power of the Commissioner in such appellate proceedings. As per subsection (1) of section 251, while disposing of the appeal, the Commissioner would have powers to confirm, reduce, enhance or annul the assessment. Thus, while disposing of an appeal filed by an assessee against the order of assessment, the Commissioner after following the requirement of hearing provided in subsection (2) of section 251 may even enhance the assessment. The question of correct taxability of the receipt by the assessee was thus at large before the Commissioner (Appeals) and now is open before the Tribunal. At that stage, it would not be open for the Assessing Officer to reopen the assessment on this matter which is a subject matter of th....