2003 (3) TMI 38

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.... is right in law and fact in interfering with the order of the Commissioner of Income-tax (Appeals)?" The brief facts necessary for decision of this case are as follows. The assessee is a company in which the public are not substantially interested. The assessee obtained a leasehold right in respect of a piece of land from the Cochin Port Trust and the assessee had constructed a building therein for the purpose of his business. The assessee sold the building during the accounting period relevant to the assessment year 1986-87 to M/s. Ram Bahadur Thakur Pvt. Ltd. for a consideration of Rs. 2,34,000. The Assessing Officer computed the capital gains on the transfer of the property at Rs. 1,37,120. According to the assessee, there cannot be ....

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....ty [1981] 128 ITR 294, held that the consideration received on the surrender or transfer of the leasehold right was not liable to capital gains. Hence, the reference. Sri P.K.R. Menon, senior Central Government standing counsel for taxes appearing for the applicant, submits that the Tribunal erred in holding that the transfer evidenced by a registered document dated June 28, 1985, clearly says that the transfer was only in respect of the building and improvements and not the land or the leasehold right in respect of the land. Senior counsel based on the above submitted that when the document clearly says that the transfer was only in respect of the building, the Tribunal was not justified in holding that the transfer was in respect of th....

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....on that a sum of Rs. 1 lakh received as consideration for the transfer of the leasehold right cannot be subjected to capital gains tax since there was no cost of acquisition. The Assessing Officer has taken the view that the consideration was only for the transfer of the building. The first appellate authority, it is seen, has taken a view that the assessee had surrendered the leasehold right in favour of the Cochin Port Trust, and therefore no leasehold right was available with the assessee for transferring it to the purchaser, namely, M/s. Ram Bahadur Thakur Pvt. Ltd. at the time of transfer. However, we find that the Tribunal has elaborately considered the question as to whether the transfer was in respect of the building only or was in ....

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....lding and the leasehold right in favour of M/s. Ram Bahadur Thakur Pvt. Ltd., the assessee wrote a letter on October 31, 1984, to the Cochin Port Trust for their permission. In answer to the said request, the estate manager of the Cochin Port Trust wrote to the assessee on January 11, 1985, expressing consent subject to certain conditions stipulated in the said letter. The said letter is extracted, in paragraph 7 of the appellate order. It is specifically stated therein that the chairman has accorded sanction to transfer the lease of 50.11 cents of land in plot No. 10 leased to the assessee in Cat. II to M/s. Ram Bahadur Thakur (Kerala) P. Ltd., Cochin-3, subject to the assessee agreeing to abide by the following terms and conditions. Claus....

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....ated in the said letter. Agreement dated March 11, 1985, between the assessee and the transferee, namely, M/s. Ram Bahadur Thakur (Kerala) P. Ltd. is seen considered by the first appellate authority. Clause (1) of the said agreement which is extracted in the first appellate authority's order says that the vendor will sell free of all encumbrances, and the purchaser will purchase the schedule building together with all the improvements therein, for the total price or consideration of Rs. 2,34,000 upon and subject to the terms and conditions and covenants herein contained. Clause (5) of the said agreement further provided that, the vendor undertakes to surrender the land to the Port Trust to enable the Port Trust to allot the land to the purc....

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....ween the assessee and the Cochin Port Trust, and the permission granted by the Cochin Port in the communication dated January 11, 1985, is in terms of clause (b) of the lease agreement. The reason for non-inclusion of the leasehold right in the sale deed executed by the assessee in favour of M/s. Ram Bahadur Thakur Pvt. Ltd., is that the Cochin Port Trust in the letter dated January 11, 1985, had specifically stated that the assessee shall execute a sale deed only in respect of the structures in the leasehold land. Of course, the sale deed also refers to the communications sent by the Cochin Port including the communication dated January 11, 1985. In these circumstances, we are of the view that the Tribunal has correctly held that the tr....