TaxTMI 
TaxTMI 
2018 (10) TMI 719
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....e learned Commissioner of Income Tax (Appeals) has erred in confirming the receipt of Rs. 5,00,000/- (i.e. Rs. 2,50,000/- each received from two tenants) on transfer of revisionary rights as long term capital gin as against claimed of capital receipt not liable to tax. 4. Without prejudice to the above ground of appeal No.3, on the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in confirming the application of section 50C on transfer of revisionary rights and has further erred in replacing sales proceeds at Rs. 43,79,500/- as against the actual receipt of Rs. 5,00,000/- on transfer of revisionary rights. 5. Your appellant craves to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, to alter, to amend or to furnish fresh and / or detailed grounds of appeal. 2. The brief facts of the case are that assessee is a developer cum builder. The company was incorporated on 14.09.1990. The return of income for the year under appeal was filed on 25.11.10 declaring total income of Rs. at NIL after setting off of carried forward losses of Rs. 1,60,444/- Thereafter a....
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....operty, as the lease period has been for more than 12 years. Further, the AO has been of the view that the nature of the income which has been rental earnings from the house property will not change just because it has been received by the company formed with the object of carrying out business as builder and developer. The issue is considered. It is to be noted that the nature of receipts was rental income even to the previous owners and was taxable accordingly under the head Incme from house property. The assessee company had purchased that old property perhaps with a view to construct the new one but because it could not get hold the right over the remaining 116th portion and the tenants continue to reside there, it could not carry out the intended business. But then, for that reason the nature of income cannot get changed that of as Business income. The AO has also relied onto the decision of Honble Supreme Court in the case of Sultan Bros Pvt Ltd (1964) 51 hR 53 (SC) wherein its earlier decision in the case of East India Housing Et Land Development Trust Ltd (1961) 42 ITR 49 (SC) was followed. The AO has, rightly assessed the rental receipts under the head Income from house pr....
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....h the parties at length and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in its detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no. 4.2 of its order and the same is reproduced below:- 4.2 Ground No (2) : Through this ground the assessee has contended that amount received as Rs. 7,50,000/- on account of tenancy rights of the property has wrongly been treated as "Income from other sources" as against its claim of "Income from business". The relevant part of the assessee's submissions on this issue finds place in para 3 of this order. The issue is considered. It is noted that the assessee received Rs. 7.50 lakh on account of transfer of tenancy rights of some of the flats in the building "Kapoor Mahal" whose 516th portion was acquired by it on lease [reference para 4.1 above]. The assessee's business is of builder and developer. Therefore, the fee obtained on transfer of....
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.... placed on record, judgment cited by the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in its detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no. 4.4 & 4.4.1 of its order and the same is reproduced below:- 4.4 Ground No (4 & 5): Through these grounds the assessee has contended that AO has erred in treating the compensation of Rs. 2.5 lacs each received from the two tenants for transfer of reversionary rights as income from Capital gain as against its claim of capital receipt; and that the AO had erred in applying Section 50C and adopting the sale proceeds of Rs. 43,79,500/- as per stamp valuation authority to work out the capital gain thereon. The relevant part of the assessee's submission on the issue finds place in Para 3 of this order. The issue is considered. Briefly the facts are that during the course of assessment proceedings, the AO noted the comments of the auditor's report and Notes to the accounts which says, "the assessee has rec....
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....th day of December, 2009 between the assessee and the two of the tenants Mr Bharat Somani and Mr Vikram Somani. By that deed, the assessee company has assigned by- and Large all its rights over the said two flats to those persons, so much so, that at one place it was mentioned that, 'This purchaser would be entitled to sale I transfer and assign the said premises subject to a right of first refusal available to the purchaser as separately recorded'. It is also noted that as per Clause 3 of that deed, the assessee had agreed to sale the reversionary right, title and interest in the said premises for the lumpsum consideration of Rs. 2.50 lacs for each flat to those two persons [tenants]. A reference is made thereof to a memorandum of intention dated 27.12.1993. This means decision to transfer that right was taken much earlier [i.e., in the year 1993] for the lumpsum amount of Rs. 2.50 Lacs and the same is executed in the year 2009 i.e., the year under consideration. It is quite obvious that the rates by that time have gone much higher which is also evident from the facts that stamp valuation authorities itself had valued the transaction [transfer of the assessee's interes....
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....ts in the form of two flats along with one garage at such low throw away price which is otherwise impossible if such sale happen to take place in favour of any third party. Hence, from the documents submitted, the revenue noted that the value taken by the Stamp Valuation authority for stamp duty of the two said flats were Rs. 23,78,500/- and Rs. 20,01,000/- respectively and thereby adopted those figures as deemed sate consideration u/s 50C of the Act and computed the net capital gain of Rs. 40,57,216/- and while doing so, the revenue allowed the deduction on account of cost of acquisition. From the contents of the deeds, the assessee company has assigned by and Large all its rights over the said two flats to those persons, so much so, that at one place it was mentioned that, 'This purchaser would be entitled to sale I transfer and assign the said premises subject to a right of first refusal available to the purchaser as separately recorded'. Even as per Clause 3 of that deed, the assessee had agreed to sale the rights, title and interest in the said premises for the lumpsum consideration of Rs. 2.50 lacs for each flat to those two persons. In this respect, the referen....