TaxTMI 
TaxTMI 
2020 (2) TMI 265
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.... head Long Term Capital Gains of Rs. 3,56,63,433/- by treating arrear rent of Kolkata Port Trust (hereinafter referred to as "KPT"), paid by or on behalf of the Appellant, as consideration for alleged transfer of leasehold rights. 2. That the Ld. CIT (A) was erred in law as well as in facts in upholding the addition of the Ld. DCIT of Rs. 10,00,000 out of the addition made of Rs. 14,66,500/- as alleged undisclosed income from license fee, without appreciating the fact that Rs. 10,00,000 has been directly paid by the Appellant to KPT in terms of the agreement between the Appellant and its sub-lessee in view of commercial expediency." 3. These grounds are interlinked therefore we adjudicate them together. Facts of the case, which can be stated quite shortly are as follows: Assessee had got lease hold rights from Kolkata Port Trust [KPT over two plots of land at Hide Park Extension for a long time. Since 01.11.1970 assessee had stopped paying rent. In 1999 it entered into agreement with M/s. ARA Enterprises Pvt. Ltd. for sub leasing the premises to them. Since 01.02.1999 it started receiving monthly rent from M/s. ARA Enterprises Pvt. Ltd. Still assessee did not pay any re....
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....ear 2011-12. In this regard reliance was placed on the following judgments decisions: a) Non such Tea Estate Ltd. 1975 98 ITR 175 SC. Even an assessee following the mercantile system of accountings is not entitled to claim a deduction until liability for the sum for which deduction is claimed has accrued. The reasons given by the High Court overlooked the plain terms of sec. 326 of the Companies Act, 1956. Sec. 326 prohibits the appointment or reappointment of a managing agent unless the Central Government approved such appointment or reappointment. The Central Government would not accord its approval unless the requirements specified in clauses (a),(b) &(c) of sub-section (2) of the section have been fulfilled. Therefore, it cannot be assumed that the Central Government will approve every proposed appointment or reappointment of a managing agent. Thus, in the instant case it was only when the Central Government conveyed its approval to the appointment of managing agents by its letter dated 02.09. 1957, that the appointment became effective and the company's liability to pay the remuneration of the managing agents accrued. b) Saurashtra Cement & Chemi....
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.... any furniture, utensil or other article or worked or sewn into any wearing apparel. Agricultural land in India, not being land situate - (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last proceeding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item(a) as the central Government may, having regard to the extent of and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the official Gazette; (iv) 6% per cent Gold Bonds, 1977, or 7 per cent Gold Bond:, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government; (v) Special Bearer Bonds, 1991, issued by the Central Government; ....
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....eld that transfer of lease by the assessee in favour of sub-lessee would amount to transfer of a capital asset and the consideration received by the assessee under that transaction would partake the character of capital gains and, therefore, liable to tax. Hon'ble Madras High Court held that transferring an immovable property by was of a lease creates an interest in the land. According to section 2(14), the word 'capital asset' means, property of any kind held by an assessee'. Therefore, it does not necessarily mean that the property, which the assessee holds, must be his own. Any kind of property held by an assessee would come within the definition of 'capital asset'. From the decisions of the Supreme Court in A.Gasper v. CIT [1991] 192 ITR 382 and the Madras High Court in A.R.Krishnamurthy & A.R. Rajagopalan v. CIT[1982] 133 ITR 922/[1981] 6 Taxman 289, it is clear that transfer by way of lease is treated as transfer of a capital asset, on the principle that the lease creates an interest in the land and, therefore, to that extent, it extinguishes the right of the transferor. Therefore, when the assessee transfers his leasehold rights in the land in his occ....
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....t to transfer of Leasehold Rights, under certain conditions. Whether the lessor continues getting rent even after the date of transfer is not relevant in deciding whether transfer has taken place. Perusal of the two agreements with M/s. ARA Enterprises Pvt. Ltd shows that agreement dated 21.01.1999 was in the nature of leave and license agreement for a limited period. M/s. ARA Enterprises Pvt. Ltd. was to occupy the premises only for a limited period. No other rights were conferred on the lessee through this agreement. Refundable deposits were taken, which were equivalent to three months of rent and six months of rent was taken in advance to be adjusted against the monthly rent @ 50% of the rent. Assessee continued to have effective control over the premises and its Leasehold Rights were not affected in any manner. However, agreement dated 07.02.2008 was like transfer of Leasehold Rights. Assessee got lump sum payments equivalent to arrears of rent. Besides it was also entitled for monthly rental from the lessee. However, henceforth assessee did not have the power to terminate the agreement and evict M/s.ARA Enterprises Pvt. Ltd., so long as they continued to pay timely re....
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....der the circumstances it is logical that transfer of leasehold rights to M/s ARA Enterprises Pvt. Ltd. would take place only when the same was restored to the assessee. Hence year of transfer is the current year and capital gains the assessee during the current year. During appeal has accrued to proceedings assessee was asked to furnish documents regarding restoration of its Leasehold Rights by Kolkata Port Trust. However, assessee has not submitted any communication in this regard. However, it can be inferred that on full payment of arrear of rent during the year, eviction proceedings subsided and after that transfer of Leasehold Rights has taken place. Now the next issue is regarding the total consideration received for transfer of this Leasehold Rights. It is seen that M/s. ARA Enterprises Pvt. has paid Rs. 2,24,00,000/- on 31.03.2010 and balance amount of Ltd. arrear of Rs. 1,32,63,433/- has been paid during the year. These two amounts are basically the consideration for transfer of Leasehold Rights. Thus Rs. 3,56,63,433/- is the consideration for restoration and subsequent transfer of Leasehold Rights. Besides during the current year, M/s. ARA Enterp....
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....tion involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation 1.-For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA. Explanation 2.-For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has ....
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.... (assessee) is holding lease rights in the property and the assessee has transferred these lease rights in favour of M/s ARA Enterprises Pvt. Ltd. and received the lumpsum amount. Therefore, it falls in the definition of property of any kind held by an assessee and hence subject to capital gain tax. We note that the explanation to Section 2(14) of the Act clearly says that the property includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever. In the assessee's case under consideration, the assessee transferred his lease hold rights in favour of M/s ARA Enterprises Pvt. Ltd and these lease rights fall in the category of 'any other rights whatsoever'. We note that M/s. ARA Enterprises Pvt. has paid Rs. 2,24,00,000/- on 31.03.2010 and balance amount of Ltd. arrear of Rs. 1,32,63,433/- has been paid during the year. These two amounts are basically the consideration for transfer of Leasehold Rights. Thus Rs. 3,56,63,433/- is the consideration for restoration and subsequent transfer of Leasehold Rights. Besides during the current year, M/s. ARA Enterprises Pvt. Lt....