TaxTMI 
TaxTMI 
2008 (11) TMI 175
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....the surrender of tenancy rights under the head "Capital gains" as claimed by the assessee. 2. Property No. 7, KG Marg, New Delhi, was taken on rent by the assessee. Thereafter, the assessee made improvements in the said rented premises and retained the same for more than five years. The assessee had shown the said property as inventory in its balance-sheets for several years. On April 4, 2001, the assessee surrendered the tenancy rights in the said property to the owner for a consideration. In the year in question, the assessee showed the said property as a capital asset and the loss incurred on surrender of the tenancy rights in the said property was claimed at Rs. 14,10,737 after claiming the benefit of indexation. The Assessing Officer ....
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....cquire tenancy rights and sell the same so as to construe tenancy rights as its stock-in-trade. 4. On behalf of the Revenue, it was contended that the assessee itself had shown the said property in all earlier years as its stock-in-trade and it is only in the year in question that it has been shown as a capital asset. It was contended that this cannot be permitted and, therefore, the capital loss claimed by the assessee could not be allowed. 5. The Tribunal noted that the tenancy right surrendered by the assessee during the year in question was held to be its stock-in-trade by the Assessing Officer as well as the Commissioner of Income-tax (Appeals) mainly on the basis of the treatment given by the assessee itself to the said tenancy righ....
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....t the assessee's stock-in-trade as alleged by the Revenue. The Tribunal observed that the treatment given by the assessee in its books of account for the earlier years was patently wrong. Consequently, such wrong treatment could not be held against the assessee when the clear finding was that the said tenancy right was a capital asset in the hands of the assessee. It is in these circumstances, that the Tribunal set aside the order passed by the Commissioner of Income-tax (Appeals) on this issue and directed the Assessing Officer to assess the profit/loss arising from the surrender of tenancy rights under the head "Capital gains" as claimed by the assessee. 6. The Supreme Court, in the case of CIT v. D. P. Sandu Brothers Chembur P. Ltd. [20....