TaxTMI 
TaxTMI 
2024 (11) TMI 71
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....cts and circumstances of the case and in law, the Ld. AO as well as the Ld. CIT(A) erred in not appreciating that the terms 'transfer' and 'received' are totally different having different connotations under the Act and therefore cannot be used interchangeably as has been done in the present case. 3. In the facts and in the circumstances, of the case the Ld. CIT(A) erred in confirming the action of the Ld. AO in invoking the provision of 56(2)(x), in the present case, without appreciating that: (i) The said section is not at all applicable in the present case; (ii) The appellant has not received any land, building or cash so as to be able to invoke section 56; and; (iii) In any case nothing is received in the relevant assessment year so as to be chargeable to tax in the relevant year; 4. Without prejudice to the above, if the argument of the Ld. AO is accepted then the entire transaction cannot be charged to tax at all since it is in the nature of acquisition of a capital asset and not sale of a capital asset. 5. In the facts and in the circumstances, of the case the Ld. CIT(A) erred in not accepting the valuatio....
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....sideration paid by the assessee, be not made under section 56(2)(x)(b)(B) of the Act. In response, the assessee submitted the valuation report by an independent valuer. As per the valuation report, the market value of the immovable property was determined at Rs. 2,53,38,057 and in order to drive the value of the cost of conversion of tenancy into ownership, the valuation was adopted at Rs. 25,23,806, i.e. 10% of Rs. 2,53,38,057. The assessee further submitted that section 56(2)(x)(b)(B) is not applicable in the present case as he has not received any immovable property, but it is a mere conversion of one class of rights (tenancy rights) in the property to another class of rights (ownership rights) in the same property. 5. The Assessing Officer ("AO") vide order dated 26/09/2022 passed under section 143(3) read with section 144B of the Act did not agree with the submissions of the assessee and also did not accept the valuation report submitted by the assessee on the basis that in the valuation report, it has been mentioned that the tenant is eligible to take concession of 10% at the time of valuation of the immovable property. However, the valuer has considered the cost of conver....
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....t No. 24 Floor No. 5VA, Ram Nam Mansion, Block No. 6, Cinema Road, Dhobi Talao, Mumbai-400020 as a tenant under what is popularly known as Pagdi system of tenancy. In the said building, apart from the assessee, other tenants were also residing for a very long time. The landlord of the property, i.e. Tarabhai Bhatia Family Trust, converted the tenancy rights of various tenants, who were staying in the tenanted premises prior to the year 1995, into ownership rights including that of the assessee. As a consideration for the conversion of tenancy rights into ownership rights, during the relevant assessment year, the assessee paid Rs. 25,00,000 to the landlord. There is no dispute among the parties regarding the aforementioned basic facts of the present case. 8. As is evident from the record, during the assessment proceedings, it was noticed that the stamp duty valuation authority had assessed the fair market value of the said property at Rs. 1,38,70,000. Accordingly, the assessee was asked to show cause as to why the difference between the consideration paid by the assessee in respect of the aforesaid transaction and the valuation made by the stamp duty authority be not considered a....
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....y value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:- (i) the amount of fifty thousand rupees; and (ii) the amount equal to five per cent of the consideration: .................... Explanation.-For the purposes of this clause, the expressions "assessable", "fair market value", "jewellery", "property", "relative" and "stamp duty value" shall have the same meanings as respectively assigned to them in the Explanation to clause (vii)." 10. For completion, it is also pertinent to note the meaning of the term "property" as provided in the Explanation to section 56(2)(vii) of the Act and the same reads as follows: - "Explanation.-For the purposes of this clause,- (a) .......; (b) .........; (c) .........; (d) "property" means the following capital asset of the assessee, namely:- (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures;....
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....uilding and the dispute arose regarding the cost of acquisition of the said property. The appellate authority overruled the decision of the AO and came to the conclusion that the taxpayer was a tenant, and thus valued the cost of acquisition at a nominal amount of Rs. 2,500. In further appeal, the Tribunal concluded that what was transferred was not the tenancy rights but the building itself and, therefore, what was to be allowed as a deduction for working out the capital gains was not the cost of tenancy but the cost of ownership rights. The Hon'ble Jurisdictional High Court dismissed the appeal filed by the Revenue and held that this is a pure finding of fact, which requires no interference. 14. On the other hand, in CIT v/s Dr. D.A. Irani, [2000] 111 Taxman 600 (Bom.), the facts before the Hon'ble Jurisdictional High Court were as follows: - "2. This reference pertains to the assessment year 1977-78. The assessee jointly with his mother held a flat in Shanti Kutir, Bombay, admeasuring about 1,800 sq. ft. The said flat was originally taken on lease in the year 1962-63 by the father of the assessee for residential purposes on a monthly rent of Rs. 175. Since then it wa....
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.... the interest of the lessor in the lessee in such a case and the tenancy comes to an end. This principle has been statutorily recognised in section 111(d) of the Transfer of Property Act, 1882, which specifically provides for determi- nation of lease in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right. 5. From the above discussion, it is clear that the asset transferred, in the instant case, was the flat acquired by the assessee by purchase from the owners with all the rights and interest therein including the occupancy right. The assessee was owner of the flat and not a tenant. The fact that the assessee was in occupation of the flat as a tenant before its purchase is wholly irrelevant because on purchase there was a union of the interests of the lessor and the lessee and the tenancy was existinguished. The said flat having been sold within 4 to 5 months of its purchase, the capital gain arising there from was rightly held by the ITO to be a short-term capital gain. The Tribunal was not justified in reversing the said finding of the ITO. 6. In view of the above, we answer t....
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.... ownership right and once this is a factual position, then it cannot be held that the some cost should be assigned on the tenancy right also. The judgment of Hon'ble Jurisdictional High Court in the case of Dr. D.A. Irani (supra) also gets squarely applicable, wherein it has been held that even if the assessee was tenant before its purchase, it becomes wholly irrelevant because at the time of purchase, tenancy gets extinguished and hence the value has to be assessed from the date of acquisition of the property. Therefore, the cost of acquisition for the purpose of indexation has to be taken at Rs. 4,75,000/- and not Rs. 10,04,475/- as has been contented by the appellant. Thus, the finding of the CIT (Appeals) on this issue is upheld. We accordingly hold that the cost of acquisition should be taken at Rs. 4,75,000/-." (Emphasis supplied) 17. Therefore, from a careful perusal of the aforesaid decisions, it is clearly evident that the transfer of ownership rights is distinguished by the Hon'ble Courts from the transfer of ownership by the protected tenant. Dr. D.A. Irani (supra) and Mrs. Nila V. Shah (supra) are the cases where the taxpayer purchased the tenant premises from....