TaxTMI 
TaxTMI 
2026 (5) TMI 1331
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....ection 143(1) and subsequently the case was selected for scrutiny under CASS for verification of "Large Capital Gain Set off with large Capital loss and Taxable receipts from House Property shown in Schedule TDS-2 is higher than the receipts from house property shown in ITR". Notice under section 143(2) dated 29.06.2021 and notice under section 142(1) dated 11.11.2021 were issued. 3. During the course of assessment proceedings, the Assessing Officer examined the receipts reflected in Form 26AS and noticed a difference of Rs. 14,37,503/- between rental receipts credited under section 194-I and the income declared under the head "House Property". The assessee explained that the said receipts were already offered as business income on account of sub-leasing of property and requested that no addition be made. The Assessing Officer, after verification, accepted the explanation and dropped the proposed addition. 4. The primary issue arose in respect of taxability of consideration of Rs. 3,67,68,000/- received by the assessee on surrender of tenancy rights in respect of two premises situated at Senapati Bapat Marg, Lower Parel, Mumbai, in favour of Phoenix Mills (P) Ltd. The assesse....
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....stice. 8. During the appellate proceedings, the assessee reiterated that tenancy rights are capital assets and their surrender results in capital gains, and that the Assessing Officer erred in invoking section 56. It was further submitted that the assessee had furnished tenancy agreements, valuation working and details of deposit in capital gains account scheme, which were not properly considered by the Assessing Officer. The assessee also contended that the assessment was completed without granting adequate opportunity, including denial of video conference hearing. 9. The CIT(A), after considering the submissions of the assessee and material on record, examined the legal position regarding taxability of surrender of tenancy rights. The CIT(A) referred to judicial precedents including the decision of the Hon'ble Supreme Court in the case of D.P. Sandu Bros. Chembur Pvt. Ltd. [2005 (1) TMI 13 - SUPREME COURT]and held that tenancy rights constitute capital asset and surrender thereof gives rise to capital receipt chargeable, if at all, under the head "Capital Gains". It was further held that if such receipt is not chargeable under the head "Capital Gains", the same cannot be br....
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....t the cost of acquisition of the possessionary/occupancy/tenancy rights is NIL. The assessee only prepared a working in order to claim benefit of cost of acquisition while computing capital gains. If there is no cost of acquisition, the receipt is not assessable under Capital Gain." 12. Per contra, the learned Authorised Representative (AR), placing reliance on the order of the learned CIT(A), reiterated the submissions as were advanced before the first appellate authority and as reproduced in the appellate order. The learned AR submitted that the assessee had acquired tenancy rights in respect of two adjoining premises, namely Premises No. 11 and Premises No. 12 situated on the 2nd floor of the building located at 462, Senapati Bapat Marg, Lower Parel, Mumbai. It was submitted that the tenancy rights in respect of Premises No. 11 and Premises No. 12 were acquired on 12th February, 1994 for a consideration of Rs. 31,59,003/- and Rs. 15,02,887/- respectively. It was further submitted that during the financial year 2019-20, the assessee entered into agreements to surrender the tenancy rights in respect of both the aforesaid premises for a total consideration of Rs. 3,67,68,000/- (....
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....ce of ascertainable cost, capital gains computation fails and the Assessing Officer was justified in invoking the residuary head. 15. The submissions before the learned CIT(A), as reproduced in the appellate order, demonstrate that the assessee had categorically stated that tenancy rights in respect of Premises No. 11 and 12 were acquired for consideration and the same were surrendered during the year for total consideration of Rs. 3,67,68,000/-. It was further contended that both the acquisition and surrender agreements clearly evidenced the existence of tenancy rights as well as the cost incurred for acquiring the same. The assessee also relied upon provisions of section 55(2)(a) and judicial precedents to contend that tenancy rights are capital assets and surrender thereof gives rise to capital gains. 16. The learned CIT(A), after considering the entire material and submissions, has recorded a categorical finding that tenancy rights constitute a capital asset within the meaning of the Act and any consideration received on surrender thereof is a capital receipt. The learned CIT(A) has further relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. D.P. ....