TaxTMI 
TaxTMI 
1990 (8) TMI 184
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....s of the said society, by virtue of which it owned the first floor of Majithia Chambers, admeasuring 3,200 sq. ft.; (4) by an agreement dated 1-11-1974 entered into between the assessee and M/s. Chimanlal Paper Co. (C.P.C.), the assessee allotted 2,200 sq. ft. of the first floor to C.P.C. for a period of five years with effect from 1-5-1974. In consideration thereof C.P.C., which had agencies of number of well known paper mills, agreed to pay compensation to the assessee by way of rebate/commission at the rate of 5% on the value of the net sales; (5) by another leave and licence agreement dated 24-4-1975 entered into between the assessee and M/s. Chimanlal Pvt. Ltd. (CPL), the assessee allotted 400 sq. ft. of the first floor to CPL for a period of 5 years with effect from 1-11-1974. In consideration thereof CPL agreed to pay compensation of Rs. 1,500 per month and a deposit of Rs. 3,00,000 with the assessee as security for due performance/ observance of the terms/conditions of the licence; (6) sometime during the relevant previous year the assessee had thought of transferring the first floor to the Trustees of eight trusts, viz.;.- (i) Chandiwala....
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....em to use the premises and no right to them in any form was transferred. Thus there was no enforceable right for those parties in respect of the premises in any form. Thus the assessee's claim for payment of compensation is not used on any reason. It can only be construed as a device or adjustment to reduce the tax liability. The recipient can claim an exemption for such receipts in their hands. Under these circumstances, I hold that the assessee's claim of the payments of compensation as detailed above is out of place and is not allowable. The capital gain arising out of the sale is computed accordingly." The ITO worked out the capital gain at Rs. 45,22,030 as under: "II. Capital Gains: Rs. Rs. Sale price 55,00,000 Less: Original cost 641000 Addition made 251970 8,92,970 46,07,030 Less: Brokerage 30000 Solicitors 55000 85,000 Capital Gain 45,22,030" 6. In appeal before the CIT(A), the assessee strongly argued that the ITO ought to have accepted its claim for deduction of Rs. 43 lakhs paid to CPC and CPL on the ground that: "(a) The occupants we....
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....tedly the concerns are closely inter-connected and legally there was no enforceable right of the occupiers to claim for compensation for vacating the premises owned by the appellant company." Further, the CIT(A) was of the view that the reported decisions relied on behalf of the assessee would not be of much help to it, as the facts and circumstances obtaining in those cases are clearly distinguishable from the one obtaining in the case of the assessee. 8. Being aggrieved by the order of the CIT(A), the assessee has come up in appeal before the Tribunal. The learned Counsel for the assessee reiterated the submissions, which were made before the income-tax authorities and strongly urged that they should have accepted the assessee's contention that the compensation of Rs. 43 lakhs paid to CPC and CPL should be deducted from Rs. 55 lakhs in working out the capital gain. In this connection, he invited the attention of the Tribunal to the relevant clauses of the agreements dated 1-11-1974 and 24-4-1975 to urge that over the years CPC and CPL had acquired right to the property as the licensee which could not have been terminated without long drawn process of litigation and uncertai....
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....in relied on the aforesaid two decisions in A. Venkataraman' s case (supra) and C.V. Soundararajan' s case (supra) which, according to him, directly support the stand taken up by the assessee. In the later case, the amount was paid to the mother for vacating the premises which was a case of much more close relationship than that obtaining in the instant case. He also relied on the order of the Tribunal, Madras Bench 'C' in the case of ITO v. C. Thangavel Gounder 1981 12 TTJ 273, wherein on identical facts/ circumstances obtaining in that case the Tribunal was pleased to accept similar deductions claimed by the assessee. He, therefore, urged that we should likewise accept the assessee's claim for deduction of Rs. 43 lakhs in the present case also. 9. The learned representative for the department, on the other hand, supported the action of the I.T. authorities. In this connection, he stressed the point that C.P.C. and C.P.L. were licensees, that the period of leave and licence had expired long back, that legally they had to vacate the occupancy and that all the three parties were closely connected sister concerns where the scope of litigation could not be imagined. He also invited....