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2006 (3) TMI 115 - HC - Income TaxTransaction of lease and sub-lease - transfers leasehold rights in the land - By way of a sub-lease to another person - Whether Such transfer of lease hold right in the land is falling under the definition u/s 2(47) would amount to transfer of a capital asset or not - HELD THAT:- The Supreme Court in A. Gasper v. CIT [1991 (8) TMI 7 - SUPREME COURT]. In R. K. Palshikar (HUF) v. CIT[1988 (5) TMI 3 - SUPREME COURT] held that the transfer by way of lease would amount to transfer of a capital asset and therefore tax is leviable as capital gains. Thus, it is clear that the 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. If the facts of the present case are analysed in the context of the law laid down by the Supreme Court and the various sections of the Income-tax Act, we have no difficulty at all in holding that when the assessee transfers his leasehold rights in the land in his occupation by way of a sub-lease to another person, it amounts to extinguishing his rights in the property and since his leasehold rights had created an interest in the land, i.e., enjoyment and possession and therefore it would definitely come within the definition of "capital asset" as defined u/s 2(14) of the Income-tax Act. Whether the owner himself transfers by way of a lease or a lessee transfers by way of sub-lease, the principle remains the same, namely, in either action, there is extinguishment of rights.
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