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2012 (9) TMI 402 - HC - Income TaxCost of acquisition of tenancy rights - invoking section 45 - Whether the Tribunal was right in equating the purchase of land with that of acquisition of tenancy rights - Held that:- As per the statutory provisions applicable at the relevant time, the capital asset in case of which it is not possible to conceive or ascertain the cost of acquisition, there would be no charge of capital gain. In case of tenancy rights, however, depending on facts of case, it has to be ascertained whether the cost of acquisition of tenancy right was possible to ascertain. Acquisition of tenancy right did not fall in the same category as the acquisition of goodwill of a business in which the cost of acquisition was not conceivable. As the assessee and the landlord entered into an agreement were the landlord agreed to rent out four existing floors to the assessee, and for three more under construction floors of the building, the assessee agreed to advance to the landlord a sum of Rs.6 lakhs on which the landlord would pay interest at the rate of 6% p.a. Both sides agreed to certain fixed monthly rent on such rental properties. The agreement did not provide for either termination of the tenancy rights or the period during which such advance made to the landlord would be returned to the assessee. From the record, it further emerges that such advance was made for the purpose of completing the remaining construction. Since the landlord could not complete the construction with the agreed amount, the assessee made further advance of Rs.2.50 lakhs at same interest rate. It has also come on record that the landlord returned the amount after a period of three years though the tenancy continued for several years thereafter. Thus it can be fairly concluded that the entire contract was a composite agreement of advancement of loan at a reduced interest, granting property on rent to the assessee and the fixation of the rent also. It is impossible to distinguish any part of the differential interest which can be attributed to the cost of acquisition of the tenancy rights. If the advance was not returned for a period of four, five or six years, the cost of acquisition would defer. This is an additional ground to convince that such differential rate in interest on the advance made, cannot be seen as a cost of acquisition of the property or at any rate, being inapportionable proportion -in favour of assessee.
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