2020 (12) TMI 217 - ITAT KOLKATA - Income Tax

Head Note / Extract:
Capital gain on tenancy rights - transfer u/s 2(47) - whether the assessee has rightly offered the income from the surrender of tenancy rights, under the head "Capital Gains"? - HELD THAT:- We have to necessarily uphold the order of the ld. CIT(A) that the assessee had acquired a capital asset in the form of tenancy rights and the transfer of this capital asset results in capital gains, which is taxable under the head "Capital Gains". AO rejected the claim of the assessee that transfer of tenancy rights will be assessed under the head capital gains on the ground that no purchase price was paid for the tenancy - A loan of ₹ 8,00,000/- was given as construction loan which was refundable. This loan is directly linked to the tenancy rights and it is, in a way, consideration for obtaining the rights. Even if the assessee has not paid any amount for purchase of tenancy rights, the nature of rights would remain tenancy right and this is a capital asset. Section 55(2)(a) of the Act clearly stipulates that in case no price is paid for acquisition of an asset mentioned in clause (a) to Section 55(2) of the Act, then the cost shall be taken as Nil. Hence the Assessing Officer was legally incorrect in his view. Thus, we uphold the finding of the ld. CIT(A) on this issue. Deduction u/s. 54EC and 54F - As the main question as to whether the assessee has rightly offered the income from the surrender of tenancy rights, under the head "Capital Gains" has been held in favour of the assessee and as all the conditions prescribed for grant of claim of deduction u/s. 54EC and u/s. 54 of the Act, are met, in our view, the ld. CIT(A) has rightly granted relief to the assessee. Appeal of the revenue is dismissed.