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2006 (10) TMI 174 - AT - Income TaxTransfer of a capital asset - Chargeable as capital gain - Scope of occupancy right granted under D&NH Regulation,1971 u/s 4 of the Regulation - Whether, the possession of land as Alwara is a capital asset within the meaning of section 2(14) of the Act and the sale whereof is liable to capital gain u/s 45? - HELD THAT:- The Supreme Court decision in the case of Mysore Minerals Ltd.[1999 (9) TMI 1 - SUPREME COURT], though this case was rendered in respect of depreciation, fact remains that ownership has to be looked from a wider perspective, in the cases before us, assessees enjoyed unhindered possession and use of land, exercised their right of sale, which was duly accepted by the revenue authorities, sale deed was accordingly allowed to be executed and registered, all these put together, clearly leads to an inescapable conclusion that assessees may be owners of the land. We have perused order of Tribunal in Shri Navroz J. Wadia's case in which Alwara rights are held to be tenancy rights and by applying therefore provisions of section 55(2) gains have been held to be liable for tax. In our considered opinion, the Tribunal has not appreciated a very vital fact that Alwara right ceased to exist way back in 1971. What was to be adjudicated was not the nature of Alwara rights, but the rights conferred on these assessees as per new Land Reforms Regulations in lieu of extinguishment of Alwara right. In our view Tribunal has adjudicated about the nature of Alwara right which may not be very relevant to the issue. A plain reading of aforesaid provisions clearly reveals that tenant under this provision does not include erstwhile Alwara-right or the persons who has been given occupancy right u/s 4(2) of "D&NH" Land Reforms Regulation, 1971, therefore, erstwhile Alwara-right who have been granted occupancy right under new regulations are not be treated as tenant. In view thereof, we find merit in the arguments of learned counsel that the holding of the assessees cannot be held as tenancy. Be that as it may with regard to the rights to these assessees under OA 1963 or D&NH Regulations, 1971, they are the rights of property and on transfer of the same a capital gain tax would arise u/s 45 of the Act. The assessees, however, wants shelter of the decision of the Supreme Court in the case of B.C. Srinivasa Shetty [1981 (2) TMI 1 - SUPREME COURT] and contend that as there was no cost of acquisition, property cannot be subject to capital gain tax. In our opinion the possession of land held by assessees' is not as Alwara right holder but on occupancy rights as per D&NH Land Reforms Regulation, 1971. The occupancy rights in these lands, therefore, amount to be capital assets within the meaning of section 2(14), the sale whereof is liable to be taxed as capital gain u/s 45. In consideration of above facts, circumstances, arguments and case laws, it is clear that assessees have sold capital asset as owners of land in question, cost of acquisition is clearly ascertainable, which is to be substituted by fair market value as on 1-4-1981 as prayed to be opted. The cost of acquisition in the hands of the forefathers of the assessee being the previous owner, if cannot be ascertained, is to be the fair market value on the date on which capital assets became property of the previous owner and in that case also the assessees would be entitled to substitute the fair market value as on 1-4-1981 u/s 55(2) of the Act and that has to be allowed as a deduction with benefit of indexation cost as aforesaid. In either of the situation, the result would be same. We, accordingly, hold that the sale of Occupancy right is the transfer of capital asset and would be chargeable to capital gain tax subject to deduction of the market value of the rights as on 1-4-1981 with benefits of indexation cost as aforesaid. In the result, the appeals stand partly allowed.
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