1995 (9) TMI 99 - AT - Income Tax

Summary

Issues Involved:
1. Whether the amount received for surrendering statutory tenancy rights is casual and non-recurring within the meaning of section 10(3) of the Income-tax Act, 1961 and exigible to tax u/s 56 of the Act.
2. Nature of interest held by a statutory tenant under the Bombay Rent Act.
3. Whether the receipt in question is income and taxable under the Income-tax Act.

Summary:

Issue 1: Whether the amount received for surrendering statutory tenancy rights is casual and non-recurring within the meaning of section 10(3) of the Income-tax Act, 1961 and exigible to tax u/s 56 of the Act.

The Tribunal examined whether the amount of Rs. 1,40,00,000 received by the assessee for surrendering statutory tenancy rights could be considered a casual and non-recurring receipt u/s 10(3) and thus taxable u/s 56. The assessee argued that the receipt was not liable to tax as capital gains u/s 45, citing the Supreme Court's decision in CIT v. B.C. Srinivasa Setty, which held that if the machinery provision for computation fails, the main provision for computing capital gains also fails. The Assessing Officer, however, treated the amount as casual and non-recurring income under "Income from other sources," relying on CIT v. Gulab Chand.

Issue 2: Nature of interest held by a statutory tenant under the Bombay Rent Act.

The Tribunal referenced several judgments, including Anand Niwas (P.) Ltd. v. Anandji Kalyanji Pedhi, Ratanlal Chandiprasad Jalan v. Raniram Darkhan, and Chandravarkar Sita Ratna Rao v. Ashalata S. Guram, to determine the nature of interest held by a statutory tenant. It was concluded that a statutory tenant has no estate or interest in the premises and only has a personal right to remain in possession. This right is not transferable or assignable.

Issue 3: Whether the receipt in question is income and taxable under the Income-tax Act.

The Tribunal held that the receipt of Rs. 1,40,00,000 is income. The definition of income under section 2(24) includes capital gains, and the term "income" is of wide import, encompassing all monetary returns. The Tribunal rejected the assessee's argument that the receipt did not bear the character of income, supporting the Assessing Officer's view that the receipt was taxable under the Income-tax Act.

Conclusion:

The Tribunal concluded that the sum of Rs. 1,39,95,000 is taxable income for the assessment year 1990-91, dismissing the assessee's appeal. For the interveners, the Tribunal directed a fresh inquiry to determine whether they had the right to transfer tenancy rights under their original lease agreements. If such a right existed, the receipts should be considered capital gains, and in line with B.C. Srinivasa Setty's case, no tax would be applicable due to the absence of machinery provisions for computation. The appeals of the interveners were allowed for statistical purposes.