2018 (4) TMI 1827 - AT - Income Tax

Premium received on tenancy transfer - correct head of income - Capital gain or income from other sources - exemption u/s 54 EC - HELD THAT - As decided in own case 2017 (2) TMI 1467 - ITAT MUMBAI CIT(A) has rightly directed the AO to assess this receipt of premium as capital gain taxable in the hands of the assessee. Even otherwise, this issue is covered in favour of assessee by the principle of consistency in view of the decision of Radha Soami Satsang 1991 (11) TMI 2 - SUPREME COURT and Gopal Purohit 2010 (1) TMI 7 - BOMBAY HIGH COURT . We find no infirmity in the order of CIT(A) and hence the same is confirmed. These four appeals of Revenues are dismissed.

Summary

Issues:
1. Assessment of premium received on property transfer as capital gain or income from other sources.
2. Interpretation of change in ownership regarding premium received on property transfer.

Analysis:
1. The appeal involved the assessment of a premium of ?5,23,50,000 received on the transfer of property as either capital gain or income from other sources for the assessment year 2013-14. The assessee declared this amount as Long Term Capital Gains (LTCG) in the return of income, claiming an exemption under section 54 EC and disclosing taxable gain at ?4,73,50,000. However, the Assessing Officer (AO) added the entire premium amount as "Income from Other Sources." The dispute revolved around the nature of this premium and its tax treatment.

2. The key issue was whether the change in tenancy, resulting in the premium received by the assessee, constituted a change in ownership for tax purposes. The Revenue contended that the premium should be assessed as income from other sources since there was no change in ownership of the property. Conversely, the assessee argued that the premium should be treated as LTCG based on previous Tribunal orders in their favor for different assessment years. The Tribunal referred to the definition of "capital asset" under section 2(14) of the Income Tax Act, emphasizing the broad scope of the term and the valuable rights acquired by the assessee in the form of tenancy rights.

3. The Tribunal examined previous orders in the assessee's case for different assessment years, where it was held that the tenancy rights acquired by the assessee constituted a capital asset, making gains arising from such rights assessable under the head of "Income from capital gains." The Tribunal upheld the order of the Commissioner of Income Tax (Appeals) directing the premium received on tenancy transfer to be treated as LTCG. Given the identical facts and legal principles involved, the Tribunal followed the precedent set by the Co-ordinate Bench and dismissed the Revenue's appeal, affirming the tax treatment of the premium as capital gains.

4. In conclusion, the Tribunal's decision clarified the tax treatment of premiums received on property transfers, emphasizing the broad definition of capital assets and the significance of acquired rights in determining the nature of income for taxation purposes. The judgment provided a consistent interpretation of ownership changes and their implications on tax liabilities, ensuring conformity with legal provisions and previous judicial decisions in similar cases.