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Assessment of capital gains on the sale of shop premises involving tenancy and ownership rights. Analysis: The judgment pertains to an appeal regarding the assessment of capital gains on the sale of a shop room by the assessee for the assessment year 1976-77. The assessee had acquired tenancy rights in a building before 1954 and later became a member of a cooperative society formed by the tenants and the landlord. The society acquired ownership rights from the landlord, and subsequently, the assessee sold the shop room, including furniture and society shares. The dispute arose over the classification of capital gains as short-term or long-term based on the nature of rights transferred. The Income Tax Officer (ITO) treated the surplus from the sale as short-term capital gains, considering the merger of tenancy and ownership rights. The Commissioner (Appeals) upheld the ITO's decision but directed a re-computation including the cost of furniture. The assessee contended that the sale involved separate rights - tenancy and ownership - and capital gains should be classified accordingly. The assessee argued that the tenancy rights had no separate cost, and the payment to the cooperative society was a contribution, citing a Supreme Court ruling. However, the tribunal rejected this argument, stating that the payment was for acquiring ownership rights and repairs. The tribunal also noted that the assessee himself had distinguished between tenancy and ownership rights in his claim for capital gains classification. The tribunal further considered the apportionment of the sale price between tenancy and ownership rights, emphasizing that a significant portion of the consideration related to tenancy rights. The tribunal highlighted the distinction between ownership flats and tenancy rights in a cooperative society setup, emphasizing the transfer of full ownership rights upon sale approval by the society. Ultimately, the tribunal set aside the Commissioner (Appeals) order and remanded the matter for fresh disposal. It directed a reevaluation considering the apportionment of the sale price between ownership and tenancy rights to determine capital gains separately for each. The tribunal emphasized the need to assess capital gains based on the distinct nature of tenancy and ownership rights, potentially resulting in long-term capital gains for tenancy rights and short-term capital gains for ownership rights. The tribunal's decision focused on a detailed analysis of the rights involved in the sale transaction and the proper classification of capital gains based on these rights.
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