TMI Blog2006 (9) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... gain tax. The company was having the lease right, hence the on money received for surrender of lease right was rightly taxed in the hands of the company by the Assessing Officer. The present assessment is framed under section 143(3) read with section 147 of the Act. The assessee was required to show as to why a sum of Rs. 30 lakhs being the amount of on money received on surrender of leasehold rights in land near Amalsad, district Valsad as disclosed by Shri Jitmal Parekh being director of the company in his statement recorded under section 132(4) of the Act, should not be added to the total income of the assessee. It was submitted that a sum of Rs. 30 lakhs was received on surrender of leasehold rights in agricultural land admeasuring more than 11 acres at village Dambhar on May 13, 1991. The agricultural land is situated beyond 8 kms. from the nearest municipality and thus it is not a capital asset within the meaning of section 2(14) of the Act. It was submitted that the land in question qualifies as " agricultural land" and surrender of leasehold rights does not attract capital gain. To raise such contention, reliance was placed on the Special Bench decision of the Tribunal, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, 1995, that he had received a sum of Rs. 30,00,000 as on money on surrendering leasehold rights in land. It is also stated in his statement dated March 2, 1995, that the said sum was received by him only which was utilised for setting the issue of division of the business within his brother. 5. The assessee-company has not reflected receipt accrual of Rs. 30,00,000 in any of the return of income filed till date. The assessee was given one more opportunity by way of issuance of notice under section 148 of the Act but the assessee did not file any return of income in response thereto and have shown the said sum of Rs. 30,00,000. However, the assessee, vide its letter March 22, 2001, during the course of assessment proceedings admitted that it got Rs. 30 lakhs in consideration of surrender of leasehold rights and contended that the said amount is not taxable in any provision of the Act. 6. Considering all the facts and circumstances it has been clearly emerged that the sum of Rs. 30,00,000 had been received by the assessee through its director. The receipt of the said sum is not the result of release of leasehold rights as evidenced by the release deed." It is under these circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h lease rent of Rs. 6,000 per annum, vide lease deed dated November 14, 1984, and the assessee-company had been given right to sell/gift/charge or transfer its right acquired through the said deed. The assessee-company had surrendered the said rights in favour of the original owner vide release deed dated May 13, 1991. However, in the lease deed there was no mention of consideration or it was mentioned that the possession has been given back without consideration. These facts are not at all in dispute. The director of the assessee-company had made a statement under section 132(4) regarding having received a sum of Rs. 30 lakhs on surrender of the above mentioned lease rights which is the main basis of making addition of Rs. 30 lakhs and otherwise there is no document on record that the assessee had earned such amount out of any other sources. Probably non-mention of consideration in the release deed has created suspicion in the mind of the Assessing Officer for treating the same sum of Rs. 30 lakhs as a sum not relating to transfer of leasehold rights and thus the addition has been made under section 69 of the Act. The learned Departmental representative argued that even if secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined ; and receipts are not chargeable under section 45 of the Act because of the inapplicability of computation provision and the consideration cannot be treated as casual and non-recurring receipt under section 10(3) and be subject to tax under section 56. Thus, he pleaded that the order of the Commissioner of Income-tax (Appeals) should be confirmed. We have carefully considered the rival submissions in the light of material placed before us. The facts which are undisputed have been stated in the above part of this order. The amount has been taxed on the basis of the statement of the director recorded under section 132(4) of the Act and there is no evidence on record to show that this amount relates to any other source. Therefore, the said amount has rightly been treated by the Commissioner of Income-tax (Appeals) being related to surrender of leasehold rights of subject agricultural land. If it is so addition could not be made under section 69 of the Act because subject sum is not an unexplained investment as rightly held by the Commissioner of Income-tax (Appeals). Thus, we find no force in the contention of the Revenue that addition can be sustained to be rightly made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asa Setty [1981] 128 ITR 294 held that all transactions encompassed by section 45 must fall within the computation provisions of section 48. If the computation as provided under section 48 could not be applied to a particular transaction, it must be regarded as never intended by section 45 to be the subject of the charge` . In that case, the court was considering whether a firm was liable to pay capital gains on the sale of its goodwill to another firm. The court found that the consideration received for the sale of goodwill could not be subjected to capital gains because the cost of its acquisition was inherently incapable of being determined. Pathak J., as his Lordship then was, speaking for the court said (page 300) : ` What is contemplated is an asset in the acquisition of which it is possible to envisage a cost. The intent goes to the nature and character of the asset, that it is an asset which possesses the inherent quality of being available on the expenditure of money to a person seeking to acquire it. It is immaterial that, although the asset belongs to such a class, it may, on the facts of a certain case, be acquired without the payment of money. In other words, an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s may go into the building of the goodwill, some tangible some intangible. It is contended that a tenancy right is not a capital asset of such a nature that the actual cost on acquisition could not be ascertained as a natural legal corollary. 9. We agree. A tenancy right is acquired with reference to a particular date. It is also possible that it may be acquired at a cost. It is ultimately a question of fact. In A. R. Krishnamurthy v. CIT [1989] 176 ITR 417, this court held that it cannot be said conceptually that there is no cost of acquisition of the grant of the lease. It held that the cost of acquisition of leasehold rights can be determined. In the present case, however, the Department` s stand before the High Court was that the cost of acquisition of the tenancy was incapable of being ascertained. In view of the stand taken by the Department before the High court, we uphold the decision of the High Court on this issue. 10. Were it not for the inability to compute the cost of acquisition under section 48, there is, as we have said, no doubt that a monthly tenancy or leasehold right is a capital asset and that the amount of receipt on its surrender was a capital receipt. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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