TMI Blog2012 (9) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is not open to the Revenue to contend so. Having regard to the unworkability of the provisions of section 45 and that Section 55 itself was introduced relevant only to the subsequent assessment year, namely, 1995-96, the Apex Court held that till the amendment in 1995, the compensation received on surrendering the tenancy rights could not be assessed to capital gains. Thus, on the fact position as found by the Tribunal and which form the very basis of the order under Section 263 that the assessee was treated as tenants as per the document dated 25.02.1994, the genuineness of which was never questioned by the Revenue no hesitation in confirming the order of the Tribunal. - Tax Case (Appeal) No.1199 of 2005 - - - Dated:- 19-6-2012 - MRS.JUSTICE CHITRA VENKATARAMAN, MR.JUSTICE K.RAVICHANDRA BAABU, JJ. For appellant : Mr.T.Ravikumar Standing Counsel for Income Tax For respondent : Mr.C.V.Rajan JUDGMENT CHITRA VENKATARAMAN, J. The Revenue is on appeal as against the order of the Tribunal raising the following substantial questions of law: 1. Whether on the facts and in the circumstances of the case the Tribunal was right in holding the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate since 1950 on a monthly lease rent of Rs.2,150/-. It had however subleased it in 1950 itself to its 100% subsidiary company by name M/s.Sri Rama Vilas Service Limited at a lease rental of Rs.2,150/-. The owners were receiving the lease rent from the subsidiary company itself. Admittedly, after 1974, there was no renewal of the lease in favour of the assessee. In 1978, the assessee company and the owners of the property agreed for execution of the lease deed directly in favour of the 100% subsidiary company M/s.Sri Rama Vilas Service Ltd. and accordngly, the deed was entered into on 28.7.1978 between the owner of the property and M/s.Sri Rama Vilas Service Ltd. In 1979, the property in question was purchased by four persons viz., B.Radhamma, B.Papa Raju, Y.Rajyalakshmi and B.V.Raju from the original owner in 1979. On 25.2.1994, the four co-owners on the one hand and the assessee and M/s.Sri Rama Vilas Service Ltd. as second and third party, entered into a Memorandum of Understanding, as per which, the assessee and M/s.Sri Rama Vilas Service Ltd. were stated to have surrendered their tenancy rights in favour of the four co-owners and in lieu of the surrender of the tenancy rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an agreement between the assessee and the owners of the property, who had agreed to pay the assessee a sum of Rs.2.60 crores and a sum of Rs. and Rs.1.30 crores to Sri Rama Vilas Services Ltd., for agreeing to vacate the premises and hand over possession to the owners. Thus, adopting the reasoning of the Special Bench of the Tribunal, Mumbai, the Commissioner confirmed the proposal to revise the assessment; that the compensation received was liable to be assessed under Section 10(3) of the Income Tax Act. A direction was given to that effect to the Assessing Officer, to redo the assessment. The assessee went on appeal before the Income Tax Appellate Tribunal. In the course of the appeal proceedings, while objecting to the view of the Commissioner to keep the receipt as a casual receipt, the assessee pointed out to the document pertaining to the earlier lease that the assessee had with the original vendor under lease deed dated 06.12.1969 and subsequently, the original vendor and SRVS entering into lease deed dated 28.8.1978 and submitted that as per the document dated 06.12.1969, the right of the assessee to sub-lease was recognised by the then vendor. On the sale of the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the suit was a matter which was not denied by the assessee and the owners had filed an eviction suit against SRVS. 5. As far as the initiation of proceedings under Section 263 of the Income Tax Act was concerned, the Tribunal pointed out that the entire order proceeded on the premise that the tenancy rights of the assessee was personal in nature, which could not be transferred to any other person, and hence not capital. On a reading of the agreement dated 25.02.1994 between the assessee, sister concern and the purchaser/owner, the Tribunal held that the two companies were recognised by the purchaser/owner as tenants. The Tribunal held that the Assessing Authority and the Commissioner of Income Tax proceeded on the admitted fact that the assessee had tenancy rights. In the background of the said fact and that the decision of the Special Bench relied on by the Commissioner of Income Tax was overruled by the decision of the Bombay High Court in the decision reported in [2001] 249 ITR 265 (Cadell Weaving Mill Co. P. Ltd. Vs. CIT), the order of the Commissioner of Income Tax under Section 263 was liable to be set aside and the assessee's appeal allowed, treating the right as a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document dated 25.02.1994, the question of any receipt at the hands of the assessee being treated as capital, did not arise. Taking us through the order of the Tribunal, learned Standing Counsel appearing for the Revenue pointed out that the assessee produced fresh documents before the Tribunal. On going through the documents, the Revenue contended that the assessee could not be treated as tenant. He further contended that the assessee had not placed the document dated 28.8.1978 before the Commissioner and hence, in fairness to their plea, the order of the Tribunal has to be set aside. 7. Countering the said contention of the Revenue, learned counsel appearing for the assessee pointed out that in the face decision of the Apex Court reported in [2005] 273 ITR 1 (CIT Vs. D.P.Sandu Bros. Chembur P. Ltd. (SC)), confirming the Judgment of the Bombay High Court reported in [2001] 249 ITR 265 (Cadell Weaving Mill Co. P. Ltd. Vs. CIT), it is no longer open to the respondent to contend that the receipt was casual in nature; hence, assessable under Section 10(3) of the Act. Apart from that, learned counsel further pointed out that when once the Commissioner had assumed jurisdiction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome assessable at the hands of the assessee. 10. Thus following the decision of the Special Bench reported in [1996] 217 ITR ITAT Reports 51 (Cadell Weaving Mill Co. Pvt. Ltd. Vs. Assistant Commissioner of Income-tax), the Commissioner held that the income was assessable under Section 10(3) of the Income Tax Act. Thus a reading of the Commissioner's order shows the admitted fact that as per the document dated 25.02.1994, the assessee's status as a tenant was not disputed. It is also a matter of record herein to point out that the genuineness of the document dated 25.02.1994 remained unassailed by the Revenue. Hence, the admitted fact position is that the assessee was a tenant. The only ground on which the order of the Assessing Officer was sought to be revised was the character of the receipt alone and applying the decision of the Special Bench of the Tribunal, the Commissioner of Income Tax (Appeals) held that it was to be assessed as income under Section 10(3) of the Income Tax Act. Thus a reading of the order of the Commissioner shows that he had no doubt at all in his mind that the entire revision proceeded on the admitted fact that the assessee was a tenant. When the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted, we are afraid, the very basis of the Section 263 order fails, in which event, the entire order of the Commissioner has to be set aside. As already pointed out, whatever might have been the terms of understanding under the document dated 28.08.1978, as far as the present case is concerned, the right to receive compensation is traceable to the document dated 25.02.1994. Consequently, it is not open to the Revenue to contend that the order of the Commissioner could be sustained on a different fact situation, a position which is not open to the Revenue to contend so. In this connection, the decision of the Karnataka High Court reported in [1991] 192 ITR 547 (Commissioner of Income-tax Vs. D'Silva (L.F.) merits to be seen. The said case dealt with the scope of jurisdiction of the Tribunal in an appeal from the order passed by the Commissioner of Income Tax (Appeals). The facts therein are that the assessee therein was a co-owner of a property, along with two others and the assessee had equal share in the property. During the relevant accounting year, the firm called M/s.Curzon Project, consisted of six partners, which included the assessee and the co-owners. The firm was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuineness of the transaction. On appeal by the Revenue, rejecting the said contention, the High Court pointed out that while initiating proceedings, the Commissioner never doubted the genuineness of the transaction in question. It was not his case that the contribution towards the share capital made by the assessee was only a ruse or device for converting the asset into money. He sought to revise the assessment order purely on the basis of the law as he understood it; he proceeded that there was an element of transfer in the transaction of contributing the personal asset as the share capital in the firm. Partially, the Commissioner was justified in this assumption. However, the inapplicability of Section 48 of the Act and the impracticability of evaluating the capital gain were not realised by the Commissioner. The notice issued by the Commissioner proceeded as if there was a valid transfer under a genuine situation. The basis of initiation of the proceedings by the Commissioner, hence, could not be altered before the Appellate Tribunal; the scope of the proceedings had to be the same as the one envisaged by the Commissioner, having regard to the peculiar nature of the revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (L.F.), held that in entertaining an appeal from the Commissioner's order, the Tribunal has to examine whether the order is sustainable in law and whether it is within the powers conferred under Section 263 of the Income Tax Act. When the Commissioner chooses to set aside the order of the Income Tax Officer on a particular ground, the Tribunal cannot go beyond that, to sustain the order on a different ground. 14. Again, in the decision reported in [1999] 236 ITR 156 Commissioner of Income-tax v. Howrah Flour Mills Ltd.), the Calcutta High Court held that the Tribunal cannot justify an order passed under Section 263 on grounds other than those mentioned by the Commissioner in the revised order itself. We are in entire agreement with the reasoning of the Punjab and Haryana High Court decision reported in [1983] 140 ITR 490 (Commissioner of Income-tax vs. Jagadhri Electric Supply and Industrial Co.), the Kerala High Court decision reported in [1994] 207 ITR 108 (Commissioner of Income Tax Vs. Chandrika Educational Trust), Karnataka High Court decision reported in [1991] 192 ITR 547 (Commissioner of Income-tax v. D'Silva (L.F.) and the Calcutta High Court decision reported in [1999 ..... 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