TMI Blog2013 (9) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... 1973, i.e., subsequent to the date of agreement of the assessee that the licensees who are deemed to be tenant under section 15A were to be considered as tenant. Therefore, in any case, the assessee had acquired the status of tenant of the landlord. As per the provisions of section 55(2) tenancy right has been considered to be capital asset. Moreover, the definition of capital asset as per section 2(14) of the Act is wide enough to cover "property of any kind" and the type of right acquired by the assessee in the property used by it cannot in any manner be said to be less than "any kind of property" held by the assessee - assessee, in fact, was enjoying possession of the impugned property and for peaceful vacation thereof it had received the impugned amount which was described by both parties as amount paid for surrender of tenancy rights. The assessee had acquired the said right long back and the licensor to the assessee also had recognised the said right of the assessee. The right of the assessee was undisputed and the nature thereof was "property of any kind" which was held by the assessee and was to be termed as a capital asset within the meaning of section 2(14) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shed and premises to the landlord namely Mr. Paresh S. Shah and was not to jeopardize their right of tenancy by any act or default during the substances of the agreement, therefore, the assessee cannot be construed as a sub-lessee in any form of the said portion of the shed thus there was no existence of right of tenancy with the assessee ; clause 8 of the agreement states an obligation of the assessee for prompt and regular payment to the original licensor of all taxes and payments and that payment does not include any payment for use of portion of the shed on which the looms have been affixed ; clause 10 of the agreement states about the obligation of the assessee for insurance of machinery and factory which also does not create any right in the shed in favour of the assessee ; clause 11 states that the assessee shall not be entitled to make any structural alteration in any of the portion of the shed without permission of Modern and if any alteration is done that will become the absolute property of Modern ; clause 12 states the assessee is not entitled to carry on any other business on the portion of the said shed except without prior permission of Modern. Referring to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax (Appeals) has taken into account the following 15 points and has upheld the action of the Assessing Officer. 1. The licence agreement dated June 13, 1972, is between Modern Textile and Silk Mills P. Ltd. (hereinafter referred as MTRSMPL) as licensor and the assessee M/s. Kewal Silk Mills (hereinafter referred as KSM) as a licensee. The owner of the land is not a party to the agreement. 2. The license agreement was essentially for the purpose of taking on licence (rent), looms and machinery only as described in schedule (Ref.: second unnumbered para of 1st page of the agreement). 3. The agreement was not registered under the Registration Act, 1908, perhaps due to reason of lease of movable property or otherwise (any agreement relating to immovable property exceeding value of Rs. 100 is compulsorily registrable whereas registration of agreement relating to movable property is optional (Ref.: sections 17 and 18 of the Registration Act, 1908). 4. The licensor, i.e., to say MTRSMPL is not the owner of the immovable property, i.e., to say land in question. It had only tenancy right on the land. 5. The owner of the land/immovable property Shri Paresh Shantilal Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... looms and machinery could not be transported since the same are married to the ground on which they have been fixed. 11. Clause 7 of the agreement states that the licensors, (Modern Textile Rayon and Silk Mills P. Ltd.) shall pay regularly the rent in respect of the said shed and premises to the landlord (Mr. Paresh S. Shah) and shall not jeopardize their right of tenancy by any act or default during the subsistence of this agreement. In other words, the licensor, Modern Textile Rayon and Silk Mills P. Ltd. was itself not the owner of the said shed and premise and Modern Textile Rayon and Silk Mills P. Ltd., with whom the assessee had entered into an agreement for the "lease of machinery and equipment" had (i.e., licensor MTRSMPL) itself entered into a lease agreement with his landlord for the shed and premise and the MTRSMPL, lease to the assessee was only for the looms. The machinery and equipment were given on rent to the assessee exclusively for the purpose of weaving cloths and in the agreement, Modern Textile Rayon and Silk Mills P. Ltd. had claimed himself, licensor for the lease of machinery and equipment and the assessee, M/s. Kewal Silk Mills, as the licensee. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee or the licensor MTRSMPL to give any tenancy or sub-tenancy right to the assessee. There is/was no permission or consent of the landlord, i.e., owner of the land to confer tenancy or sub-tenancy to the assessee. There was no intention on the part of the owner of the land or the licensor to that effect. Similarly there was no express or implied intention of the licensor to give any tenancy or subtenancy right to the assessee, which is clearly evident from the agreement. After narrating the facts the learned authorised representative submitted that though it is the main case of the assessee that the leave and licence agreement dated June 13, 1972 in itself is sufficient to establish the possessory rights of the assessee over the land in respect of which the impugned amounts have been received but even if the case of the Assessing Officer is accepted that the said agreement does not give any right to the assessee in the land which can constitute capital asset then also amendment in the Bombay Rent, Hotel and Lodging and House Rates Control Act, 1947 (Rent Control Act), which was brought into the statute by the Amendment Act of 1973, has converted the status of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of the lessee has been explained by the hon'ble Supreme Court in its decision in the case of Anandram Chandanmal Munot v. Bansilal Chunilal Kabra, AIR 2000 SC 288 (copy of this decision filed at pages 43 to 59 of the paper book). He invited our attention towards following observations of the hon'ble Supreme Court : "After the commencement of the amending Act of 1973 a tenant is barred even to give on licence the whole or any part of the premises let to him. Sub-section (2) of section 15 validates any sub-tenancy created before the first day of February 1973 and in that case a tenant is not 1iabIe to eviction under clause (e) of sub-section (1) of section 13 of the Act. We may at this stage refer to the relevant provisions of law under the Act. Section 5(11) of the Act defines tenant which is as under: '5(11) "Tenant" means any person by whom or on whose account rent is payable for any premises and includes: (a) such sub-tenant and other persons as have derived title under a tenant before the 1st day of February 1973 ;(aa) any person to whom interest in premises has been assigned or transferred as permitted or deemed to be permitted, under section 15 ; (b) any person re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head "Income from other sources" and the learned Commissioner of Income-tax (Appeals) has also wrongly confirmed the same. On the other hand, the learned Departmental representative relying upon 15 points relied on by the learned Commissioner of Income-tax (Appeals) pleaded that the learned Commissioner of Income-tax (Appeals) has rightly upheld the action of the Assessing Officer. In the rejoinder, it was submitted by the learned authorised representative that the assessee had possessory right of the property and by virtue of these possessory right for more than 36 years the right was converted into capital asset and transfer/surrender thereof will be assessable under the head "Capital gains". We have carefully considered the rival submissions in the light of the material placed before us. Copy of agreement dated June 13, 1972 is filed by the assessee in the paper book at pages 20 to 24. The assessee being a partnership through its partners has been referred to as licensees who were desirous of taking licences of loom and machinery more particularly described in schedule for a period of one year from the date of the agreement on a monthly compensation of Rs. 3250 per mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide which a sum of Rs. 39,000 has been paid by the assessee to Modern on February 9, 2002, by cheque No. 679943 "towards rent for the months from July 2001 to December 2001". The said amount has been duly acknowledge to be received by Modern. The second receipt is dated April 3, 2003 copy of which is placed at page 26 of the paper book which is a receipt dated April 3, 2003, vide which a sum of Rs. 19,500 has been paid by cheque No.621974, dated March 26, 2003 "towards rent for month from January 2003 to March, 2003". The third receipt is dated February 9, 2005 copy of which is placed at page 27 of the paper book, whereby a sum of Rs. 13,000 has been paid vide cheque No. 013369 dated January 17, 2005 to Modern "towards rent for months of December 2004 and January 2005". All these receipts duly show that what was being paid by the assessee was considered to be rent by the other parties and thus parties in principle had accepted that the assessee was the tenant from whom the rent was being received by the other party. The further correspondence between the assessee and its licensor, the purchaser of the land and the assessee are also describing right of the assessee as tenancy right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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