TMI Blog2016 (4) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... he grant of the tenancy right which was replied by the assessee-HUF vide letter dated 07-12-2011 filed with AO on 08-12-2011 and has also enclosed copies of agreements and details along with the said letter, In the instant case , proper and adequate enquiry has been duly made by the AO and after due application of mind has arrived at the instant decision of bringing to tax one time lumpsum payment received by the assessee-HUF on allotment of tenancy rights vide tenancy agreement dated 06-05-2008 as capital receipt chargeable to tax as Income from Capital Gains u/s 45 of the Act. Further, in the case of other co-owner Dushyant P Bobado(HUF), the CIT(A) has accepted this lumpsum payment on allotment of tenancy rights by the tax-payer in favour of the tenants received vide tenancy agreement dated 06-05-2008 as capital receipts chargeable to tax as Income from Capital Gains u/s 45 of the Act. Order passed u/s. 263 of the Act by the CIT is not sustainable under law as in our considered view the AO has made proper and adequate inquiries and has applied his mind and has taken decision after due application of mind and the view of the AO is one of the plausible and possible view and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the learned CIT erred in setting aside the order passed u/s 143(3) of the I.T. Act on 26.12.2011 for A.Y. 2009-10 on the issue of assessing the receipts i.e. total receipts of ₹ 65,00,000/- where the assessee s share is 1/3rd, although the same was neither erroneous nor prejudicial to the interest of revenue. 6. On the facts and in the circumstances of the case and in law, the learned CIT erred in setting aside the order passed u/s 143(3) of the I.T. Act on 26.12.2011 for A.Y. 2009-10 on the issue of assessing the receipts i.e. total receipts of ₹ 65,00,000/- where the assessee s share is 1/3rd, and directing the A.O. to pass a fresh order after treating the said income as income other than Capital gain and disallowing the exemption u/s 54EC of the I.T. Act. 3. The Brief facts of the case are that the assessee-HUF filed its return of income on 26th July, 2009 declaring total income of ₹ 91,493/- and the assessment was framed by learned assessing officer (Hereinafter called the AO ) vide orders dated 26.12.2011 under section 143(3) of the Income Tax Act,1961(Hereinafter called the Act ) assessing the total income of the assessee-HUF at ₹ 1,62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assesee-HUF has 1/3rd share jointly alongwith his brother s HUF in the building known as Jeshtaram Building at Dadar,Mumbai. The building is fully let out and is occupied for commercial as well as residential purpose by the tenants who have occupied its tenancy since last 25 years. The assessee-HUF submitted that they have created tenancy rights in respect of Block No. 1 2 on the ground floor of D Building to one Mr. Nanji Kenia and Nailesh Kothari by entering into two separate tenancy agreements dated 6th May, 2008 for ₹ 26,50,000/- each. Both these agreements were registered and stamp duty of ₹ 132500/- was paid on each document. In addition as sum of ₹ 12 lakhs was received for carrying out addition/alteration in the said flats. The assessee-HUF submitted that during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act conducted by Revenue, the question of taxing these receipts as income from other sources was raised by the AO and the same was replied in detail vide letter dated 07.12.2011, which was acknowledged by the ITO on 08.12.2011 and the same is on record with the Revenue. Thus, the Assessee- HUF in nutshell subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is no transfer of capital assets. Even the right of re-possession has been retained by the assessee-HUF. The income thereof is not a capital gain. Thus, the CIT held that the order of the AO is erroneous in so far as the order is prejudicial to the interest of the revenue and the said receipt must be assessed as income from house property and not capital gain arising from transfer of property. The AO was required to make inquiries during the course of proceedings which was not made. So this is valid ground for CIT to interfere under section 263 of the Act. The CIT held that the view adopted by the AO is not one of the possible view but was erroneous view. Under such circumstances, the revision of view erroneously adopted by the AO is justified and serves the intent behind section 263 of the Act and hence the order passed by the AO is erroneous and prejudicial to the interest of revenue in assessing income as capital gain and allowing the exemption u/s 54EC of ₹ 22,35,000/-. and hence the order passed on 26.12.2011 by the AO u/s 143(3) of the Act for the assessment year 2009-10 is hereby set aside vide orders dated 08.10.2012 passed by the CIT u/s 263 of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant extract of the said letter reads as under : With reference to the deductions claimed u/s.54EC of the Income Tax Act, 1961 of ₹ 22,50,000/-, I have been instructed by my client to submit as under: 1. My client entered in to Tenancy agreement for transfer of tenancy rights for Block No. I and Block No. II on the ground floor of D Building of Jeshtaram Building, Dr. Ambedkar Road, Dadar, Mumbai-400 014. Copies of the agreements are attached . Two agreements were separately executed for Block I and Block II for ₹ 26,50,000/- each . In addition to the above a sum of ₹ 12,00,000/- was received as regards to the capital expenditure carried out in the two flats. Xerox copy is attached. Please refer to clause 4 on page 3 of the Tenancy agreement wherein it is specifically mentioned that the consideration is one time premium for grant of tenancy of the two blocks. This necessarily a capital receipts as this is a one time premium received for grant of Tenancy. Please refer to clause 5 of the Tenancy agreement which provide for monthly rent for the use of the premises and the tenancy shall be governed by the Maharashtra Rent Control Act,2000 . In the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shyant P Babode(HUF) with respect to the same transaction being 1/3 coowner, the CIT(A) has held the transfer of tenancy right as transfer of long term capital asset and brought the same to tax as Income from Capital gains vide orders dated 21.10.2013 which has attained finality and are placed in paper book at page 89-97. The assessee-HUF relied upon the decision of Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd v. CIT in (2000) 243 ITR 83(SC) , CIT v. Max India Limited (2008) 295 ITR 282(SC) and decision of Hon ble Bombay High Court in the case of CIT v. Gabriel India Limited (1993)203 ITR 108(Bom. HC) and submitted that the AO in the instant case has applied his mind and adopted one of the possible and plausible view which is in-fact a correct view before passing the assessment orders and the CIT cannot substitute his view by invoking provisions of Section 263 of the Act and rather view adopted by the CIT is erroneous view. The assessee-HUF submitted that rent is charged as per Maharashtra Rent Control Act. The assessee-HUF relied upon decision of Hon ble Delhi High Court in the case of CIT v. Vikas Polymers in (2010) 341 ITR 537(Del. HC) , Hon ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith his brothers HUF s who are also co-owners in the said property as one time premium for allotting the tenancy right in the property in which the assessee-HUF has 1/3rd share , which is non-refundable. The tenants are also paying rent of ₹ 269 per month and the tenancy is governed by Maharashtra Rent Control Act, 2000 whereby tenants have protection under the said Maharashtra Rent Control Act, 2000. This tenancy is perpetual and there is no period of expiry of tenancy , whereby landlord does not have power to evict the tenant till the rent s are paid and tenants are not in default in payment of rent. Landlord i.e assessee-HUF cannot terminate tenancy unilaterally if the rents are paid in time by the tenants and the tenants abide by the terms and conditions of the agreement. The landlord i.e. assessee-HUF by giving notice of six months can ask for eviction only in case of default by tenant in payment of rent. However, there are clauses, whereby no subletting is permitted and tenants are not allowed to carry out structural additions in the said premises except with the permission of landlord. In our considered view after the careful reading of the clauses of the tenancy agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The AO has taken one of the possible views which in our considered view is in-fact plausible and correct view by treating one time premium on allotment of tenancy rights by assessee-HUF in favour of tenants as capital receipts chargeable to tax as Income from capital gains u/s 45 of the Act arising from transfer of long term capital asset which view is duly supported by Section 55(2)(a) read with Section 45 of the Act and several judicial pronouncements treating one time PAGDI or SALAMI as capital receipts (273 ITR 1(supra) and 249 ITR 265 (supra)) and by no stretch of imagination the same view can be held to be erroneous view. The CIT cannot substitute its own view if there are two possible views and the AO has taken one of view after application of mind and which is one of the plausible and possible view (Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd v. CIT in (2000) 243 ITR 83(SC) , CIT v. Max India Limited (2008) 295 ITR 282(SC) and decision of Hon ble Bombay High Court in the case of CIT v. Gabriel India Limited (1993)203 ITR 108(Bom. HC) ) . The CIT cannot substitute its own view on the view of the AO even if the view of the CIT is a better view ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
