TMI Blog2001 (8) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... July, 1986, as consideration for transfer of possession of shop No. 9/866, is exempt and thus deleting the same from the computation of capital gains arising during the year on the basis of shop Nos. 9/865 and 9/866? The facts of the case are as follows : On Appukutty was the managing partner of a partnership firm, M/s M. Appukutty. Originally, it was a proprietary concern. It was converted into a partnership only in 1964. Appukutty was a tenant of shop No. 9/866 from 1941. By document No. 2225 of 1960, Appukutty brought the Jenmom right of shop 9/866 and the adjacent shop No. 9/865 for a consideration of ₹ 10,800. The firm was in possession of building 9/866. By agreement dt. 3rd July, 1986, the possessory right of shop No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (No. 1 is Appukutty) in jenmom right and we are conducting business therein as partners and the same is in our exclusive possession. And whereas we have decided to sell the possession right that we have along with No. 1 in the said shop room retaining the jenmom right through mediators for a consideration of ₹ 1,00,000 (rupees one lakh only) . In the body of the document, it is stated that : In consideration of ₹ 1,00,000 fixed for delivering the possession of the said shop room paid by you as per cheque No. 009155, dt. 27th June, 1986 drawn on chartered bank for a sum of ₹ 1,00,000 the receipt of which we do hereby acknowledge . Copy of document dt. 30th Aug., 1960 was produced, which shows that Appukutty was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto . 6. In CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 126 ITR 294 (SC) : TC 20R.148, the Supreme Court had occasion to decide the question whether the transfer of goodwill come within the meaning of transfer of capital assets. In that case, their Lordships dealt with s. 45 of the Act and held as follows : Sec. 45 charges the profits or gains arising from the transfer of a capital asset to income-tax. The asset must be one which falls within the contemplation of the section. It must bear that quality which brings s. 45 into play. To determine whether the goodwill of a new busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the asset is a material factor in applying the computation provisions pertaining to capital gains. 7. Another case referred to us is the decision A.R. Krishnamurthy Anr. vs. CIT (1989) 76 CTR (SC) 18 : (1989) 176 ITR 417 (SC) : TC 20R.202 . In that case, the appellant, a body of individuals, purchased two pieces of land in 1966 at a price of ₹ 27,600. In 1970 it granted a mining lease to a private company to extract clay for a period of 10 years at a premium of ₹ 5 lakhs in addition to payment of royalty. The ITO determined a sum of ₹ 4,82,960 as long-term capital gains after determining 5/8ths of the price of the land as cost of acquisition of the leasehold interest. The question arose whether there is any ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no cost of acquisition for the transfer of the tenancy right. Regarding the question whether the amount received by the assessee was liable to capital gains, the Court held that the consideration received by a tenant for parting with the tenancy right is not exigible to tax as capital gains in cases where no cost of acquisition for the tenancy can be predicated. Therefore, the Tribunal was justified in holding that no tax on capital gains was leviable on the amount of consideration received on the transfer of the tenancy right. In that decision, this Court mainly referred to the decision of the Delhi High Court Bawa Shiv Charan Singh vs. CIT (1985) 47 CTR (Del) 12 : (1984) 149 ITR 29 (Del) : TC 20R.233. In that case, the Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership came into possession of the building in 1962. Apparently, no amount was paid for getting possession. It can be said to be as self-generated asset. It is true that possessory right is different from tenancy right. Salmond on Jurisprudence, 12th Edn. at p 266, it is stated as follows : Possession differs from ownership in another quite different respect. Ownership, as we saw, consists of a combination of legal rights, same or all of which may be present in any particular instance; and such rights imply the existence of legal rules and a system of law. With possession this is not so. A possessor is not so much one who has certain rights as one who actually has possession. Whether a person has ownership depends on rules ..... X X X X Extracts X X X X X X X X Extracts X X X X
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