TMI Blog2004 (3) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... of land bearing khasra No. 148 along with the rights, easements, amenities on lease for a period of 72 years from 17th Dec., 1992, as per the lease deed dt. 17th Dec., 1992 registered with the office of the Sub- Registrar, Udaipur. The terms regarding lease deposit were as under: 15.1 The lessee shall keep deposited with the lessor an advance lease deposit of ₹ 2.50 crores on the following terms and conditions : (i) Amount of advance lease deposit ₹ 2.50 crores (ii) Mode of receipt by the Lake Palace Hotels and Motels (P) Ltd. : (a) ₹ 33 lakhs by cheque dt. 2nd May, 1989 (b) ₹ 33 lakhs by cheque dt. 31st Oct., 1989 (c) ₹ 34 lakhs by cheque dt. 30th April, 1990 (d) ₹ 1.50 crores by cheque dt. 2nd Nov., 1992 (iii) Interest'9 per cent per annum simple interest with effect from the date of receipt of payment. (iv) Payment'10 yearly instalments of ₹ 25 lakhs each from 1st May, 2055. The terms and conditions regarding consideration of the above lease were as under: 3. Consideration 1. In consideration of the lease hereby granted on the demised premises for a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th-tax assessment of the assessee, the fair market value of land as on 31st March, 1992 as well as on 31st March, 1993, had been taken at ₹ 2,44,05,030. On that basis, the cost of acquisition of the lease hold rights had been determined by the AO at ₹ 29,96,751, as per the following calculation: ₹ 2,44,05,030 x 61,81,125 = ₹ 29,96,751 The AO by taking the cost index as on 31st March, 1992, at 223 worked out the cost of acquisition at ₹ 66,82,754 (Rs. 29,96,751 x 223/100). Accordingly, the capital gain was worked out by the AO at ₹ 51,39,366 (Rs. 1,18,32,120'Rs. 66,82,752). The AO completed the assessment by ignoring this contention of the assessee that there was no consideration except rent as per the lease agreement and, therefore, the provisions of ss. 45 and 48 were not applicable. The AO also stated that the lease agreement had been drafted and executed in such a manner that no consideration could be reflected apparently and that type of colourful device could not be permitted to evade tax. He relied on the decision in the case of Amora Chemicals (P) Ltd. vs. Asstt. CIT (1996) 56 TTJ (Ahd) 273. In this manner, capital gain of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd salami/premium is well recognised under s. 105 of the Transfer of Property Act. There lay many decisions and in such decisions amounts received by way of salami/premium alone have been taxed by way of capital gain and rent or royalty received annually have been taxed under s. 28/56. It was further stated that the lessee company was an existing assessee and interest charged from the assessee-company had been duly shown as income and the lease rentals as deductible expenditure. Therefore, the advance deposit of ₹ 2.5 crores which was refundable was only to safeguard the interests of the assessee to compel the lessee company to comply with the terms and conditions of the agreement strictly. It was stated that the transactions where the consideration had been correctly declared/disclosed could not be treated to be covered by the ratio of the decisions relied upon by the AO. The reliance was placed on the decision in the case of Asstt. CIT vs. K.B. Investment Finance Company Ltd. (1995) 53 ITD 410(Del), wherein it had been held that for the purpose of invoking s. 45 the consideration received within the meaning of s. 48 must be available in order to compute the gain. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformance of agreement besides real consideration shown in the form of lease rent. He also pointed out that the lease agreement was entered into on 17th Dec., 1992, in supersession of existing licence agreement dt. 2nd May, 1989, against which deposit to the extent of ₹ 1 crore was already available with the assessee. The CIT(A) also pointed out that the total value of the land taken by the AO as per the wealth-tax record as on 31st March, 1993, was ₹ 2,44,05,030 and the value of consideration by transfer of leasehold rights worked out at ₹ 1,18,32,120 against the cost of acquisition of leasehold rights computed at ₹ 66,82,754. According to him, the total lease rent for the entire lease period worked out to ₹ 16.90 crore at the stipulated rate. Therefore, the adequacy of consideration or full value of consideration and/or genuineness of transaction had to be examined and judged in the light of these facts and aspects because no other material/evidence or basis had been brought on record to support the findings that the interest rate of 9 per cent was concessional being disguised consideration for transfer. The CIT(A) stated that nowhere the AO mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, the ratio could not be said to be squarely applicable to the facts of the assessee's case, in the absence of any amount received as salami or premium, whereas in those cases amount of salami or premium was ascertainable and specifically mentioned. The CIT(A) further stated that the provisions of s. 45/48 were specific and both these provisions could not be invoked on assumptions and presumptions. According to him, the deeming provisions for computing the capital gains had been specifically provided for under different sections, such as ss. 45(2), 45(3), 45(4), etc., and the charging s. 45(1) could not be construed to be the deeming provision but strictly interpreted to charge the capital gain tax because it was based on statutory legal fiction. The CIT(A) further pointed out that s. 48 deals with the mode of computation of income chargeable under the head 'capital gains' and unless and otherwise provided, consideration shown in the document of transfer should be adopted being binding as per the standing provisions of law. He, therefore, observed that the full value of consideration which had not been shown to have actually received or accrued to the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussion, the CIT(A) held that the concept of adopting the full value of consideration was not applicable to bona fide transaction unless it was shown that the consideration mentioned in the deed had been understated and the assessee had actually received more than what was stated in the document. He, therefore, deleted the addition made by the AO on account of capital gains on the basis of concessional rate of interest as deemed consideration. Now the Department is in appeal. 4. The learned Departmental Representative strongly supported the order of the AO and stated that the assessee had shown interest of 9 per cent. However, the prevailing market rate was 18 to 24 per cent. Therefore, the assessee received the deposit/loan on concession rate and the AO was fully justified in determining the value by taking into consideration the rate of interest at 18 per cent and accordingly in computing the capital gain. 4.1 In his rival submissions, the learned counsel for the assessee, at the very outset, stated that the observations of the AO that it was a colourable device was without any basis and evidence on record. He emphasised that the assessee as well as the lessor company bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, there is no question of charging the capital gains. In the instant case, the assessee had not received any consideration in lieu of the transfer of capital asset because the land in question had been given on lease and the assessee received lease rent year after year and on that lease rent, tax had been paid in accordance with law. The AO considered the security deposit as the value of consideration. However, the deposit in question was refundable. The AO also worked out the value of consideration by taking the present value factor of 18 per cent, i.e., the deemed rate of interest. On the contrary, the rate of interest shown by the assessee at 9 per cent was actual rate of interest. Therefore, the AO was not justified in assuming that the rate of interest was 18 per cent. In our opinion, the differential interest, if any, cannot be considered as value of consideration for transfer of the capital asset. Considering the totality of facts, we are of the considered opinion that the order passed by the CIT(A) is well reasoned and just on the basis of facts. We, therefore, do not see any valid ground to interfere with the finding of the CIT(A) because the working of the AO is based o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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