TMI Blog2005 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... 005 - Commissioner of Income-Tax Versus D. P. Sandu Bros. Chembur P. Ltd. Union of India And Another Versus Cadell Weaving Mill Co. P. Ltd And Another Judge(s) : MRS. RUMA PAL., C. K. THAKKER. and ARIJIT PASAYAT. JUDGMENT The judgment of the court was delivered by Mrs. Ruma Pal J. - The primary question involved in this appeal is whether the amount received by the respondent-assessee on surrender of tenancy rights is liable to capital gains tax under section 45 of the Income-tax Act, 1961. The assessment year in question is 1987-88. The lease agreement was entered into in 1959 for 50 years under which an annual rent was paid by the lessee to the lessor. The lease would have continued till 2009. During the relevant previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exigible to tax. The Department preferred an appeal before the High Court. The High Court dismissed the appeal. Being aggrieved by the decision of the High Court, this further appeal has been preferred by the Department. The Department has contended that the surrender value of the tenancy lights was chargeable as capital gains under section 45 of the Act. If not, it was liable to be taxed as "Income from other sources" under section 10(3) read with section 56 of the Act. Section 2(24)(vi) defines "income" as including "any capital gains chargeable under section 45". Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year is chargeable to income-tax under the head "Capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court found that the consideration received for the sale of goodwill could not be subjected to capital gains because the cost of its acquisition was inherently incapable of being determined. Pathak J. as his Lordship then was, speaking for the court said: "What is contemplated is an asset in the acquisition of which it is possible to envisage a cost. The intent goes to the nature and character of the asset, that it is an asset which possesses the inherent quality of being available on the expenditure of money to a person seeking to acquire it. It is immaterial that although the asset belongs to such a class it may, on the facts of a certain case, be acquired without the payment of money." In other words, an asset which is capable of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the cost of acquisition would be taken as determinable but the rate would be nil. The amendment took effect from April 1, 1995 and accordingly applied in relation to the assessment year 1995-96 and subsequent years. But till that amendment in 1995, and therefore covering the assessment year in question, the law as perceived by the Department was that if the cost of acquisition of a capital asset could not in fact be determined, the transfer of such capital asset would not attract capital gains. The appellant now says that B.C. Srinivasa Setty's case [1981] 128 ITR 294 (SC) would have no application because a tenancy right cannot be equated with goodwill. As far as goodwill is concerned, it is impossible to specify a date on which the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court, as early as in 1957 had, in United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC), held that the heads of income provided for in the sections of the Indian Income-tax Act, 1922 are mutually exclusive and where any item of income falls specifically under one head, it has to be charged under that head and no other. In other words, income derived from different sources falling under a specific head has to be computed for the purposes of taxation in the manner provided by the appropriate section and no other. It has been further held by this court in East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49 that if the income from a source falls within a specific head, the fact that it may indirectly be covered by a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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