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TMI Blog2014 (10) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertook various improvements which were finally completed during the financial year 2005-06. In the year 2003, the appellant applied to DDA for conversion of leasehold land, into freehold land. On 25.01.2007, DDA executed conveyance deed in favour of the appellant converting the land into freehold land. The appellant paid Rs. 3,89,89,196/- to DDA for such conversion from leasehold land to freehold land, which comprises of the following components:- a) Conversion Charges Rs.53,21,759/- b) Other Dues Rs.20,24,316/- c) UEI Charges Rs.3,12,17,381/- d) Stamp Duty Rs.4,25,740/- The appellant, thereafter, on 07.04.2007, sold the entire land along with superstructure for a consideration of Rs. 30 crores and offered for tax long term capital gains of Rs. 4,07,35,010/-, which were computed as under:- Total sales consideration Rs. 30,00,00,000/- Less: Indexed cost of acquisition and Improvement on land & building -Rs.25,58,52,290/- Less: Selling Expenses (Professional Fees) (Rs.34,12,700) LTCG Rs. 4,07,35,010/- 4. However the AO, in the order of the assessment dated 30th December 2010, determined the long term capital gain at Rs. 5,08,54,387/- as against Rs. 4,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght existing of the assessee. And there was no charge whatsoever in the nature and character of the land in question. In support of this said submission he referred to the judgement of the Allahabad High Court in the case of CIT(A) Vs. Smt. Rama Rani Kalia 358 ITR 499 and judgement of the jurisdictional High Court in the CIT Vs. Fric India Ltd in ITA No. 146 of 2002 dated 2nd September, 2014. 8. The ld DR supported the view of the ld CIT(A) that in terms of the lease deed the assessee was incorrect in contending that there was only a qualitative change in the title. He referred to the decision in the cased of CIT Vs. Modi (Karnataka) 218 ITR 01 and CIT Vs. Irani 234 ITR 850 (Mum). The ld Sr. Counsel Shri Vohra in his rejoinder submitted that perusal of the lease agreement will reveal that assessee acquired the industrial plot with all the trappings of the owner and the property was to remain with the assessee in perpetuity. He submitted that the rights cannot be compared with the ordinary rights of a lessee under the lease who is a mere tenant. It was submitted by the Sr. Counsel Mr. Ajay Vohra, that the conversion of property from perpetual lease to freehold is just an improvemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been preferred by the revenue against the said conclusion of the ld CIT(A). The challenge of the assessee is firstly confined to the nature of the asset transferred in the year under consideration i.e. whether the land sold is a short-term capital asset or a long-term capital asset. Admittedly the land sold was initially held by the assessee as a lease-hold land and transferred as a free-hold land in the instant year. The ld DR submitted that the period of holding as a lease-hold land is not to be considered while determining the period of holding of the free hold land. We find that this issue came up recently before the jurisdictional High Court in the case of CIT Vs. Frick India Ltd. (supra). In the said case the Hon'ble Delhi High court held as under:- 8. Assuming that there was a registered instrument under which the lease was first created on 15th March, 1973, the assessee upon end of the term of the lease would be a tenant by holding over under Section 116 of the Transfer of Property Act. The said section provides that where a tenant after end or determination of the lease, remains in possession of the property and rent is accepted by the lessor (the landlord), in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Lord Diplock had referred to the term, "business" as an 'etymological chameleon', which suits its meaning to the context in which it is found. The background, therefore, has to be given due regard and not to be ignored, to avoid absurdities. This principle is applicable when we interpret the word, "held" in Section 2(42A) of the Act, for the said word is capable of divergent and different connotations and understanding. 11. The word, 'held' as used in Section 2(42A) of the Act is with reference to a capital asset and the term, 'capital asset' is not confined and restricted to ownership of a property or an asset. Capital assets can consist of rights other than ownership right in an asset, like leasehold rights, allotment rights, etc. The sequitur, therefore, is that word „held‟ or „hold‟ is not synonymous with right over the asset as an owner and has to be given a broader and wider meaning. In Black's Law Dictionary, Sixth Edition, the word 'hold' has been given a variety of meanings under nine different headings. Four of them, i.e, 1, 4, 8 and 9 read as under: "1. To possess in virtue of a lawful title; as in the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court in Commissioner of Income Tax versus K. Ramakrishnan, (2014) 209 DLT 14 has held that for the purpose of calculating period of holding we have to look and take into account the date since the assessee got 'beneficial interest' in the property. The Allahabad High Court in CIT versus Rama Rani Kalia, (2013) 358 11R 499 (All) has drawn distinction between holding of an asset and the nature of title over the property and it has been observed that period of holding will determine whether the consideration should be taxed as a short-term capital gains or long-term capital gains. Thus, conversion of leasehold right into freehold by way of improving the title over the property would not affect the taxability of the gain from such property, which is relatable fo the period over which the property years and consideration received on surrender has been rightly treated as a long term capital gain. 15. In view of the aforesaid discussion, the question of law is answered in favour of the assessee and against the appellant-Revenue. Costs will e payable by the appellant as per the Delhi High Court Rules." 10. Applying the aforesaid judgement to the facts of the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rs. 10,01,080/- towards unauthorized sub-letting charges cum completion certificate. Construction of office premises was started on' this plot 1ami and, as per the assessee, It was completed in Financial Year. 1998-99. Assessee has submitted completion certificate dated 26.03.1999 from DDA. However, It IS not clear from the certificate as to what the constructed area. There i mention of map submitted by the assessee vide letter no /93 dated 02.02.1994. Assessee was asked to submit this map and the letter to get a clear picture of the extent of construction of this plot. However, vide letter dated 13 12 2010, assessee has informed that a fire had broken out in his office on 06.12.2000 and most of the records got burnt in fire. Hence they have expressed their inability in producing the papers submitted. fO"r1hepUrpose of obtaining the occupancy." 5.9 The aforesaid finding of the Id. AO has not been rebutted by the appellant company and thus, remains un-assailed. The fact that the lease hold rights of the appellant 11 company were cancelled by the lessor on 29.03.1998 and were restored only on 06.08.2004 goes against the claim of the appellant company that the development work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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