TMI Blog2006 (6) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue should be given an opportunity to find out whether Rs. 10 lakhs or any amount by way of pakidi was received by the assesses - orders of the Tribunal, appellate authority and the original assessing authority are set aside and the matter is remitted to the original assessing authority for a revised assessment after giving the Revenue as well as the assessees an opportunity to substantiate their respective contentions - - - - - Dated:- 6-6-2006 - Judge(s) : K. S. RADHAKRISHNAN., V. RAMKUMAR. JUDGMENT The judgment of the court was delivered by V. Ramkumar J.- I.T.R. No. 134 of 1999 at the instance of the Revenue is a reference under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act" for short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reunder the monthly rent reserved was Rs. 5,000 and the period of lease fixed was 20 years. It was, therefore, a compulsorily registrable instrument within the meaning of section 17(1)(d) of the Registration Act, 1908, and section 107 of the Transfer of Property Act, 1882. Although the transaction recorded in the said instrument is a lease, legally there is no transfer of a capital asset so as to attract capital gains tax. Moreover, the document recites payment of a refundable security of Rs. 2 lakhs only. There is no whisper in the document to suggest payment of Rs. 10 lakhs by the tenant to the assessees by way of pakidi. When the document is silent about the payment of any amount by way of pakidi it is impermissible to find such a case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset" have been defined under section 2(14) of the Act to mean property of any kind held by an assessee, whether or not connected with his business or profession. Thus, in order to attract capital gains tax there must be profit or gain arising from the transfer of a capital asset. "Transfer" in the context of the Act has to be considered with reference to the said expression as defined under section 2(47) which reads as follows: "(47) 'transfer' in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration Act and section 107 of the Transfer of Property Act, the transaction in question does not become anything other than a lease transaction. The apex court had an occasion to consider this aspect of the matter in Anthony v. K.C. Ittoop and Sons [2000] 6 SCC 394. There also the instrument in question was an unregistered one purporting to create a lease for 5 years and, therefore, compulsorily registrable. Although the Supreme Court held that the instrument as such could not be looked into for holding that the executee thereunder was a lessee, it was observed as follows: "When lease is a transfer of a right to enjoy the property and such transfer can be made expressly or by implication, the mere fact that an unregistered instrument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in the case on hand. Here, there is a clear transfer of interest in immovable property by the assessees in favour of Sundaresa Pai referred to above attracting capital gains tax on the profits and gains arising therefrom. What now survives for consideration is the further question as to whether the assessees had received Rs. 10 lakhs by way of pakidi under the lease arrangement in question. The respondents/assessees are brothers. They are co-owners in respect of the commercial building constituting the subject-matter of the aforementioned lease deed. No doubt, the original assessing authority and the appellate authority placed reliance upon the sworn statement of Sundaresa Pai, the tenant of the assessees to hold that he had pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts regarding such matters on which the written instrument is silent. The adjudicatory authorities cannot ignore the ground realities and the common course of human conduct and also the mercantile malpractices. It is pertinent in this context to note that the tenant of the assessees in his sworn statement has in unequivocal terms declared his unaccounted income to the rune of Rs. 17,44,226 out of which Rs. 10 lakhs was stated to be the pakidi given to the assessees. He had brought the said amounts to tax. This statement of the tenant was one made against his own pecuniary and proprietary interest because, by making such a statement, he was running the risk of incurring additional tax liability. But then, the assesses were not confronted wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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