TMI Blog2018 (10) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... r the head "Income from other sources" - Decided against the assessee. Transfer of revisionary rights - Held that:- the assessee company has assigned by and Large all its rights over the said two flats to those persons, so much so, that at one place it was mentioned that, 'This purchaser would be entitled to sale I transfer and assign the said premises subject to a right of first refusal available to the purchaser as separately recorded'. - the language used in such deed is nothing but to camouflage the real nature of transaction. Even from the records, it is evident that assessee had sold its right, title and interest in the said property, therefore it was rightly taxed under the head ‘capital gain’. - Decided against the assessee. - I.T.A. No. 1695/Mum/2014 - - - Dated:- 30-8-2018 - Sh. B. R. Baskaran, AM And Sh. Sandeep Gosain, JM For the Appellant : Shri Haridas Bhat For the Respondent : Shri Kiran Unavekar ORDER PER SANDEEP GOSAIN, JUDICIAL MEMBER: The present Appeal filed by the assesseeis against the order of Ld. CIT (Appeal) 5, Mumbai dated 12.12.13 for AY 2010-11 on the grounds ment ioned herein below:- 1. On the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property as against the same being offered to tax as Business Income . 4. We have heard counsels for both the parties at length and we have also perused the material placed on record, judgment cited by the parties as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in its detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no. 4.1 of its order and the same is reproduced below:- 4.1 Grond No. 1 : Through this ground, the assessee has challenged taxing of rental income of ₹ 60,281/- as income from house property as against income from business . The written submissions on the issue finds place in para 3 of this order. The issue is considered. Briefly, the facts are that in the year 1998, the assessee had acquired 516th lease right of an old building named Kapoor Mahal alongwith the tenants for the remaining Lease period. The said building in fact was constructed by one Mr Kapoorchand Nemchand Mehta on a plot of Land which was acquired on lease in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 1/6th portion, even after 15 years till date. The tenants continue to occupy the premises. The revenue authorities by invoking the provisions of section 27(iiib) of the I.T. Act has rightly treated the assessee as owner of the leased property, as the lease period in the present case has been more than 12 years. Even from the facts, the revenue authorities rightly concluded that the nature of the income which had been rental earning from the house property will not change just because it has been received by the company formed with the object of carrying out business as builder and developer. From the records, we also noticed that the nature of the receipts was rental income even to the previous owners and was taxable accordingly under the head Income from the house property . While reaching to the said conclusion, the revenue authorities relied upon the decision of Hon ble Supreme Court in the case of Sultan Bros Pvt Ltd (1964) 51 ITR 53 (SC) and East India Housing Land Development Trust Ltd (1961) 42 ITR 49 (SC). No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities and submissions made by both the parties, we find that Ld. CIT(A) while deciding the said ground has rightly appreciated that the assessee received ₹ 7.50 lakh on account of transfer of tenancy rights of some of the flats in the building Kapoor Mahal whose 5/6th portion was acquired by the assessee on lease. We noticed that since the assessee is in the business of builder and developer, therefore, the amount received on transfer of tenancy rights cannot be taxed as Business income . The AO had already allowed the related expenses on account of legal professional fees and the balance amount of ₹ 2,53,888/- was taxed under the head Income from other sources . No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the assessee stands dismissed . Ground No. 3 4 7. These grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s 55(2)(a) of the Act and thus going by the decision of the Supreme Court in the case of B C Srinivas Shetty [1981] 128 ITR 294(SC) the said receipt was a capital receipt and the provisions of the capital gain are not applicable to the said receipt in the absence of any cost of acquisition. The AO noted that in the context the assessee had entered into an agreement with two existing tenants namely Mr Bharat Somani and Mr Vikram Somani by way of Transfer Deed dated 05.12.2009 and transferred its balance interest / ownership interest I reversionary interest onto the purchasers [those two tenants]. It is noted that Mr Bharat Somani is also the director of the assessee company and Mr Vikram Somani is also a relative of Mr Bharat Somani. They are said to be tenants [occupants of] in the same old building, 'Kapoor company in the year 1988 for the rest of the lease period. The AO after examining the issue has been of the view that assessee company had followed that form of transaction only to camouflage the real nature of the transaction i.e., sale of assets in the form of two flats along with one garage at such low throw away price which is otherwise impossible if such sale happ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I would like to refer that the issue had arisen during the assessment proceedings on the basis of the remarks of the auditor which clearly talks of conversion of tenancy rights into the ownership right for those two flats. Even otherwise, from the language used in those two deeds, it is very evident that assessee has sold its reversionary right [for whatever it means], title and interest in the said property two flats] and that would also bring it within the scope of the provisions of capital gain in my considered view, the AO has rightly taxed the amount under the head, capital gain and does not call for any interference. The assessee s grounds rejected. After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and submissions made by both the parties, we find that Ld. CIT(A) while deciding the said ground has rightly appreciated that the revenue authorities considered the comments of the auditor's report and Notes to the accounts which says , the assessee has received ₹ 5 lacs from two tenants for conversion of tenancy rights into ownership right for their flats . The assessee entered into agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued the transaction at ₹ 23,78,500/- and ₹ 20,01,000/- [totaling to ₹ 43,79,500/-]. The revenue authorities after considering the memorandum of intention dated 27.12.1993 had reached to the conclusion that the language used in such deed is nothing but to camouflage the real nature of transaction. Even from the records, it is evident that assessee had sold its right, title and interest in the said property, therefore it was rightly taxed under the head capital gain . Ld. AR relied upon the judgments in the case of Voltas Ltd. Vrs. ITO (2016) 48 CCH 274 Mum-Trib, ITO vrs. Prem Ratan Gupta (2012) 31 CCH 0384. These judgments are of no help in the case of the assessee as the same pertains to Development Rights, etc. and judgment of Hon ble Gujrat High Court in the case of Commissioner of Gift Tax Vrs. Gautam Sarabhai Ltd., Malabar Hill Cooperative Hsg. Socity vrs. Union of India, (1990) 58 CCH 0229 (Mum HC), Gemini Pictures Circuit Pvt. Ltd. Vrs. DCIT (2012) 82 CCH 115 (Mad HC). The para materia contained in the above decisions are different from the facts of the present case. Therefore they are not applicable to the facts of the present case. No n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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