9911796707
TMI Blog2001 (11) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act." 2. Questions (a) to (o ) have been answered by Their Lordships as indicated below :- Questions Answers (a )Whether on the facts and in the circumstances of the case and in law, was the Tribunal justified in holding that the receipt of ₹ 1,40,00,000 by the applicant on the surrender/termination of the tenancy rights/possessory rights was casual and non-recurring receipt within the meaning of section 10(3) of the Income-tax Act? In the Negative i.e, in favour of assessee and against the Depart- ment. (b)Whether on the facts and in the circumstances of the case and in law, was the Tribunal justified in holding that the compensation received by the statutory tenant towards the surrender of statutory tenancy rights/possessory rights was casual and non-recurring within the meaning of section 10(3) of the Income-tax Act? In the Negative i.e, in favour of assessee and against the Depart- ment. (c )Whether on the facts and in the circumstances of the case and in law, was the Tribunal justified in holding that the surrender of the tenancy rights/possessory rights by the statutory tenant to the landlord did not amount to "transfer" within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nazarali & Sons v. CIT [1987] 163 ITR 73 (Guj.) (vii)CIT v. Merchandisers (P.) Ltd. [1990] 182 ITR 1074 (Ker.) (viii) CIT v. Markapakula Agamma [1987] 165 ITR 386 (AP) (ix) Joy Ice Cream (P.) Ltd. v. CIT [1978] 112 ITR 1 (sic) (x )Associated Pharmaceuticals Ind. (P.) Ltd. [ITAT (Mad.) Bench 'A' IID Vol. 47-656]. Whether on the facts and in the circumstances of the case and in law, was the Tribunal justified in holding that the receipt of ₹ 1,10,00,000 by the applicant on surrender of tenancy rights/possessory rights was not a capital receipt ? In the Negative i.e., in favour of assesee and against the Department Whether on the facts and in the circum-stances of the case and in law, was the Tribunal justified in holding that the receipt of ₹ 1,40,00,000 by the applicant on the surrender of the tenancy rights/possessory rights is income within the meaning of section 2(24) of the Income-tax Act? In the Negative i.e., in favour of assesee and against the Department. Whether on the facts and in the circumstances of the case and in law, has the Tribunal misdirected itself in basing its conclusion by ignoring the Bombay High Court Judgments in the cases of- In the Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the identical issue and all the cases were bunched and heard by Their Lordships. It was ultimately held that the tenancy right is a capital asset, that the surrender thereof for consideration gives rise to capital receipt, that since tenancy right has no cost of acquisition the consideration cannot be brought to tax under the head capital gains nor can the compensation be assessed as casual or non-recurring income under section 10(3). However, in the case of the assessee-company, the question whether the compensation would be includible as part of the "book profit" for the purpose of section 115J was not answered by the Hon'ble High Court since the Tribunal had not considered the question. Therefore the Tribunal was directed to deal with this ground. 4. Accordingly we have heard Mr. Y.P. Trivedi, the learned counsel for the assessee and Mrs. Nishi Singh, the learned CIT (DR), Mr. Trivedi's contention was that the departmental authorities have not examined in depth the question whether the consideration received for surrender of the tenancy rights could be considered as part of the "book profit" , that they have simply proceeded on the footing that since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to how grants given by the Government may be treated in the accounts of the company. 7. On the basis of the aforesaid submissions, Mr. Trivedi contended that all the above aspects will have to be considered by the departmental authorities and that the proper course would be to direct them to consider those aspects and pass a speaking order on the question whether the amount received for surrender of the tenancy rights would form part of the "book profit" for purposes of section 115J. 8. Mrs. Nishi Singh, the learned CIT(DR), on the other hand contended that if at all only the computation part may be directed to be made afresh by the departmental authorities and that there is no need to restore the main question, viz., whether the amount received for surrender of tenancy rights forms part of the "book profit" for purposes of section 115J. She pointed out that on the main question the judgment of the Hon'ble Bombay High Court in the case of CIT v. Veekaylal Investment Co. (P.) Ltd. [2001] 249 ITR 597 is directly in favour of the Revenue since in this case it has been held that income from capital gains is to be included in "book profit" for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the departmental authorities themselves first. One Important question to be consi-dered, as it turned out in the course of the arguments before us, is whether there is merit in the contention of the assessee that the mere inclusion of the disputed amount in the Profit and Loss account prepared in accordance with Parts II and III of Schedule VI to the Companies Act would not automatically lead to the inference that it is part of the "book profit". An incidental question, which in our opinion, arises is, whether the disputed amount can fall within the term "profit" as is generally and commercially understood and as it is understood for purposes of the Companies Act. In other words, do "capital profits" also fall to be considered as "profits" under the Companies Act? This aspect of the matter, in our opinion, assumes significance because section 115J(1A) in terms refers to Parts II and III of Schedule VI to the Companies Act and the profit and loss account prepared in accordance therewith. In Surana Steels (P.) Ltd. v. Dy. CIT [1999] 237 ITR 7775 , the Supreme Court has held, while interpreting another part of section 115J which referred to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be legally permissible or correct for them to consider the amount as part of the "book profit" for purposes of section 115J. The various authorities to which our attention has been drawn by both the sides may be of assistance to them in reaching a correct conclusion. 11. For the above reasons we are of the view that the matter needs to be restored to the file of the Assessing Officer. He will now consider afresh the question whether the amount received for surrender of the tenancy rights in the Prabhadevi property is includible as part of the "book profit" for purposes of section 115J and take a decision in accordance with law and after affording adequate opportunity to the assessee to put forth its case. 12. So far as the first issue is concerned, viz., whether the amount was rightly assessed as casual or non-recurring income under section 10(3) r.w. section 56, we hold, respectfully following the decision of the Hon'ble High Court in respect of questions (a) to (o) that the amount is not so taxable. We also hold that the amount received is a capital receipt and that it is not exigible to capital gains tax under section 45 because no "transfer" ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
