TMI Blog2020 (2) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... nce amount of Ltd. arrear of ₹ 1,32,63,433/- has been paid during the year. These two amounts are basically the consideration for transfer of Leasehold Rights. Thus ₹ 3,56,63,433/- is the consideration for restoration and subsequent transfer of Leasehold Rights. Besides during the current year, M/s. ARA Enterprises Pvt. Ltd. has also paid 50% of the rent payable to Kolkata port Trust. However, this is in the nature of revenue receipt and assessee would keep receiving such income in subsequent years. Assessee has not provided the details of amount, if any, which it might have paid for acquiring the Leasehold Rights. Amount paid if any, would not be much as it was acquired a long time back. Cost of acquiring Leasehold Rights is almost Nil. Hence entire amount of ₹ 3,56,63,433/- is taken to be Long Term Capital Gain of the assessee and income is enhanced by this amount by ld CIT(A) Therefore, having gone through the provision of Section 2(14) and Section 2(47) of the Act, it is evidently clear by reading of these sections, that the assessee has transferred lease hold rights in favour of M/s ARA Enterprises Pvt. Ltd. which is transfer as per Section 2(47) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two plots of land at Hide Park Extension for a long time. Since 01.11.1970 assessee had stopped paying rent. In 1999 it entered into agreement with M/s. ARA Enterprises Pvt. Ltd. for sub leasing the premises to them. Since 01.02.1999 it started receiving monthly rent from M/s. ARA Enterprises Pvt. Ltd. Still assessee did not pay any rent to Kolkata Port Trust. The Kolkata Port Trust issued demand cum eviction notice to assessee in 2006. The ld CIT(A) held that creation of sub lease rights would also amount to transfer of Leasehold Rights, under certain conditions. Whether the lessor continues getting rent even after the date of transfer is not relevant in deciding whether transfer has taken place. On 31.03.2010 M/s.ARA Enterprises Pvt. Ltd., through the assessee, paid ₹ 2,24,00,000/- and the balance payment of arrear of ₹ 1,32,63,433/- was made in the current year. Therefore ₹ 3,56,63,433/- ( ₹ 2,24,00,000 + ₹ 1,32,63,433) is sale consideration. These two amounts were taken by CIT(A) the consideration for transfer of Leasehold Rights. Thus ₹ 3,56,63,433/- was enhanced by ld CIT(A) treating it as long term capital gain. Therefore, the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng agent. Thus, in the instant case it was only when the Central Government conveyed its approval to the appointment of managing agents by its letter dated 02.09. 1957, that the appointment became effective and the company's liability to pay the remuneration of the managing agents accrued. b) Saurashtra Cement Chemical Industries Ltd. 213 ITR 523/80 Taxman 61 (Guj] c) Addl. Comm -vs- farasol Ltd. 19871 163 ITR 364 [1985] 22 Taxman 418 [Raj] d) Exxon Mobil Lubricants (P) Ltd. [Delhi [2010] 328 ITR 17. Hon ble High Court was of the view that liability of the assessee under the agreement had arisen and accrued in August, 2002, when the agreement was executed and, therefore, the liability of the assessee to pay for period January, 2002 to March 2002 arose and crystallized in August, 2002. 6. However, ld CIT(A) rejected the contention of the assessee and enhanced the assessment by ₹ 3,56,63,433/-, observing the followings: 4.4(c) I have carefully considered the facts of the case and the submission of the assessee. Following issues are to be decided to arrive at the conclusion:- i) Whether any asset within the meaning of section 2(14) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this behalf by notification in the official Gazette; (iv) 6% per cent Gold Bonds, 1977, or 7 per cent Gold Bond:, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government; (v) Special Bearer Bonds, 1991, issued by the Central Government; (vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government Section 2(47) reads as under: 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 treated by him as stock-in-trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882; or (vi) any transaction (whether by way of becoming a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by way of lease is treated as transfer of a capital asset, on the principle that the lease creates an interest in the land and, therefore, to that extent, it extinguishes the right of the transferor. Therefore, when the assessee transfers his leasehold rights in the land in his occupation, by way of a sub-lease to another person, it amounts to extinguishing his rights in the property and since his leasehold rights had created an interest in the land, i.e., enjoyment and possession and, therefore, it would definitely come within the definition of 'capital asset', as defined under section 2(14). Whether the owner himself transfers by way of a lease or a lessee transfers by way of sub-lease, the principle remains the same, namely, in either action there is extinguishment of rights. Hon'ble Andhra Pradesh High Court in the case of Mrs. G.Seetha Kamraj -vs- CIT, 2006, 284 ITR 54 has also looked into this issue. In this the assessee took on lease for 99 years a building from her husband case and as per the terms of the deed, the lease was to start from June 1, 1986. The assessee paid a sum of ₹ 5,000 as premium for obtaining the lease and was to pay a mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Assessee got lump sum payments equivalent to arrears of rent. Besides it was also entitled for monthly rental from the lessee. However, henceforth assessee did not have the power to terminate the agreement and evict M/s.ARA Enterprises Pvt. Ltd., so long as they continued to pay timely rent and complied with other conditions of the premises for their own use in future. They remained only a name lender in the records of KPT but effective control passed on to M/s.ARA Enterprises Pvt. Ltd. Thus enjoyment and possession of land passed on to M/s.ARA Enterprises Pvt. Ltd. In the first agreement M/s.ARA Enterprises Pvt. Ltd. were not required to discharge prior liabilities of the appellant whereas through the second agreement they agreed to pay the arrears of rent along with interest to save the Leasehold Rights. Thus it is apparent that assessee parted with their exclusive Leasehold Rights and control over the two plots of land to M/s.ARA Enterprises Pvt. Ltd. for ever, on receipt of a lump sum amount and some monthly rent. This amounts to transfer of rights of the assessee within the meaning of section 2(14) read with 2(47) and this issue is covered by the above judgements in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,32,63,433/- has been paid during the year. These two amounts are basically the consideration for transfer of Leasehold Rights. Thus ₹ 3,56,63,433/- is the consideration for restoration and subsequent transfer of Leasehold Rights. Besides during the current year, M/s. ARA Enterprises Pvt. Ltd. has also paid 50% of the rent payable to Kolkata port Trust. However, this is in the nature of revenue receipt and assessee would keep receiving such income in subsequent years. Assessee has not provided the details of amount, if any, which it might have paid for acquiring the Leasehold Rights. Amount paid if any, would not be much as it was acquired a long time back. Under the circumstances, it is presumed that the cost of acquiring Leasehold Rights is almost Nil. Hence entire amount of ₹ 3,56,63,433/- is taken to be Long Term Capital Gain of the assessee and income is enhanced by this amount. A.O. is accordingly directed to levy suitable tax on this amount. 7. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India; Having gone through the explanation 2 of section 2(47) of the Act, we note that the transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or in directly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement. Therefore, it is quite clear that M/s STP Ltd. (assessee) has transferred its lease rights by way of an agreement in favour of M/s ARA Enterprises Pvt. Ltd. and from the transferee (M/s ARA Enterprises Pvt. Ltd.) the assessee got ₹ 2,24,00,000/- and payment of arrear of ₹ 1,32,63,433/-. Therefore, both the amounts put together c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- has been paid during the year. These two amounts are basically the consideration for transfer of Leasehold Rights. Thus ₹ 3,56,63,433/- is the consideration for restoration and subsequent transfer of Leasehold Rights. Besides during the current year, M/s. ARA Enterprises Pvt. Ltd. has also paid 50% of the rent payable to Kolkata port Trust. However, this is in the nature of revenue receipt and assessee would keep receiving such income in subsequent years. Assessee has not provided the details of amount, if any, which it might have paid for acquiring the Leasehold Rights. Amount paid if any, would not be much as it was acquired a long time back. Under the circumstances, it is presumed that the cost of acquiring Leasehold Rights is almost Nil. Hence entire amount of ₹ 3,56,63,433/- is taken to be Long Term Capital Gain of the assessee and income is enhanced by this amount by ld CIT(A) Therefore, having gone through the provision of Section 2(14) and Section 2(47) of the Act, it is evidently clear by reading of these sections, that the assessee has transferred lease hold rights in favour of M/s ARA Enterprises Pvt. Ltd. which is transfer as per Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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