TMI Blog2015 (12) TMI 1836X X X X Extracts X X X X X X X X Extracts X X X X ..... leaerlyfails. The ultimate result is, thus, that the above mentioned capital gains is not exigible to income tax, as has been held by the Hon'ble Supreme Court in the case of Srinivasa Setty [ 1981 (2) TMI 1 - SUPREME COURT] and PNB FINANCE LTD. [ 2008 (11) TMI 7 - SUPREME COURT] In the present case, assessee was having adverse charge on the property and charge of tax on such transaction has nowhere been definite under the Act. Therefore, we are holding that this transaction out of purview of tax. In our considered view, we reverse the orders of authorities below and delete the addition made by Assessing Officer - Decided in favour of assessee. - ITA No.835/Kol/2008 And ITA No.281/Kol/2013 - - - Dated:- 11-12-2015 - Shri Mahavir Singh, Judicial Member and Shri Waseem Ahmed, Accountant Member By Assessee: Shri Ravi Tulsiyan, FCA By Revenue: Shri David Z. Chawngthu, ACIT-SR-DR ORDER Waseem Ahmed, Both appeals filed by different assessee are arising out of separate orders of Commissioner of Income Tax (Appeals)-XIV/II Kolkata dated 27.02.2008 and 31.12.2012. Assessment was framed by ITO Ward30(3)/ACIT,CC-XXIV Kolkata u/s 143(3)/147 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of Ld. CIT(A), Mr. P.K.Deora filed an appeal before Tribunal and Tribunal deled the addition made my AO and subsequently confirmed by Ld. CIT(A) u/s.68 of the Act vide order dated 25.10.2005 in ITA No. 306 to 310/Kol/2005 by observing as under:- Since the assessee has proved the identity, creditworthiness and genuineness of the transactions in terms of section 68 of the I.T Act and in the absence of any contrary material brought on record by the revenue to show that the assessee has filed to discharge his burden at any stage, we are of the view that the addition made by the AO u/s 68 and sustained by the Ld. CIT(A) is not sustainable in law. As regards the taxability of the amount of ₹ 50 lakhs under the head capital gains, we find that since it is an advance without giving any possession and that to under dispute and also the entire amount of ₹ 50 lakhs has been shown by the assessee in his capital account as on 31.03.2003 and also offered for taxation, therefore, we are of the view that from this point of view also the said amount is not taxable in the hands of the assessee for the year under consideration. Accordingly, the addition of ₹ 50 lakhs made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as framed the assessment by enhancing income of both couple (assessee and his wife) for an amount of ₹55 lakh each under the head protective assessment concept in order to avoid any unforeseen loss to the Revenue. So the income of both couple (assessee) enhanced by an amount of ₹55 lakh respectively. 7. Aggrieved assessee preferred appeal before Ld. CIT(A) who upheld the action of AO by observing as under:- 6. I have considered the submission of the appellant and perused the assessment order. I have also gone through the relevant documents filed in the course of assessment proceedings and the remand proceedings. The facts of the case have already been discussed as above. On careful consideration of the facts and in law, I find no force in the submission of the appellant that the receipt of ₹ 55 lakhs from Percept Advertising Ltd, credited in the appellant s capital account was a capital receipt and not liable to tax. From the assessment order, it is observed that the AO held that the appellant s wife, Mrs. Yasod Deora was the licensee of the flat No 1, Turf View, Hornby Vellard Estate, Worli, Mumbai and the appellant was staying in the said flat in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Consequently, Percept Advertising Ltd. paid another sum of ₹ 5 lakhs which was deposited by the appellant in his bank account and handed over the possession of the flat to Percept Advertising. Thus, the final settlement of dispute was made in the year under consideration i.e. AY 2003-04. The appellant transferred and credited the sum of ₹ 55 lakhs in his capital account but did not offer the same for tax for the reasons that the receipt was capital in nature. It is observed that in the course of assessment proceedings as well as the appellate proceedings, the appellant has repeatedly argued that the receipt of ₹ 55 lakhs was not for the surrender of tenancy right because neither the appellant nor his wife were the tenant of the flat. The sum was received to vacate the forceful unauthorized possession and under the Income tax Act there is no provision to tax the sum received to vacate forceful unauthorized possession of a capital asset. According to the appellant the sum of ₹ 55 lakhs was received to extinguish a capital right i.e. the right to possessions of the property. However, I am not inclined to agree with the contention of the appellant because i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case, the learned CIT(A) erred in passing a vague order by holding that the receipt of ₹ 55 lakhs by the appellant is taxable in his hands as income from other sources/ capital gain, neglecting to take into account the fact that the rates of taxes from income from other sources and capital gains are different. 5. On the fats and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of ₹ 55 lakhs on erroneous reasoning. Shri Ravi Tulsiyan, Ld. Authorized Representative appearing on behalf of assessee and Shri David Z. Chawngthu, Ld. Departmental Representative appearing on behalf of Revenue. 8. We have heard rival contentions of both the parties and perused the materials available. Ld. AR submitted written submissions along with paper book running pages from 1 to 28 and stated that it is clear case of adverse possession of the disputed flat by Mr Mrs. Deora. None of them was having the right of possession of the flat neither as a Director or employee of M/s Mahavir Leather Board Pvt. Ltd. In fact the husband was allowed to reside in the flat on account of his directorship in Kedia Disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also an extinguishment of the said right. Hence, in accordance with the different clauses of Sec.2(47) of the Act, there was a transfer of the capital asset of the assessee during the year under consideration. Any profit or gain arising out of this transfer is, thus, liable to be assessed to tax under the head capital gains as has been done by the AO. However, this capital gain is required to be computed for tax purpose in accordance with the computation provisions of Sec. 48 of the Act. It may, however, be clearly seen that there was no cost of acquisition of the right of possessions of the said disputed flat, as the assessee did not spend anything for obtaining the said possession. Hence, the mechanism for Computation of capital gain with reference to cost of acquisition of the asset transferred cleaerlyfails. The ultimate result is, thus, that the above mentioned capital gains is not exigible to income tax, as has been held by the Hon'ble Supreme Court in the case of Srinivasa Setty (B.C) 128 ITR 294 (SC) and repeated by the Hon'ble Supreme Court in case of PNB Finance Ltd. 220 CTR 110. On the other hand, Ld. DR vehemently relied on the orders of authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of, inter alia, a tenancy right, good will etc. would be taken as nil. 8. Thus, it may be noted that after the amendment of 1995, certain assets like goodwill, tenancy rights etc. have been charged to tax by specifically providing that if there is cost incurred by the assessee in this respect, the cost shall be taken as nil. However, we find that vide amendment, particular asses like goodwill, tenancy rights, trade mark etc. have been brought into the ambit of charging section. However, the rights obtained by way of adverse possession have not been included in the provision neither in the charging section 45 nor in the section 48 which provides mode of computation. Here is no any provision regarding the charging of capital gains tax on an asset title to which has been acquired in recognition of rights of adverse possession. Even u/s. 49, the cost of the asset with regard to certain mode of acquisition, such as by way of gift or will, by succession, inheritance or devolution or on any distribution of assts on the dissolution of a firm, body of AOP or liquidation of company etc.; the rights attained in an asset on account of adverse possession have not been included. Though the P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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