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TMI Blog2015 (12) TMI 1836X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. We take up assessee's appeal in ITA No.281/Kol/2013. 4. There was a residential flat in Mumbai bearing address Flat No. 1 Turf View, Hornby Vellard Estate, Worli, Mumbai (hereinafter) known as disputed flat. The flat was owned by M/s Mahabir Loather Boards Pvt. Ltd. (MLBPL for short) and this disputed flat was occupied by Mrs. Yashod Deora along with her husband Sri Pradeep Kumar Deora who was then Director/employee in MLBPL having address at 67/69 M.K. Mark Dariyanagar, House, marine Lines, Mumbai-400002, M/s Percept Advertising limited. (PAL in short) had purchased the disputed flat from MLBPL by virtue of a purchased deed dated 25.02.1997. Since the disputed flat was occupied by Mr. P.K.Deora therefore M/s Percept Advertising Ltd. entered into a settlement deed on 18.04.1997. By virtue of said settlement deed, Ms Percept Advertising Ltd., was to pay a sum of Rs.50 lakh and Mr. P.K.Deora agreed to surrender the right of the said disputed flat. Mr. P.K.Deora agreed to vacate the disputed flat on 30.09.1998 and also agreed to pay monthly compensation of Rs.5,000/- till the date of vacation of the disputed flat. However Mrs. Yashod Deora did not vacate the disputed flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. On question by AO to assessee regarding the source of Rs.55 lakh the assessee explained the entire facts of the case as stated aforesaid and argued that said compensation received by assessee for an amount Rs.55 lakh is not subject to tax under the Income Tax Act as the said disputed flat was occupied by assessee neither on account of ownership nor on account of any tenancy. The said property stand occupied by assessee under forceful possession. Therefore, the said receipt has to be considered to be a capital nature, therefore not liable to tax. The said amount received on account of vacating the said property held under forceful possession is not covered by any provision of capital gains for charging of income tax under the Act. The said amount would have been chargeable if the same had been received in order to vacate the property if the assessee had been a tenant thereof. But the assessee had occupied the said premises forcefully and there is no provision under the Act for charging such capital receipt. However, AO has disregarded the claim of assessee stating that there was a lawful eviction notice filed by M/s Percept Advertisement Ltd. Had there been any forceful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh, Indore. It is stated by the appellant that the flat under disputed at Mumbai was given by the said company to reside in the capacity of a director. That, in the month of June, 1996, he resigned from the directorship of Kedia Distelleries Ltd., In the light of the above facts, I am of the opinion that, initially it cannot be said that the flat was under forceful possession of the appellant because he had occupied the flat in the capacity of director of Kedia Distelleris Ltd., and the said company allowed him to occupy the same. The owner company, i.e. Mahavir Leather Board Pvt. Ltd., sold the flat to percept Advertising Ltd., and hence thereafter the appellant was required to vacate the flat because he was no more the director of the company which allowed him to occupy the flat. However, he did no vacate the flat and hand over the possession to the present owner. In order to get the peaceful vacant possessions of the flat, the present owner entered into an agreement with Mr. & Mrs. Deora and paid a sum of Rs. 50 lakhs which was deposited by the appellant in his bank account and showed the amount in his balance sheet as on 31.03.1998 under the head liabilities. Even after receivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely liable to tax as casual receipt under the head "income from other sources", if not as capital gain. I am of the opinion that the income is taxable substantively in the hands of the appellant because he was staying in the flat in the capacity of director of Kedia Distelleries Ltd., and did not vacate the flat after resigning from that company. Further, the entire receipt of Rs. 55 lakhs was received by him, deposited in his bank account and also credited in his capital account. Therefore, the receipt is taxable in the hands of app on substantive basis and not in the hands of his wife Yashod Deora. In view of above, it is held that the receipt of Rs. 55 lakhs is taxable in the hands of appellant as income from other sources/capital gain. The addition of Rs. 55 lakhs made by the AO is confirmed. The ground nos. 1, 2 and 3 are dismissed." Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us by raising following grounds:- "1. The orders passed by the lower authorities are arbitrary, erroneous, without proper reasoning, invalid and bad in law. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred din holding that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction by way o making an application before a judicial body viz., the Competent Authority, Konkan Division, Mumbai, for recovering the said possession from the assessee. As per the true facts of the case also, the husband of the assessee had acquired the right to possess the property as a director of M/s Kedia Distilleris Ltd., and the wife acquired the right to reside in the flat on account of being her husband. Therefore, this was a valuable right acquired and also enjoyed by her which required a legal action by km/s percept Advertising Ltd., to take away the right. Finally, both the parties arrived at a mutual settlement for delivery of the possession by the assessee on payment of a sum of Rs. 55 lakhs to the husband of the assessee by the other party. This settlement was also approved of and ratified by the Competent Authority. Hence, it can be seen that the right of possession of the flat was a legal right which had to be extinguished by not only a process of law but also substantial payment by the other party. Hence, it must be held that the said right of possessions was not only a 'property' as enunciated in the various judicial decisions cited above but it was also a valuab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the same facts of the present case and the relevant extract of the ITAT Mumbai para-7-8 in ITA No. 807/Mum/2013 dated 11.09.2015 is reproduced below:- "7. We have considered the rival contentions. We find that the issue is covered in favour of the assessee by a number of decisions of the Hon'ble Supreme Court as well as various High Courts of the country. The base decision is income CIT v. B.C. Srinivasa Shetty (1981) 128 ITR 294; (1981) 2 SCC 460 wherein the Hon'ble Supreme Court has held that all transactions encompassed by section 45 must fall within the computation provisions of section 48. If the computation as provided under section 48 could not be applied to a particular transaction, it must be regarded as "never intended by section 45 to be the subject of the charge". The Hon'ble Supreme Court in the case of "PNB Finance Ltd. vs. CIT (2008) 307 ITR 75' has reiterated the above proposition of law. In the case of CIT v. B.C. Srinivasa Shetty (supra) the court was considering whether a firm was liable to pay capital gains on the sale of its goodwill to another firm The court found that the consideration received for the sale of goodwill could not be subjected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Bombay High Court in the case of CIT vs. Star Chemicals(Bombay) Pvt. Ltd. (Income Tax Appeal No. 1110 of 2009 & Income Tax Appeal No. 1153 of 2009, dated 14th August, 2009) wherein the Hon'ble court while answering the question of chargeability of capital gains in relation to an asset/title which was acquired by way of adverse possession, has held that the Tribunal was right in holding that for want of acquisition cost, capital gains tax would not arise. Since a direct decision of the Hon'ble jurisdictional court tin relation to the chargeability of capital gain on asset acquired by way of adverse possession is available, hence, the same is binding upon this Tribunal. We therefore hold that no capital gain are chargeable to tax in relation to the asset acquired by way of adverse possession. Appeal of the assessee is allowed and order of the lower authorities is set aside." In view of the above, we find that there was no tenancy right available with the assessee which is, in fact, chargeable under the Income Tax Act under the head "income from capital gains". However, in the present case, assessee was having adverse charge on the property and charge of tax on such trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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