TMI Blog1996 (7) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company has acquired the tenancy rights in respect of 4th to 8th floors of Suraj Plaza-I Building as per agreement dated 1-7-1978 which was executed on a stamp paper of Rs. 10. In July 1978, the building of Suraj Plaza was under construction. As per lease agreement dated 1-7-1978, the assessee-company entered into a rent agreement with the HUF and acquired the tenancy rights at monthly rent of Rs. 16,480. The company also paid advance of Rs. 6 lacs to the said HUF at an interest rate of 6% per annum. During 1984 the said HUF wanted the said premises in Suraj Plaza-I to be vacated and vacant possession handed over to them by the assessee. Consequently, the Board of Directors of the assessee-company, viz., Amora Chemicals Pvt. Ltd. resolved vide Resolution dated 10-6-1984 to relinquish the tenancy rights in respect of 4th to 8th floors of Suraj Plaza-I on a consideration of a sum of Rs. 15 lacs to be paid to the assessee as compensation for such transfer and relinquishment of tenancy rights. Consequent to the above Resolution the assessee-company relinquished the tenancy rights in 1985 and it received the sum of Rs. 15 lacs in the accounting year relevant to assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 8,50,000 and further this amount of Rs. 8,50,000 was obtained by the assessee-company by getting over-draft facilities from the Bank to whom the premises were sub-let by the assessee-company for which the assessee paid interest at the rate of 15% per annum. The CIT(A) after referring to the judgment of the Hon'ble Supreme Court in the case of A.R. Krishnamurthy v. CIT [1989] 176 ITR 417/43 Taxman 30 came to the conclusion that the amount of Rs. 8,50,000 which the assessee has given to the HUF as loan at 6% per annum was an added consideration over and above the lease rent, and it can be safely inferred that the losses suffered by the assessee-company for having given Rs. 8,50,000 to the HUF at 6% interest having borrowed the same amount from the bank at 15% interest per annum, was the consideration for the acquisition of the tenancy rights. Accordingly, the CIT(A) directed the Assessing Officer to find out the difference of such interest in each of these years from the year in which the loan was advanced till the date of transfer of the property and receipt of Rs. 15 lacs. According to the CIT(A), the discounted value of total of this difference in interest for all the years can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in part to its locality, in part to the use to which the premises were put, in part to the nature of the business carried on, if commercial premises, in part to the success of the business conducted, in part to the trend of the customers or litigants, in part to the likelihood of competition and in part to several other unpredictable factors, like whims and eccentricities of persons wanting to acquire the tenancy rights. Accordingly Shri Mehta submitted that there could be no value of these tenancy rights in terms of money. Reliance was also placed on the decision of the Supreme Court in the case of A. Gasper v. CIT [1991] 192 ITR 382 at page 385 wherein, in almost similar circumstances, the Hon'ble Supreme Court observed that the amount received on surrendering of tenancy rights was not liable to capital gain tax in view of the decision of the Supreme Court in the case of B.C. Srinivasa Setty but since this decision was not referred to and could not have been referred to before the Hon'ble Calcutta High Court who decided the case as reported in A. Gasper v. CIT [1979] 117 ITR 581 and no question was raised before the Tribunal as well as before the High Court with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A). 7. Shri D.A. Mehta, the learned representative of the assessee in rebuttal submitted that the decision of the Special Bench of Tribunal in the case of Cadell Weaving Mill Co. (P.) Ltd. is not applicable to the facts of the case because in the said decision it was held that the amount received by an assessee on the surrendering of tenancy rights is a casual and non-recurring receipt and was liable to income-tax under section 2(24) read with section 10(3) of the Act. It was submitted that in the case of the assessee, the Assessing Officer as well as the CIT(A) both have held that the amount of Rs. 15 lacs received by the assessee was capital receipt chargeable to capital gains tax under section 45 and if it is now held that it is in the nature of casual and non-recurring receipt as per the ratio of the decision of Special Bench of ITAT, then, it will tentamount to enhancement of the income by the assessee by the Tribunal although no appeal or cross-objection in this regard was filed by the Revenue which is not permissible in view of the decision of the Supreme Court in the case of State of Kerala v. Vijaya Stores [1979] 116 ITR 15 wherein it is held that the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of 15% per annum. The income from rent was being treated by the assessee-company as its business income. The company granted loan to the HUF at cheaper rate so that the HUF may be able to construct more floors, which could be available to the assessee on the same monthly rent as agreed between the assessee-company and the HUF. The expenses in the form of interest at 15% on loan of Rs. 8,50,000 taken by the company from the Bank of Baroda which was given to the HUF at a cheaper rate of interest of 6% per annum was treated as expenses for business purpose and was allowed as a deduction. It is also worth noting that the assessee-company had not itself occupied all leased floors but had straightway sub-let the same to the Bank of Baroda. In the lease agreement dated 1-7-1978 there is no bar against sub-letting and since immediately after getting the floors on lease, the company sub-let the same to Bank of Baroda, it can be inferred that the rent paid by the assessee-company was not only for the use of the premises for its own purpose but also for acquiring right to sub-let it to another person for business purpose. As such it has to be held that the acquisition of tenancy rights ..... X X X X Extracts X X X X X X X X Extracts X X X X
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