Mrs. Manju Avinash Wardekar, Pune v. ITO Wd. 3(1),, Pune

ITA 555/PUN/2009 | 2002-2003
Pronouncement Date: 06-07-2011 | Result: Dismissed

Appeal Details

RSA Number 55524514 RSA 2009
Assessee PAN AAIPW1177C
Bench Pune
Appeal Number ITA 555/PUN/2009
Duration Of Justice 2 year(s) 1 month(s) 26 day(s)
Appellant Mrs. Manju Avinash Wardekar, Pune
Respondent ITO Wd. 3(1),, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 06-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 06-07-2011
Assessment Year 2002-2003
Appeal Filed On 11-05-2009
Judgment Text
1 ITAS 555-556/PN/2009 SHRI MANJU A.WADEKAR IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JM AND SHRI D. KARUNAKARA RAO AM ITA NOS.555-556/PN/2009 (ASST.YEARS: 2002-03 & 2004-05) SHRI MANJU AVINASH WA R DEKAR PUNE PAN AAIPW1177C APPELLANT VS. INCOME TAX OFFICER WARD 3(1) PUNE . RESPONDENT APPLLICANT BY : SHRI SUNIL GANOO CA RESPONDENT BY : SHRI SANJAY SINGH ORDER PER D. KARUNAKARA RAO AM BOTH THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX II PUNE DT.26-3- 2009 PASSED U/S 263 OF THE INCOME TAX ACT 1961 (THE ACT) FOR THE ASSESSMENT YEARS 2002-03 AND 2004-05 RESPECTIVELY. 2. THE ASSESSEE IS AGGRIEVED AGAINST THE ORDER OF T HE CIT AND MENTIONED THAT ALL THE GROUNDS IN THE APPEAL RELATE TO AND REVOLVE ARO UND THE ERRONEOUS ORDER OF THE CIT AND INVALID JURISDICTION ASSUMED BY HIM. OTHER WISE ESSENTIALLY THE ISSUE RELATES TO THE MANNER OF COMPUTATION OF THE CAPITAL GAINS O N TRANSFER OF LEASEHOLD RIGHTS IN THE LAND BY WAY OF DEVELOPMENT AGREEMENT. IN THIS REGARD LEARNED COUNSEL FOR THE ASSESSEE FILED A COPY OF THE ORDER OF THIS TRIBUNAL VIDE ITA NOS. 606 607 AND 2 ITAS 555-556/PN/2009 SHRI MANJU A.WADEKAR 625/PN/2008 IN THE CASE OF SMT.SEEMA HEMANT SHIRALI AND ITA NO.739/PN/08 IN THE CASE OF MANJU A.WADEKAR FOR THE ASSESSMENT YEAR 200 3-04. THE SAID ORDER WAS DT.11-6-2010. THE LD.COUNSEL MENTIONED THAT ITA 73 9/PN/08 FOR ASSESSMENT YEAR 2003-04 IS ONE AND THE SAME ASSESSEE WHOSE APPEALS ARE TO BE DECIDED IN THIS ORDER. 3. COMPARING THE GROUNDS THE LD.COUNSEL MENTIONED THAT GROUNDS ADJUDICATED BY THE TRIBUNAL IN THE SAID ORDER DT. 11-6-2010 SUP RA ARE ONE AND THE SAME AND THEY RELATE TO INVALID ASSUMPTION OF JURISDICTION BY THE CIT U/S 263 OF THE ACT AND THE DIFFERENCE IN THE EXPRESSIONS SUCH AS LEASE RIGHTS V. TENANTS RIGHTS WITHIN THE MEANING OF THE PROVISIONS OF SEC.55(2) AND 55(2)(A) OF THE ACT. THE LD.COUNSEL FAIRLY MENTIONED THAT AS PER THE DISCUSSION GIVEN BY THE T RIBUNAL IN PARAGRAPH 6.8 OF THE SAID ORDER DT. 11-6-2010 BOTH THE PRESENT APPEALS ARE TO BE DISMISSED IN VIEW OF THE FINDING OF THE TRIBUNAL VIDE PARAGRAPH 6.8 OF THE O RDER OF THE TRIBUNAL DT.11-6-2010 SUPRA. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE SAID ORDER OF THE TRIBUNAL. IN VIEW OF THE IMPORTANCE ATTACHED TO TH E RELEVANT PARAGRAPH 6.8 OF THE ORDER OF THE TRIBUNAL THE SAME IS REPRODUCED AS UN DER. FROM ABOVE DISCUSSIONS WE COME TO THE CONCLUSION THAT THERE MAY BE A SIGNIFICANT DIFFERENCE BETWEEN LEASE OR LICENCE BUT THE DIFFER ENCE BETWEEN LEASE AND TENANCY IS SUBTLE. PARTICULARLY SPEAKING IN CASE OF LICENCEE INTEREST OF THE LICENSOR IN THE PROPERTY DOES NOT TRANSFER TO THE LICENCEE THE LIC ENCEE IS ONLY AUTHORIZED TO USE THE PROPERTY. FOR EXAMPLE ALLOTMENT OF AN ACCOMMODATIO N BY THE EMPLOYER TO ITS INCUMBENT. THE TENANCY IS THE BASIC REQUIREMENT FO R LETTING OUT OF A PROPERTY FOR SOME CONSIDERATION WHEREIN INTEREST OF A LESSOR/LA ND LORD IN THE PROPERTY TO AN EXTENT IS ALSO TRANSFERRED TO THE LESSEE/TENANT FOR SOME CONSIDERATION WHICH IS CALLED RENT. IN OTHER WORDS THE TENANCY IS A BROADER TER M IN COMPARISON TO LEASE. IT IS BETTER UNDERSTOOD THAT TENANCY STILL EXISTS AFTER T ERMINATION OF LEASEHOLD RIGHT OF A LESSEE. HE CONTINUES IN POSSESSION WITHOUT TITLE A ND WITHOUT ANY AGREEMENT WITH THE PERSON IN WHOM THE RIGHT OF POSSESSION. IT IS PERHA PS THE REASON THAT THE TERMS TENANCY TENANT ARE GENERALLY USED AS SYNONYMS OF LEASE LESSEE EVEN IN A CASE OF 3 ITAS 555-556/PN/2009 SHRI MANJU A.WADEKAR LEASE AGREEMENT. WE THEREFORE DO NOT FIND SUBSTAN CE IN HE CONTENTION OF THE LEARNED AR THAT THE PROVISIONS OF SEC. 55(2) OF THE ACT ARE INAPPLICABLE IN THE CASE OF LEASE HOLD RIGHTS. IT IS ALSO NOT RELEVANT IN RELA TION TO THE PROVISIONS OF INCOME TASX ACT AS DISCUSSED ABOVE. IN SEC.194(1) TERMS LEASE SUB-LEASE TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF ANY L AND OR BUILDING ETC. HAVE BEEN USED WITH REFERENCE TO PAYMENT OF RENT. THE VERY P URPOSE OF WHICH IS AS TO WHATEVER TERM IT IS CALLED OR BY WHATEVER ARRANGEME NT THE USE OF LAND OR BUILDING ETC. IS ALLOWED AGAINST THE PAYMENT THE PAYMENT WI LL BE TERMED AS RENT. UNDISPUTEDLY IN THE PRESENT CASE BEFORE US THE LA ND HAS BEEN TRANSFERRED TO THE ASSESSEE FOR 999 YEARS ON A NOMINAL RENT GIVING THE M RIGHTS EVEN TO ALIENATE OR PART WITH THE PROPERTY TO OTHERS IN THE MANNER THEY WISH TO. THUS WE FIND SUBSTANCE IN THE ALLEGATION MADE BY THE LEARNED DR THAT THE OWNE RSHIP OF THE LAND WAS ACTUALLY TRANSFERRED TO THE ASSESSEES BY SHRI AVINASH WARDEK AR. UNDISPUTEDLY BEFORE THE AMENDMENT IN SEC.55 IN 1995 THE LAW WAS THAT IF T HE COST OF ACQUISITION COULD OT IN FACT BE DETERMINED THE TRANSFER OF SUCH CAPITAL AS SETS WILL DO NOT ATTRACT CAPITAL GAIN TAX. AFTER AMENDMENT TO SEC.55(2) WITH EFFECT FROM 1-4-1995 AND APPLIED IN RELATION TO THE ASSESSMENT YEAR 1995-96 AND SUBSEQUENT YEARS THE POSITION IS DIFFERENT. AS PER THIS AMENDMENT IN SEC.55(2) FOR THE PURPOSE OF SEC. 48 AND 49 COST OF ACQUISITION IN RELATION TO A CAPITAL ASSET BEING T ENANCY RIGHTS (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHA SE FROM A PREVIOUS OWNER MEANS THE AMOUNT OF PURCHASE PRICE AND; (II) IN ANY OTHER CASE NOT BEING A CASE FALLING UNDER CLAUSE (I) TO (IV) OF SUB-SEC.(1 OF SEC.49 SH ALL BE TAKEN TO BE NIL. IN THE PRESENT CASE BEFORE US THE ASSET HAS NOT BEEN ACQ UIRED BY THE ASSESSEES BY PURCHASE FROM A PREVIOUS OWNER HENCE CLAUSE (I) TO SEC.55(2)(A) IS NOT APPLICABLE. IN THE PRESENT CASE CLAUSE (II) TO THE SAID SECTIO N IS APPLICABLE WHEREIN THE COST OF ACQUISITION SHALL BE TAKEN TO BE NIL. I THE CASE OF CADELL WEAVING MIL CO. (P) LTD. V. CIT & OTHERS (2001) 249 ITR 265 (BOM) IT HAS BEEN HELD THAT SURRENDER OF TENANCY RIGHTS FOR CONSIDERATION IS TRANSFER GIVING RISE TO CAPITAL GAINS. THE ASSESSMENT YEAR INVOLVED THEREIN WAS 1990-91 I.E. BEFORE THE AMENDM ENT IN SEC.55(2) OF THE ACT. HENCE IT WAS HELD THAT WHERE NO COST OF ACQUISITIO N CAN BE COMPUTED FULL VALUE OF ASSET CANNOT BE TAXED AS INCOME FROM OTHER SOURCES AND ONLY GAINS FALLING U/S 45 CAN BE TREATED AS INCOME. SIMILAR VIEW HAS BEEN EX PRESSED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. D.P.SANDHU BROTHERS CHE MBUR PVT.LTD. AND OTHERS (2005) 273 GTR 1 (SC) AS IT ALSO PERTAINS TO ASSESS MENT YEAR 1987-88. THUS THERE IS NO DISPUTE THAT THE SURRENDER OF THE TENANCY RIG HT WAS A TRANSFER AND THE CONSIDERATION RECEIVED THEREFORE WAS A CAPITAL RECE IPT WITHIN THE MEANING OF SEC.45. THERE IS NO CHANGE IN THIS RATIO THE ONLY CHANGE A FTER AMENDMENT IN SEC.55(2) OF THE IT ACT WITH EFFECT FROM 1-4-1995 IS THAT NOW TH E COST OF ACQUISITION IN SUCH TRANSFER WILL BE DETERMINED AS PER THE AMENDED PROV ISIONS. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. D.P.SANDHU BROTHERS CHE MBUR PVT.LTD. (SUPRA) BEING VERY MUCH AWARE ABOUT THE SAID AMENDMENT IN SEC.55(2) OF THE IT ACT HAS BEEN PLEASED TO HOLD FURTHER THAT THOUGH THE COST OF ACQUISITION OF LEASEHOLD RIGHTS CAN BE DETERMINED IN VIEW OF THE STAND TAKEN BY THE DEPART MENT BEFORE THE HIGH COURT THAT THE COST OF ACQUISITION OF TENANCY RIGHTS WAS INCAP ABLE OF BEING ASCERTAINED THE DECISION OF THE HONBLE HIGH COURT HAD TO BE UPHELD . THIS HOLDING OF THE HONBLE SUPREME COURT WAS THERE KEEPING IN MIND HE POSITION BEFORE THE AMENDMENT IN 4 ITAS 555-556/PN/2009 SHRI MANJU A.WADEKAR SEC.55(2) OF THE IT ACT. THE PURPOSE OF MENTIONING THIS FINDING BY US IS THAT THE HONBLE SUPREME COURT THEREIN DID NOT FIND IT MATER IAL TO DISTINGUISH BETWEEN LEASEHOLD RIGHTS AND TENANCY RIGHTS FOR THE PURPOSE OF DETERMINING THE COST OF ACQUISITION. THE HONBLE KARNATAKA HIGH COURT IN T HE CASE OF CIT V. M.N.ENTERPRISES (2007) 293 ITR 35 (KAR) HAS BEEN PLEASED TO HOLD TH AT TRANSFER OF LEASEHOLD RIGHT GIVES RISE TO CAPITAL GAIN AND IT IS NOT STATUTORY DUTY OF ASSESSING OFFICER TO DETERMINE COST OF ACQUISITION OF LEASING RIGHTS ON THE BASIS OF FACTS AND EVIDENCE IN EACH CASE. THUS WHEN THE LAW ON THE ISSUE IS UNAMBIGUOUS THE RE IS NO NEED TO ENTERTAIN ANY CONTRARY ARGUMENT AS ADVANCED BY THE LEARNED AR. THERE IS ALSO NO SUBSTANCE IN THE ARGUMENT OF THE LEARNED AR THAT NON CHARGING OF PREMIUM WHICH IS GENERALLY CHARGED IN SUCH TYPE OF LEASE AGREEMENT THE AMOUNT MA BE TREATED AS GIFTS BY SHRI AVINASH WARDEKAR TO THE ASSESSEES SINCE IN OUR VIE W A GIFT CANNOT BE OF DOUBLE NATURE I.E. GIFT AS WELL AS LEASE HOLD RIGHT AT TH E SAME TIME. ETHER IT WILL BE A GIFT OR A LEASE. WITHOUT CONSIDERING THE ABOVE MATERIAL AS PECT OF THE RATIO AD THE LAW AS ON THE DATE ON THE ISSUE THE AO HAS COMMITTED ERROR OF AW IN ACCEPTING THE STAND OF THE ASSESSEES THAT IN THE PRESENT CASE IT WAS NOT P OSSIBLE TO DETERMINE THE COST OF ACQUISITION TO COMPUTE THE CAPITAL GAINS IN THE HAN DS OF THE ASSESSEES HENCE PROVISIONS OF SEC. 55(2) ARE NOT ATTRACTED NOR THE VALUE OF THE LAND N QUESTION AS ON 11-7-1989 WITH INDEXATION RATE OR THE FAIR MARKET VALUE AS PER SEC. 55(3) OF THE ACT SHOULD HAVE BEEN ACCEPTED BY THE AO FOR DETERMINING THE COST OF ACQUISITION. THE ASSESSMENT ORDERS UNDER CONSIDERATION HAVE THUS RIG HTLY BEEN HELD BY THE LEARNED CIT AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTE REST OF REVENUE WITHIN THE PROVISIONS OF SEC. 263 OF THE IT ACT. THE SAME IS UPHELD. THE RELATED GROUNDS IN APPEALS (ITA NOS. 606 607 AND 739/PN/08) ARE REJEC TED. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE I N THE ASSESSEES OWN CASE VIDE ITA NO.739/PN/2008 DT. 11-6-2010 SUPRA WE ARE OF T HE OPINION THAT THE ASSESSMENT ORDERS UNDER CONSIDERATION ARE RIGHTLY HELD BY THE CIT AS ERRONEOUS IN SO FAR AS THEY ARE PREJUDICIAL TO THE INTERESTS OF THE REVENUE WIT HIN THE MEANING OF THE PROVISIONS OF SEC.263 OF THE ACT. THEREFORE THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE DISMISSED. 5. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE D ISMISSED. ORDER PRONOUNCED IN THE COURT ON -7-2011. (SHAILDENDRA KUMAR YADAV) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUN TANT MEMBERS PUNE DATED THE JULY 2011 *VNR 5 ITAS 555-556/PN/2009 SHRI MANJU A.WADEKAR COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEES AS MENTIONED IN THE CAUSE TITLE 2. ITO WARD 3(1) SOLAPUR. 3. CIT -II PUNE. 4. CIT CONCERNED 5. D.R. ITAT A BENCH PUNE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE