By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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4 (2008) 114 ITD 127 (Ahd.)
ITO v. Heena Agriculture (P) Ltd.
A.Y. 1992-93. Dated : 8-9-2006
S. 69 — On-money received on surrender of leasehold rights in
agricultural land cannot be brought to tax u/s.69 as income from undisclosed
sources —It is a capital receipt.
S. 45 r/w S. 55 — The gain on surrender of tenancy right
could not be taxed u/s.45, for the period prior to the amendment brought into
statute with effect from 1-4-1995, in the provisions of S. 55(2).
Facts :
The assessee had acquired leasehold rights for a period of 98
years in an agricultural land. In the relevant assessment year, it surrendered
the said rights in favour of the original owner allegedly without any
consideration. However, during the course of search, the director of the
assessee company had given a statement on oath that he had received a sum of
Rs.30 lakhs as on-money on behalf of the assessee on surrendering the leasehold
rights in a land. The sum of Rs.30 lakhs had been brought to tax under these
circumstances, under the provisions of S. 69.
On appeal, the CIT(A) deleted the addition.
On Revenue’s appeal, the Tribunal held the following :
1. The amount had been taxed on the basis of statement of
the director recorded u/s.132(4) and there was no evidence on record to show
that the said amount related to any other source. Therefore, the amount had
been rightly treated by the CIT(A) as being related to the surrender of
leasehold rights of subject agricultural land. Therefore, addition could not
be made u/s.69 because subject sum was not an un explained investment as
rightly held by the CIT(A).
2. There cannot be any dispute on the argument that
leasehold rights constitute capital asset. However, there was no material on
record to suggest that the assessee had incurred any cost for acquiring the
said tenancy right. The contention of the assessee in this regard was that
there being no cost of acquisition of tenancy right, the gain arising
therefrom cannot be taxed as capital gain as per decision of SC in the case of
CIT v. B. C. Srinivasa Shetty. Following the said case, the Special
Bench in the case of Cadell Weaving Mill Co. (P) Ltd. has held that the amount
received for surrender of tenancy right is not liable for capital gains tax
prior to the amendment brought into the statute in the provisions of S. 55(2)
w.e.f. 1-4-1995.
3. In view of the said legal and factual aspects, the
Commissioner (Appeals) was right in holding that the amount of Rs.30 lakhs
could not be brought to tax, his order is upheld and the appeal of the
Department is dismissed.
Cases referred to :
(i) Cadell Weaving Mill Co. (P.) Ltd v. ACIT, (1955)
55 ITD 137 (Bom.) (SB),
(ii) Rajendra Mining Syndicate v. CIT, (1961) 43 ITR
460 (AP),
(iii) CIT v. Sandu Bros. Chembur (P.) Ltd., (2005)
273 ITR 1,
(iv) CIT v. B. C. Srinivasa Shetty, (1981) 128 ITR
294.
