Vinod V. Chhapia v. ITO - Taxpublishers.in

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The Tax PublishersITA No. 3178 (Mum) of 2010 2013 TaxPub(DT) 1123 (Mum-Trib) : (2013) 053 (II) ITCL 0217 : (2013) 056 SOT 0465 Income Tax Act, 1961 --Head income--Capital gains or income from other sources Surrender of tenancy rights v. consent for transfer of tenancy rights --B the of tenant was having tenancy rights over the property owned by assessee. He surrendered the said rights and property in favour of landlord to facilitate renting of the property to new tenants. New tenant paid consideration to old tenants and also paid Rs. 7.26 lakhs to the assessee. Assessee gave possession of the property to new tenant on monthly nominal rent. Assessee treated the amount of 7.26 lakhs as amount received on surrender of tenancy, right taxable under the head capital gains and claimed exemption under section 54E. As per assessing officer, was a transfer of right of residence to the new tenants by the existing tenant, therefore it was chargeable to tax under the head 'income from other sources'. Commissioner (Appeals) confirmed the order of assessing officer and assessee filed appeal against it. Assessee contended that gains made by the assessee was in the context of the surrender of certain capital rights attached to the immovable property and therefore, the gains was capital gain attracting the provisions relating to 'capital gains'. Revenue mentioned that the assessee had not received the tenancy rights from the original tenant and had not paid the consideration for receiving the same, therefore, the principle relating to the surrender of tenancy rights was not applicable and gain received by the assessee was rightly taxed as 'income from other sources'. *Held :* The consideration of Rs. 7.26 lakhs paid by the new tenant was consent of the landlord for the transfer of tenancy rights between the new and old tenants. Agreement indicated that old tenant surrendered the tenancy rights along with the property to the assessee. If that was true, there was no need for the old tenant to be signatory to the agreement giving the property on rent to the new tenant for consideration of Rs. 14.48 lakhs for which there was need for consent of the landlord. The consideration for consent implied no transfer of any capital asset by the landlord to the new tenant. Further, there was no evidence to inter that the house was in vacant possession of the assessee of after end of the alleged tenancy of the old tenant and there was continuity of renting of property. Therefore, the amount of Rs. 7.26 lakhs, the consideration for consent constituted a windfall gain to the assessee. Income Tax Act, 1961, Section 2(47) read with sections 45 and 56 In The ITAT, Mumbai F Bench D. Manmohan (MZ) & D. Karunakara Rao, A.M. Vinod V. Chhapia v. ITO ITA No. 3178 (Mum) of 2010 A.Y. 2006-07 21 November, 2012 Appellant by : Chetan A. Karia Respondent by : Om Prakash Meena. ORDER SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No. 3178 (Mum) of 2010
2013 TaxPub(DT) 1123 (Mum-Trib) : (2013) 053 (II) ITCL 0217 : (2013) 056 SOT 0465

Income Tax Act, 1961

--Head income--Capital gains or income from other sources Surrender of tenancy rights v. consent for transfer of tenancy rights --B the of tenant was having tenancy rights over the property owned by assessee. He surrendered the said rights and property in favour of landlord to facilitate renting of the property to new tenants. New tenant paid consideration to old tenants and also paid Rs. 7.26 lakhs to the assessee. Assessee gave possession of the property to new tenant on monthly nominal rent. Assessee treated the amount of 7.26 lakhs as amount received on surrender of tenancy, right taxable under the head capital gains and claimed exemption under section 54E. As per assessing officer, was a transfer of right of residence to the new tenants by the existing tenant, therefore it was chargeable to tax under the head 'income from other sources'. Commissioner (Appeals) confirmed the order of assessing officer and assessee filed appeal against it. Assessee contended that gains made by the assessee was in the context of the surrender of certain capital rights attached to the immovable property and therefore, the gains was capital gain attracting the provisions relating to 'capital gains'. Revenue mentioned that the assessee had not received the tenancy rights from the original tenant and had not paid the consideration for receiving the same, therefore, the principle relating to the surrender of tenancy rights was not applicable and gain received by the assessee was rightly taxed as 'income from other sources'. Held : The consideration of Rs. 7.26 lakhs paid by the new tenant was consent of the landlord for the transfer of tenancy rights between the new and old tenants. Agreement indicated that old tenant surrendered the tenancy rights along with the property to the assessee. If that was true, there was no need for the old tenant to be signatory to the agreement giving the property on rent to the new tenant for consideration of Rs. 14.48 lakhs for which there was need for consent of the landlord. The consideration for consent implied no transfer of any capital asset by the landlord to the new tenant. Further, there was no evidence to inter that the house was in vacant possession of the assessee of after end of the alleged tenancy of the old tenant and there was continuity of renting of property. Therefore, the amount of Rs. 7.26 lakhs, the consideration for consent constituted a windfall gain to the assessee.

Income Tax Act, 1961, Section 2(47) read with sections 45 and 56

In The ITAT, Mumbai F Bench

D. Manmohan (MZ) & D. Karunakara Rao, A.M.

Vinod V. Chhapia v. ITO

ITA No. 3178 (Mum) of 2010

A.Y. 2006-07

21 November, 2012

Appellant by : Chetan A. Karia

Respondent by : Om Prakash Meena.

ORDER