Dr. Indira P. Nichani vs Chief Commissioner of Income Tax and Another

The assessee has come up with this appeal challenging the order passed by the assessing officer, which has been confirmed by the Commissioner (Appeals) and further affirmed by the Tribunal in ITA No. 808/Bang/2001 dated 1-3-2005.

The appeal was admitted to consider the following substantial questions of law:

(1) Whether on the facts and circumstance of the case, the Tribunal and the lower authorities are justified in holding that the amount of Rs. 11,25,000 received by the appellant from the buyers was towards giving up her tenancy rights and not for relinquishment of her pre-emptive rights to purchase the property as contended by her?

(2) Whether on the facts and circumstances of the case, the Tribunal is justified in rejecting the contention of the appellant that she was entitled to deduct a sum of Rs. 9,93,000 towards indexed cost of acquisition as she has spent Rs. 3,00,000 for acquiring the pre-emptive rights to purchase the property, valued at Rs. 11,25,000?

The facts leading to this case are hereunder:

The assessee was a tenant in respect of a residential premises situated in Kumara Park West Extension, Bangalore and the same was taken on lease for a period of 20 years in the month of April, 1976. Later on, a new lease deed was entered into between the parties extending the period of lease from 20 years to 50 years commencing from 1-12-1979 and the assessee was permitted to construct the first floor on the existing building. It was also agreed that in the event of sale of the property, the right to purchase the property should be afforded to the appellant-assessee at the first instance. The copy of the lease deed is produced as Annex. A. Subsequently, under a MoU dated 9-4-1979, one Ramandas P. Asrani and others entered into an agreement with the assessee seeking permission to purchase the property in occupation of the assessee. The property in occupation of the assessee was sold by her lessor to Sri. Ramandas P. Asrani and others under registered document. The assessee is continued to be tenant. Subsequently, the purchaser has requested the assessee to surrender her tenancy rights or pre-emptive rights to purchase the property. Accordingly, the MoU came into existence on 9-4-1997 as per Annex. D and Rs. 11,25,000 was paid by the purchaser to the assessee herein. Relying upon this document, the assessing officer came to the conclusion that the assessee has received a sum of Rs. 11,25,000 for surrendering tenancy rights. Accordingly, the assessment was completed for the assessment year 1998-99. Being aggrieved by the order of assessment, the appeal was preferred by the assessee before the Commissioner (Appeals), which appeal came to be dismissed on 10-10-2001 as per Annex. F. Being aggrieved by the concurrent findings, an appeal was preferred before the Tribunal, which also ended in vain. Being aggrieved by the concurrent findings of the authorities below, the present appeal is filed.

Heard the learned Counsel for the parties.

The main contention of Sri S.P. Bhat, learned Counsel for the appellant is that the amount of Rs. 11,25,000 received by the appellant assessee was not towards surrendering her tenancy rights, but it was giving up pre-emptive rights to purchase the property in question. It is also his contention that the assessee had put up construction on the first floor on her cost and the same has been taken note of. Therefore, he requests the court to set aside the order passed by all the authorities.

Though a feeble attempt is made by the counsel for the respondents, he ,is unable to show how the assessing officer has come to the conclusion that a sum of Rs. 11,25,000 was received by the appellant in order to surrender her tenancy rights.

Having perused the MoU, it is clear that the assessee has received a sum of Rs. 11,25,000 in order to surrender her tenancy rights and also to give up pre-emptive rights to purchase the property. This is evident from Clause 1 of the MoU dated 9-4-1997, which reads hereunder:

In consideration of the first party having agreed to pay a sum of Rs. 11,25,000 as mentioned hereinbelow, the second party does hereby and hereunder surrender/assign her tenancy rights in respect of the schedule premises and further the second parry does hereby relinquish its right, claim and pre-emption rights in respect of the schedule premises.

In view of the said document, we are of the view that a sum of Rs. 11,25,000 was received by the assessee not only for surrendering her tenancy rights, but also to relinquish pre-emptive rights in respect of the property in question. This aspect of the matter has not been considered by the assessing officer and so also the Commissioner (Appeals) and also by the Tribunal. When the appellant was permitted to put up construction on the first floor, the cost of the construction and the amount towards giving up tenancy rights as well as pre-emptive rights to purchase the property under the lease deed have not been considered by the assessing officer separately. In the circumstances, without answering the questions of law framed in this appeal, the matter is remanded to the assessing officer to consider the assessee in the light of the MoU dated 9-4-1991 and the lease deed dated 1-12-1979 in accordance with law.

Accordingly, the appeal is allowed.