Rajasthan High Court - Jaipur
Commissioner Of Income Tax vs Gotan Lime Stone Khanij Udhyog on 4 September, 2003
Equivalent citations: (2004)186CTR(RAJ)125, [2004]269ITR399(RAJ)
JUDGMENT
1. This IT appeal has been admitted by this Court on 19th Jan., 2000 and following substantial questions of law have been framed by this Court arising out of this appeal :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that provisions of Section 43B of the Act are not applicable to outstanding liability on account of land tax and thereby deleting the disallowance of Rs. 8,21,088 made under Section 43B of the Act?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that receipt of Rs. 1,00,000 from M/s J.K. White Cement Works is capital receipt and not taxable in the hands of assessee, either as capital gain or as casual income under Section 10(3) of the Act?"
2. About question No. 1, it is now common ground that Rajasthan Land Tax Act, under which liability was created has been held to be ultra vires legislative competence of State legislature and, therefore, invalid. However, the declaration of levy of tax to be invalid was to operate prospectively from the date of judgment of Supreme Court in Federation of Mining Associations of Rajasthan v. State of Rajasthan and Ors. and other connected matters decided on 30th Aug., 19991 [vide 1992 Supp. (2) SCC 241].
3. Question No. 1 relates to disallowance of Rs. 8,21,088 claimed by the assessee as outstanding liability on account of land tax under the Rajasthan Land Tax Act. It has been disallowed under Section 43B of the Act on the ground that it represents the amount of tax not actually paid when it became payable and was still outstanding as on the end of the previous year. The assessee contended that since Rajasthan land tax has been declared to be ultra vires by the Hon'ble Supreme Court, it cannot be termed as tax or duty within the meaning of Section 43B but should be considered as any other expenses incurred wholly and exclusively for the purpose of business and liable to be deducted on the basis of mercantile method of accounting regularly maintained by the assessee, when the liability was incurred.
4. It does raise an interesting question but in view of submission made by the assessee, we need not go into details of this issue.
5. The learned counsel for the respondent-assessee states that large portion of such amount in question has been paid from time to time as and when amount has been paid by it, said payment has been claimed and allowed as deduction against income of the relevant subsequent assessment years. Only Rs. 41,388 was paid during the previous year relevant to assessment year in question. Deduction of so much amount actually paid by the assessee during the relevant time cannot be disallowed even under Section 43B. The same has to be treated as eligible deduction for the year in question, in any event.
6. Apart from the above statement that amount other than Rs. 41,388 has been availed as deduction in subsequent years and the claim to deduction of the same amount cannot be allowed twice, we find that the Supreme Court in India Cement v. State of Tamil Nadu 1990 (1) SCC 12 has held the royalty to be a tax, and for that reason has further held in Gorelal Dubey v. CIT (2001) 248 ITR 3 (SC) that to a claim for deduction of royalty, Section 43B is attracted. Therefore, even if the liability, which has failed as land tax, but has not been set aside and sustained, shall bear the character of additional royalty. In that event also as per the ratio of Gorelal's case (supra), Section 43B shall apply to the claim of the assessee.
7. Accordingly, we set aside the order of the Tribunal as far as it relates to the allowing deduction of Rs. 8,21,088 is concerned, by holding it to be beyond the scope of Section 43B and direct to verify the facts about actual payment of Rs. 41,388 out of the aforesaid claim. On verification deduction to the extent of Rs. 41,388 may be sustained.
8. The second question is whether the receipt of Rs. 1,00,000 by the assessee-respondent from M/s J.K. White Cement Works as a compensation for the assessee agreeing to surrender part of his limestone lease area so that the same may be allotted to M/s J.K. White Cement Works for its white cement plant, is a casual receipt liable to be taxed as income or is a capital receipt subject to capital gain.
9. The facts which are not in dispute in this regard are that the assessee was holding a large area measuring 15 sq. kms. under mining lease for limestone. Request was made by M/s J.K. White Cement Works that the assessee should surrender 4 sq. kms. part of the total lease area, to enable M/s J.K. White Cement Works to obtain lease of surrendered area in its favour from the State Government. In pursuance of which an agreement to that effect was agreed to between the assessee and M/s J.K. White Cement Works which was duly approved by State Government. In consideration of such agreement, the assessee received Rs. 1,00,000 and he surrendered 4 sq. kms. of lease area to be allotted to M/s J.K. White Cement Works. The State Government ultimately granted lease of said area in favour of M/s J.K. White Cement Works after the same was surrendered by the assessee.
10. The AO treated receipt of Rs. 1,00,000 as income by treating it to be a casual receipt under Section 10(3). On appeal, the CIT(A) affirmed the view of the AO. However, the CIT(A) agreed with the assessee that the receipt of Rs. 1,00,000 was a capital receipt in his hands as it arises out of surrender of part of mining lease as part of its business asset and it was for consideration of this transfer the amount was received. It was also stated that the M/s J.K. White Cement Works has paid this amount of Rs. 1,00,000 to it as a result of transfer of his capital asset and consequently the amount of Rs. 1,00,000 was received by the assessee from M/s J.K. White Cement Works resulted in capital gain. The CIT(A), therefore, directed the AO to ascertain the cost of acquisition of leasehold rights in mines by the assessee in respect of lease area surrendered so as to compute capital gains to assessee.
11. Aggrieved with the aforesaid order of CIT(A) holding that the receipt of Rs. 1,00,000 is a capital receipt in respect of transfer of leasehold area, the assessee preferred an appeal. The Revenue also preferred an appeal before the Tribunal against the finding that the amount of Rs. 1,00,000 was not a revenue receipt but was a capital income.
12. The Tribunal allowed the appeal of the assessee holding it to be not an income.
The Tribunal in its judgment under appeal held as under:
"After perusing the order of the AO as well as of written submission filed by assessee, we are of the view that the findings of the CIT(A) that these are not casual arid non-recurring income as per provisions of Section 10(3) are correct. Therefore, we dismiss the plea of Department that this is a casual income and taxable in the hand of assessee. However, we do not agree with the findings of the CIT(A) that this is capital asset and capital gains tax is chargeable. The provisions of the law amended w.e.f., 1st April, 1995 wherein it was held the cost of tenancy right stage carriage permits, or loan hour will not be taken to be nil for the purposes of Sections 48 and 49. If these provisions are applicable then they are applicable from 1st April, 1993 i.e., for asst. yr. 1994-95. Here before us the issue is for asst. yr. 1988-89. Therefore, the amended provisions are not applicable in the case of the assessee. In the case of Kettlewell Bullen & Co. Ltd. v. CIT (1964) 53 ITR 261 (SC) the Hon'ble Supreme Court has held that assessee-company was not in the nature of trading transaction, but was on in which the appellants parted with an asset of enduring a value. What the assessee was paid to compensate it for loss of a capital asset and was not, therefore, in the nature of revenue receipts.
In the case of CIT v. Automobile Produce of India Ltd. (1983) 140 ITR 159 (Bom), the Hon'ble Bombay High Court has held that the termination of the activity was not a necessary incident of the business of the assessees and that the extinct and surrender of the industrial licence and the corroborates agreement impaired the profit making structure of the assessee. Therefore, the amount of Rs. 24 lacs paid by PAL to the assessee-company as compensation is a capital receipt.
In the present case here before us the facts are similar. In the case here before us the assessee was enjoying some lease right which were given by the State Government, The lease right were surrendered and the company to whom the lease rights were further allotted paid a sum of Rs. 1 lac to the assessee as compensation. This amount was paid just to avoid any future litigation. Therefore, in our considered view this amount of Rs. 1 lakh is neither a revenue receipt nor a receipt on which capital gains tax can be charged. Therefore, in our considered view this is a capital receipt and not taxable in the hands of assessee. Accordingly, this ground of the assessee is allowed and the ground of the Department is dismissed."
13. The facts which were noticed by the Tribunal for the purpose of its decision were that the assessee received a sum of Rs. 1 lac from M/s J.K. White Cement Works as a result of surrender of leasehold rights over 4 sq.kms. area out of 15 sq. kms. area in favour of M/s J.K. White Cement Works on a condition that the lease may be made available in the name of M/s J.K. White Cement Works. Accordingly, the State Government has granted the lease in favour of M/s J.K. White Cement Works and a sum of Rs. 1 lac was paid to the assessee to avoid any future litigation by M/s J.K. White Cement Works.
14. We may notice here some confusion which were raised during the course of argument. Learned counsel for the appellant had invited our attention to the order of ITO in which he has stated that except letter No. 11935, dt. 26th Aug., 1988, indicating adjustment of Rs. 1 lac in the account of the assessee, no other information was furnished. During the course of hearing, it appeared to AO that the assessee had no leaseholds rights over the area allotted to M/s J.K. White Cement Works, Gotan, which he could surrender but the assessee-firm desired to press its peremptory right over the area allotted to M/s J.K. White Cement Works. To avoid litigation that may arise on account of asserting of such peremptory right M/s J.K. White Cement Works have paid a sum of Rs. 1 lac to the assessee. Therefore, this amount of Rs. 1 lac received by the assessee was not against transfer of any capital asset, but only for preventing the assessee from exercise of its peremptory right for acquiring lease in respect of 4 sq. kms. of land in question.
15. With the apparent two discrepancies in the two findings, the assessee-respondent was required to clarify the position from the material on record or otherwise.
16. We had been taken through letter dt. 26th Aug., 1988, which is a part of record and to which reference was made in the order of AO. According to the learned AO, it was a letter indicating adjustment of certain amount only. However, contrary to inference drawn by the AO, this letter clearly indicated that this was written with reference to transfer of mining lease dt. 10th Feb., 1987, between the partners who are carrying the business in the name and style of M/s Gotan Lime Stone Khanij Udhyog, Gotan, the assessee and M/s J.K. White Cement Works, Gotan, and the amount has been adjusted only in respect of transfer of leasehold rights over 4 sq. kms. area
17. As a supportive document, the learned counsel for the assessee-respondent also placed on record the order of the Government of Rajasthan, Mines Department dt. 13th Jan., 1987, which puts beyond doubt that it was not a case of foregoing peremptory rights to acquire the mining lease in the land in question in preference to someone else but was for entering into such transaction of transfer of 4 sq. kms. mining lease area out of existing lease area of assessee on certain conditions in favour of M/s J.K. White Cement Works, Gotan. Thus, the factual statement appearing in the order of Tribunal is the correct statement of facts.
18. On the aforesaid premise, the Tribunal has apparently found that this was not a case in which capital income or revenue receipt flowed to the assessee on account of transfer of his leasehold rights. The amount so received was not against transfer of any capital asset but on account of premature surrender of rights at the request of M/s J.K. White Cement Works, who expected to acquire such right for itself in the surrendered area. It had resulted in loss of capital asset of the assessee which has ultimately reached M/s J.K. White Cement Works from whom the consideration has flown.
19. The finding of the Tribunal that this is not a revenue receipt and does not result in capital gain is, in our opinion, unexceptionable. In Kettlewell Bullen & Co. Ltd v. CIT (1964) 53 ITR 261 (SC), somewhat in like manner, the question was considered. The managing agency held by the appellant before the Supreme, Court was surrendered by the appellant so as to enable M/s Mugneeram Bangur & Co. to acquire the managing agency. The surrender of the original agency took place at a time when five years period of its term still remained, to the assessee-company, certain amount has received from the aspirer of managing agency viz., M/s Mugneeram Bangur & Co. Like question has arisen before the Supreme Court that whether the amount which was received from M/s Mugneeram Bangur & Co. through the managed company, in the hands of recipient Kettlewell Bullen & Co. Ltd., was a revenue receipt or capital receipt.
The transaction was viewed by the Supreme Court as under :
"In truth the amount of Rs. 3,50,000 was received by the appellant from M/s Mugneeram Bangur & Co. in consideration of the former agreeing to forgo the agency which it held and which M/s Mugneeram Bangur & Co. were anxious to obtain. It was in a business sense a sale of such rights as the appellant possessed in the agency to M/s Mugneeram Bangur & Co."
In the aforesaid context, the transaction in case at hand can be viewed as under:
"In truth the amount of Rs. 1,00,000 was received by the respondent M/s Gotan Lime Stone Khanij Udhyog, Gotan from M/s J.K. White Cement Works in consideration of the former agreeing to surrender leasehold rights which it held in 4 sq. kms. of land, which M/s J.K. White Cement Works was anxious to acquire. It was in business sense a sale of such rights as the assessee possessed in the mining lease of 4 sq. kms. to M/s J.K. White Cement Works."
After referring to a large number of decision from the Courts of England and Scotland seemingly taking different views, approved the following view by Lord President Cooper in IRC v. Fleming & Co. (1951) Tax Cases 57; so also in Kelsall Parsons & Co. v. IRC (1938) Tax Cases 608.
20. The case of termination of contract broadly speaking in two sides of the line--(a) the cancellation of a contract which affects the profit-making structure of the recipient of compensation and involves the loss by him of an enduring trading asset, and (b) the cancellation of a contract which does not affect the recipient's trading structures nor deprive him of any enduring trading asset, but leaves him free to devote his energies and organisation released by the cancellation of the contract to replacing the contract which has been lost by other like contracts. It was inter alia held that the cases falling under Clause (a) were held to be resulting in receipt of capital nature and cases falling under Clause (b) were held to be resulting in receipt of revenue nature.
The Supreme Court concluded :
"On an analysis, a satisfactory measure of consistency in principle is disclosed. Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue : whereby the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt."
21. In the case which was before the Supreme Court on the fact narrated above, the amount so received by the assessee was held to be capital receipt in the hands of recipient. In the present case, there is striking similarity with the facts, as noted above. The assessee had a mining lease of 15 sq. kms. in his favour and he is carrying on the business of mining. Thus, mining lease constituted his business apparatus. Out of the business apparatus of the assessee, he surrendered 4 sq. kms. area to the State Government only under an agreement that the same may be transferred to M/s J.K. White Cement Works, and to that extent an agreement was executed between assessee-respondent and M/s J.K. White Cement Works. Upon this, the State Government vide its order dt. 13th Jan., 1987, approved and granted lease in favour of M/s J.K. White Cement Works on terms and conditions mentioned in the order. The consideration for such surrender of part of business apparatus flew from M/s J.K. White Cement Works to the respondent-assessee.
22. Applying the ratio of Kettlewell Bullen & Co. 's case (supra), the transaction in terms amounts to transfer of business apparatus (leasehold rights in 4 sq, kms. of land) by the assessee to M/s J.K. White Cement Works only. The consideration of Rs. 1,00,000 received for such transfer amounts to capital receipt.
23. Apparently, the Tribunal has not erred in applying the principle to hold that the amount received from M/s J.K. White Cement Works by the assessee-respondent for surrendering a part of enduring trading asset namely, the leasehold area over 4 sq. kms., is not a revenue receipt but that is a capital receipt and apparently falls outside the purview of Section 10(3) to be taxed as casual receipt of revenue nature.
24. However, we notice that notwithstanding noticing that it was a sale of business asset of enduring nature and that it would be a compensation received for such transfer, the question has not been pursued whether capital receipt results in accrual of capital gains so as to be taxed under that head. Because such question was not raised in Kettlewell Bullen & Co. case (supra).
25. Whether the amount received by the assessee-respondent from M/s J.K. White Cement Works in the present case for transfer of his capital asset results in a capital gain?
26. It was a transfer of leasehold rights over 4 sq. kms. area in favour of M/s J.K. White Cement Works, there could not be a direct transfer by the assessee to M/s J.K. White Cement Works, therefore, with the consent of appropriate State Government which is the paramount owner of the rights in the sub-soil, the leasehold rights were surrendered and on such surrender the paramount owner and competent authority under the relevant provisions of law allotted the leasehold rights in favour of M/s J.K. White Cement Works.
27. The first question that may arise when there is no direct transfer by the assessee to the person to whom the transfer has been made would result in capital gain. We find under Section 45 and Section 48 of the IT Act that the provisions do not inhibit the computation of capital gains on the basis of such transfer. In its elementary form the computation of capital gains requires that from full value of consideration, the cost of acquisition and other expenses incurred in carrying out the transfer, be deducted. The balance is capital gain. Thus, cost of acquisition of capital asset becomes an essential ingredient of computing capital gains.
28. In this connection, the assessee-respondent has contended that unless it is possible to determine cost of acquisition of capital asset, provisions for computing capital gains cannot be made applicable at all. Since there is no cost of acquisition of leasehold rights surrendered nor it is ascertainable, it is not possible to determine capital gains arising out of such transfer so as to be included in its total taxable income.
29. This principle was enunciated by the Supreme Court in CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC). It was a case which has arisen in the context of transfer of goodwill of a business. The Court laid down the ratio that the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section.
30. On this premise, the Court further viewed that, "what is contemplated is an asset in the acquisition of which it is possible to envisage a cost. The intent goes to the nature and character of the asset, that it is an asset which possesses the inherent quality of being available on the expenditure of money to a person seeking to acquire it, It is immaterial that although the asset belongs to such a class, it may, on the facts of a certain case, be acquired without the payment of money. That kind of case is covered by Section 49 and its cost, for the purpose of Section 48, is determined in accordance with those provisions. There are other provisions which indicate that Section 48 is concerned with an asset capable of acquisition at a cost. Sec. 50 is one such provision. So also is Sub-section (2) of Section 55. None of the provisions pertaining to the head 'capital gains' suggests that they include an asset in the acquisition of which no cost at all can be conceived".
31. Applying this principles to the case of goodwill, the Court found that in the case of goodwill it is not possible to determine the date when it comes into existence. The date of acquisition of the asset is another material factor in applying the computation provisions pertaining to capital gains, therefore, computation provisions cannot be made applicable to the case of goodwill to find out its cost of acquisition or to find out the date of the acquisition of goodwill because it comes into existence over a course of period. In view thereof, it was held that notwithstanding goodwill is a transferable asset, no capital gain arises from such transfer.
32. We may notice that this principle was further affirmed in a case Sunil Siddharthbhai v. CIT (1985) 156 ITR 509 (SC).
33. We also notice here that the question whether capital gains arise on transfer of tenancy rights where there is no cost of acquisition or cost of acquisition can be or cannot be ascertained, has received attention of many High Courts in India. The consensus of the opinion in this regard is that transfer of tenancy rights or its acquisition without making payment does not result in accrual of capital gains on its surrender or transfer. References in this connection may be made to Bawa Shiv Charan Singh v. CIT (1984) 149 ITR 29 (Del), CIT v. Merchandisers (P) Ltd. (1990) 182 ITR 107 (Ker), A. Gasper v. CIT (1979) 117 ITR 581 (Cal), CIT v. Joy Ice-Creams (Bang) (P) Ltd. (1993) 201 ITR 894 (Kar), CIT v. Neba Ram Hansraj (1997) 223 ITR 854 (Pat) and in a very recent decision Cadell Weaving Mill Co. (P) Ltd. v. CIT (2001) 249 ITR 265 (Bom).
34. In this connection it is pertinent to notice that this question directly came before the Supreme Court in A. Gasper v. CIT (1991) 192 ITR 382 (SC).
The facts of the case as noticed by the Supreme Court were that the assessee was a monthly tenant since 1940. In 1967, the landlord had entered into an agreement for leasing out the property to Associated Battery Makers (Eastern) Ltd., permitting them to construct a building on the said premises. The assessee was also a party to the said agreement. As part of the agreement, the assessee received a sum of Rs. 4,50,000 in consideration of which he permitted the new lessees to put up the construction, He transferred his tenancy rights to Associated Batteries and became a licencee in respect of the premises under Associated Batteries. The sum of Rs. 4,50,000 was received in two instalments of Rs. 2,25,000 each, the first on March, 1967 and the second on May, 1967.
While the Court said that as the question was raised for the first time before the Tribunal and the Tribunal has not allowed that plea, and when a specific question was sought to be raised for making a reference to High Court, reference of said question was declined and thereafter no application was made under Section 256(2) to get the said question referred to High Court and it appeared that before the High Court no such question was raised, the Supreme Court said that :
"It would not go into the question as the jurisdiction of the High Court in a reference under the IT Act is in the nature of advisory jurisdiction and only such issues can be and are answered as arise properly on the facts and the questions referred to the High Court."
In the circumstances, the Supreme Court expressed its inability to answer the question which was not raised before High Court. However, significantly, the Supreme Court still said about the merit of contention before it that:
"The contention raised on behalf of the assessee has great force and if it were open to it to raise this issue before us, we may have had to decide it, in its favour. But due to technical problems, unfortunately, the course of proceedings in the present case precludes us from giving any relief to the assessee."
The Supreme Court has further observed that the benefit of decision of Supreme Court in B.C. Srinivasa (supra) was not given to the assessee as he did not raise this question before High Court, though were certain High Courts decisions on the same lines. With these observations the Supreme Court has concluded as under :
"As we have stated earlier, it does appear that, no merits, the assessee has a good case in view of the decision of the Supreme Court earlier referred to, which we are unable to consider for the 'technical' reasons given above. If so advised, it will be open to the assessee to apply to the CBDT for administrative relief by abstaining from recovering the tax that has been levied on this amount if it has not already been recovered. If such an application is made, the CBDT will no doubt consider the same sympathetically and expeditiously."
Apparently, the Hon'ble Supreme Court has not given decision on merits as such but has expressly found in favour of the assessee and approved the High Court decisions of other High Courts on the issue, with observation to seek relief administratively in light of B.C. Srinivasa Setty's case (supra).
35. In these circumstances, the principle approved by the Hon'ble Supreme Court is that when tenancy rights are acquired without any cost of acquisition or cost of acquisition of tenancy rights cannot be ascertained, the transfer of such tenancy rights does not result in capital gains because the computations provisions cannot be made applicable to compute such income.
36. In this connection, it is further relevant to notice that taking into account this legal position, the Parliament has intervened Section 55 of IT Act, 1961, has been amended by specifically providing now w.e.f. 1st April, 1995 by substituting the existing provisions as under :
"For the purposes of Sections 48 and 49 of the IT Act :
(a) in relation to a capital asset, being goodwill of a business or a trade-mark or brand name associated with a business or a right to manufacture, produce or process any article or thing, or right to carry on any business, tenancy rights, stage carriage permits or loom hours,--
(i) in the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price; and
(ii) in any other case not being a case falling under Sub-clause (i) to (iv) of Sub-section (1) of Section 49, shall be taken to be nil."
The aims and objects for this amendment were seated in Memorandum explaining the provisions in Finance Bill, 1994 [(1994) 206 ITR (St) 205] as under :
"In a number of cases, the Courts have decided that, in case of self-generated assets like goodwill, or where the cost of asset to an assessee (not covered by situations mentioned in Section 49) is nil, no tax on capital gains consequent to transfer of such assets could be charged. They have interpreted that, only if an asset did cost something to the assessee in terms of money, the provisions relating to levy of tax on any capital gains, under Section 45(1) r/w Section 48(ii) would apply. A transaction to which these provisions cannot be applied has been held to be one over intended by Section 45(1) to be the subject of the charge. The Courts have further interpreted that the intent of levying capital gains tax goes to the nature and character of the asset, that it is an asset which possesses the inherent quality of being available on expenditure of money to a person seeking to acquire it. The. Court have held that none of the provisions pertaining to the head 'capital gains' suggests that 'capital assets' include an asset in the acquisition of which no cost at all can be conceived. The leading case propounding this interpretation is CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC).
In order to overcome the judicial interpretation, the Finance Act, 1987, w.e.f. 1st April, 1988, has provided in Section 55(2)(a) that cost of acquisition in case of self- generated goodwill will be taken to be nil. For the purpose of bringing the capital gain arising from transfer of any or the following assets, in the acquisition of which the assessee has not incurred any expenditure, the Finance Bill proposes to amend the provisions relating to capital gains and provide that the cost of acquisition of the following is to be taken at nil :
(1) Tenancy rights (2) Route permits (3) Loom hours The proposed amendment will take effect from 1st April, 1995, and will accordingly, apply in relation to asst, yr. 1995-96 and subsequent years."
37. In view of the aforesaid discussion, we are of the opinion that in the present case, the receipt of Rs. 1,00,000 in the hand of assessee for transfer of leaseholds rights by surrendering the same so as to enable M/s J.K.. White Cement Works to acquire the same was a capital receipt. Because of the fact that the computation provisions under Section 48 of IT Act could, not be applied to, such transaction for want of no ascertainable cost of acquisition on the date of acquisition that capital gains did not arise out of such transfer. This is a case of the year 1988-89, prior to the amendment in Section 55(2) which came into force in 1995 and does not operate retrospectively.
For the reasons stated above, we are of the opinion that the amount of Rs. 1,00,000 in the hands of assessee is a capital receipt and not a revenue receipt, and is also, not liable to be included in total income as capital gain.
38. Accordingly, we partly allow this appeal, by holding that the Tribunal was not right in allowing deduction of the amount of land tax to the extent it was not actually paid during the previous year relevant to asst. yr. 1988-89. However, the amount of Rs. 41,388 claimed by the assessee to have actually been paid during the previous year shall be allowed as deduction subject to verification. The receipt of Rs. 1,00,000 from M/s J.K. White Cement Works was not includible in taxable income is rightly held by the Tribunal.
No costs.