Income Tax Appellate Tribunal - Kolkata
Bakhtiar Ali Shah, Kolkata vs Department Of Income Tax on 15 March, 2012
आयकर अपीलीय अधीकरण, Ûयायपीठ - " िस" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
(सम¢)Before ौी महावीर िसंह, Ûयायीक सदःय एवं/and ौी सी.डȣ.राव, लेखा सदःय)
[Before Shri Mahavir Singh, JM & Shri C. D. Rao, AM]
आयकर अपील संÉया / I.T.A No. 1571/Kol/2011
िनधॉरण वषॅ/Assessment Year: 2008-09
Income-tax Officer, Wd-32(3), Kolkata. Vs. Bakhtiar Ali Shah
(PAN: AUFPS5446K)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
Date of hearing: 15.03.2012
Date of pronouncement: 20.04.2012
For the Appellant: Shri L. K. S. Dahiya
For the Respondent: Shri M. D. Shah
आदे श/ORDER
Per Mahavir Singh, JM ( महावीर िसंह, Ûयायीक सदःय)
सदःय This appeal by revenue is arising out of order of CIT(A)-XIX, Kolkata in Appeal No.81/CIT(A)-XIX/ITO,Wd.32(3)/Kol/10-11 dated 03.08.2011. Assessment was framed by ITO, Wd-32(3), Kolkata u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2008-09 vide his order dated 21.12.2010.
2. The only issue in this appeal of revenue is against the order of CIT(A) in treating the sum received by assessee from Ideal Real Estate Pvt. Ltd. (in short "Ideal") as against the capital asset for surrendering tenancy rights and not as assessed by Assessing Officer as income from other sources. For this, revenue has raised following ground No.1:
"1. That the Ld. CIT(A) has erred in treating the sum of Rs. 1crore received by the assessee out of the transaction with M/s. Ideal Real Estate Pvt. Ltd. as long term capital gain and not one time income from other sources by failing to appreciate that the assessee was not a sub-tenant as the money received by him was not for surrendering his tenancy right but towards the shifting charges as evidenced from the deed of execution."
3. Brief facts are that the assessee filed his return of income for the relevant assessment year 2008-09 on 31.07.2008. The assessee is an advocate by profession. During the course of assessment proceedings Assessing Officer noticed that the assessee claimed deduction, from receipt of Rs.1 cr. from Ideal, u/s. 54 and 54EC of the Act treating the same on account of surrender of tenancy right in premises at 9, A.J.C. Bose Road, Kolkata-17. The Assessing Officer required the assessee to file details in respect to the tenancy of the above premises.
2 ITA 1571/K/2011 Bakhtiar Ali Shah. A.Y. 08-09 According to Assessing Officer, landlords of the said premises were Md. Sultanul Haque and Meherunnessa Haque. The total area of the above premises is 1 Bigha 4 cottahs 4 chittaks and 12 sq.ft with constructed area of 6,100 sq. ft. As per information supplied by assessee, the said premises was given on monthly tenancy to one Prince Kamgar Shah and on his demise, his legal heirs namely, Sahebjadi Bashir Begum, Sahebjadi Ahmadi Begum, Md. Hussain Shah, Fateh Ali Shah, Ahmed Shah, Mohammad Ali Shah, Manwar Ali Shah and Sahebjadi Aftan Zehan Begum became tenants and who are presently tenant, i.e. on the date of sale 09/05/1998. But according to Assessing Officer, they were illegal and unlawful occupants. According to Assessing Officer, as per deed of conveyance entered into between Sultanul Haque and Maherunessa Haque and the purchaser, these persons were not tenants rather merely occupants. In this back drop, the A.O. treated the receipt of Rs. 1 crore by assessee as casual and non recurring receipt to be assessed as "Income from Other Sources" and not the income on account of surrender of tenancy rights by giving following finding:
"The assessee is an advocate by profession, so he is aware of all the legal aspects of the matter. In 2001 the West Bengal Govt. notified West Bengal Tenancy Act and as per Section 26 of that Act any sub-tenancy existing as on the date of the said Act has to be intimated to landlord within stipulated day and on such intimation the sub-tenant would become the tenant of the landlord. In this case, the assessee is claiming to be paying rent to Fateh Ali Shah who claimed to be a tenant of the property in question and on the basis of this fact, if it found to be true, the assessee could have been a sub- tenant of Fateh Ali Shah. If that was so, the assessee would have to get registered himself as per Section 26 of the W.B. Tenancy Act. This was not done. This also goes to prove that the claim of tenancy/sub-tenancy was merely a sham transaction arranged in the way to claim deduction u/s. 54EC and 54F of the I. T. Act by dividing the consideration amongst the various family files to overcome the ceiling of 54EC i.e. Rs.50 lakhs per person and that of section 54F of the I. T. Act.
Thus, in absence of any documentary evidence the submission of the assessee is rejected and receipt of Rs.1 crore is being treated as casual and non-recurring receipt and charged to tax as 'Income from other sources'."
Aggrieved, assessee preferred appeal before CIT(A), who after considering the submissions of the assessee deleted the assessment of this sum of Rs. 1cr. as 'Income from other Sources' and treated the same as capital receipt assessable to Capital Gains. He also allowed deduction u/s. 54EC and 54F of the Act. Aggrieved, now revenue is in appeal before us.
4. Before us, Ld. CIT DR Shri L. K. S. Dahiya argued that the assessee is an advocate and being in legal profession he must be aware that in 2001, Govt. of West Bengal has notified West Bengal Premises Tenancy Act and as per section 26 of this Act in case any sub-tenancy exists as on that date the same has to be intimated to the landlord within prescribed period and on such intimation the sub-tenant would become the tenant. Shri Dahiya stated the fact that the original owners of the property i.e. the landlords were namely, Md. Sultanul Haque and 3 ITA 1571/K/2011 Bakhtiar Ali Shah. A.Y. 08-09 Meherunnessa Haque and they have given this premises on a monthly rent to Prince Kamgar Shah. After the death of Prince Kamgar Shah his legal heirs namely, Sahebjadi Bashir Begum, Sahebjadi Ahmadi Begum, Md. Hussain Shah, Fateh Ali Shah, Ahmed Shah, Mohammad Ali Shah, Manwar Ali Shah and Sahebjadi Aftan Zehan Begum became in illegal and unlawful use and occupation on the date of sale of this property as on 09.05.1998. According to him, once all these alleged tenants were in illegal use and occupation of the property, Fateh Ali Shah cannot claim that he is tenant and assessee is sub-tenant of Fateh Ali Shah. Shri Dahiya, Ld. CIT DR in such situation argued that once assessee is in illegal possession of the property, he cannot be tenant and he has no tenancy rights whatsoever. It means, according to him, this receipt is only a non-recurring and casual receipt to be assessed as "Income from other sources". On the other hand, Ld. Counsel for the assessee Shri M. D. Shah relied on the order of CIT(A).
5. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has received a sum of Rs.1 cr. from Ideal on account of vacation of property which was in his possession. The assessee claimed the same as capital receipt chargeable to LTCG and thereby claimed deduction under sections 54 and 54EC of the Act on this receipt. As per the copy of sale deed filed in assessee's paper book at pages 55 to 83 dated 09.05.1998 clearly reveals that Md. Sultanul Haque and Meherunnessa Haque are owners of the above stated property i.e. 9, A. J. C. Bose Road, Kolkata admeasuring 1 Bigha 4 cottahs 4 chittaks and 12 sq.ft with constructed area of 6,100 sq. ft. and as per Second Schedule, the occupants are shown as under:
"i) Sahebzadi Bashir Begum
ii) Sahebzadi Ahmadi Begum
iii) Md. Hussain Shah
iv) Fateh Ali Shah
v) Ahemd Shah
vi) Mohamad Ali Shah
vii) Manwar Ali Shah
viii) Sahebzadi Aftab Jehan Begum"
It means that vide sale deed dated 09.05.1998 those were occupants of the building. According to the ld. Counsel for the assessee, the assessee was running his business from the above stated premises under the name and style of M/s. Sabera Enterprises since 1997. In support of this assertion, assessee filed copy of licence issued by West Bengal Fire Dept dated 18.12.1996, licence no. 041281 and also filed copy of Trade Licence issued by Calcutta Municipal Corporation (CMC) dated 09.09.1998, licence no. 78401. The assessee also filed copy of notice issued by Inspector, Shop & Establishment Dept., Govt. of West Bengal dated 12.11.1997. Further, assessee also filed copy of letter written to Fire Department informing 4 ITA 1571/K/2011 Bakhtiar Ali Shah. A.Y. 08-09 closure of Sabera Enterprises vide dated 12.07.2004. It was the claim of the assessee that these documents were produced even before the Assessing Officer. Further, after the closure of the business the assessee started another proprietary concern in the same premises under the name and style of M/s. Communication Point. To support this, he filed copy of Certificate of Enrolment issued by Assistant Commissioner of Professional Tax dated 01.01.2002, licence no. ECW-0014850 and also trade licence issued by CMC dated 30.08.2001, licence no.A065301. It was claimed by the assessee that he was paying rent of Rs.150/- per month to Shri Fateh Ali Shah and also filed copy of rent receipts issued by Shri Fateh Ali Shah dated 03.08.2001, 07.12.2002, 02.05.2007 and 02.06.2007. According to assessee, this building was physically taken on rent by one Prince Baktihar Ali Shah and rent receipt was issued vide dated 25.10.1915 by the landlord namely Smt. Indu Prava Dassi, the rent receipt is enclosed in assessee's paper book at page 25. Subsequently, this tenancy was transferred in the name of Prince Md. Kamgar Shah when he attained majority. The copy of rent receipt dated 01.06.1951 issued by then landlords is enclosed at assessee's paper book pages 26 and 27. On demise of Prince Md. Kamgar Shah the then landlord Mrs. Preetilekha Sircar refused to accept rent from his legal heirs namely, Sahebzadi Bashir Begum, Sahebzadi Ahmadi Begum, Md. Hussain Shah, Fateh Ali Shah, Ahemd Shah, Mohamad Ali Shah, Manwar Ali Shah, and Sahebzadi Aftab Jehan Begum. Accordingly, the legal heir of Md. Kamgar Shah tendered the rent before Rent Controller vide challan dated 18.10.1996. Since then these above legal heirs continued to be in possession of and also, as claimed by assessee that they are tenants of the entire premises No. 9, A. J. C. Bose Road, Kolkata-17. The assessee started business and took possession of the said premises no. 9, A. J. C. Bose Road, Kolkata-17 from Fateh Ali Shah in the year 1996. This property was sold vide conveyance dated 09.05.1998 and the purchasers accepted that Prince Kamgar Shah was the monthly tenant and upon his demise his heirs became the tenants. According to assessee, Fateh Ali Shah is one of the lawful and bonafide tenants of the premises in question and he let out the same to Baktihar Ali Shah, the assesee on a monthly rent since 1996. According to assessee, he is holding his rights of tenancy and/or any other right therein and the present landlord Ideal admitted such right vide agreement entered into dated 30.07.2007 and executed a deed of surrender to record that the occupied portion of the property was surrendered by assessee being lawful occupant along with right and all other rights therein. Thereby assessee delivered khas, vacant, peaceful physical possession of the occupied portion of the property to the said landlord at a consideration of Rs.1 cr. From the above documents filed before us in support of his claim of sub-tenancy/occupation of the above premises No. 9, A.J.C. Bose Road, Kolkata-17, it is clear that the assessee was in occupation of the above stated premises. Even the Ld. CIT, DR Shri Dahiya has not denied the occupation of the above 5 ITA 1571/K/2011 Bakhtiar Ali Shah. A.Y. 08-09 premises by the assessee. The main contention of CIT, DR was that it is illegal occupation/possession and hence, he is not a tenant or sub-tenant. According to Shri Dahiya, even the assessee is not registered as sub-tenant after notification in West Bengal Premises Tenancy Act notified by Govt. of West Bengal in 2001. According to Shri Dahiya, as per section 26 of the Act any sub-tenancy exists as on that date and as per the said Act has to be intimated to the landlord within stipulated date and on such intimation a sub-tenant would become the tenant of the landlord. According to Shri Dahiya, no such regularization of sub- tenancy was made by assessee in this case and he is not at all tenant. Once assessee is not a tenant, according to Shri Dahiya, he has no right to claim any receipt under tenancy rights rather this receipt is on account of shifting charges. We have gone through the Deed of Surrender dated 30.07.2007 entered into between assessee and Ideal and found that the assessee has been referred to as occupant of the relevant portion of the said premises and as per this Surrender Deed the assessee occupant has offered to surrender his occupancy rights and all other rights attached thereto in the occupied portion of the premises no. 9, A.J.C. Bose Road, Kolkata-17 to the present landlord for a consideration of rs.1 cr. The assessee offered vacant, peaceful and physical possession of the occupied portion and in lieu of that received a sum of Rs.1 cr. It is also a fact that the conveyance deed i.e. sale deed dated 09.05.1998 Shri Fateh Ali Shah has clearly declared his occupation of the portion of the said premises and in turn of above events and documents, which clearly show that the assessee is in possession or occupation of the above said premises taken on monthly rent from Shri Fateh Ali Shah. The assessee is in occupation of the said premises from 1996 to 2007 till date when the possession was handed over to the landlord and during this period the assessee continued to be in exclusive possession and occupation of the said premises as a sub-tenant or occupant and continued to carry on his business from the premises as noted above. In such circumstances, when the assessee is called as occupant/sub-tenant, weather he has any right which he can transfer to landlord or to any other person. To answer this, we are relying on the decision of Hon'ble Supreme Court in the case of Rama Gowda Vs. M. Varadappa Naidu in Civil Appeal No.7662 of 1997 dated 15.12.2003, wherein Hon'ble Apex Court held as under:
"The law in India, as it has developed, accords with the jurisprudential thought as propounded by Salmond. In Midnapur Zamindary Co. Ltd. Vs. Kumar Naresh Narayan Roy and Ors. 026 1924 PC 144, Sir John Edge summed up the Indian law by stating that in India persons are not permitted to take forcible possession; they must obtain such possession as they are entitled to through a Court.
It is thus clear that so far as the Indian law is concerned the person in peaceful possession is entitled to retain his possession and in order to protect such possession he may even use reasonable force to keep out a trespasser. A rightful owner who has been wrongfully dispossessed of land may retake possession if he can do so peacefully and without the use of unreasonable force. If the trespasser is in settled possession of the property belonging
6 ITA 1571/K/2011 Bakhtiar Ali Shah. A.Y. 08-09 to the rightful owner, the rightful owner shall have to take recourse to law; he cannot take the law in his own hands and evict the trespasser or interfere with his possession. The law will come to the aid of a person in peaceful and settled possession by injuncting even a rightful owner from using force or taking law in his own hands, and also by restoring him in possession even from the rightful owner (of course subject to the law of limitation), if the latter has dispossessed the prior possessor by use of force. In the absence of proof of better title, possession or prior peaceful settled possession is itself evidence of title. Law presumes the possession to go with the title unless rebutted. The owner of any property may prevent even by using reasonable -force a trespasser from an attempted trespass, when it is in the process of being committed, or is of a flimsy character, or recurring, intermittent, stray or casual in nature, or has just been committed, while the rightful owner did not have enough time to have recourse to law. In the last of the cases, the possession of the trespasser, just entered into would not be called as one acquiesced to by the true owner."
From the above judgment of Hon'ble Apex Court it is clear that even adverse possession is a possession having attached rights. The rights are in the nature of occupation and in case the landlord wants to vacate it he has to take legal recourse. One reference is also to be made to registered agreement of tenancy dated 11.10.1988, Book No. I, Deed No.11244 for the year 1988 registered with Registrar of Assurances, Kolkata entered into between the then owners and Nisar Ahmed. As per this agreement page 5 para 1.4 clearly mentioned Fateh Ali Shah as tenant of the said premises and assessee has taken the premises on rent from Fateh Ali Shah as sub-tenant. Hon'ble Calcutta High Court in the case of Dipti Kr. Basu Vs. CWT (1976) 105 ITR 450 (Cal) held that unless the context otherwise indicates, the word 'asset' must include property of every description in view of the decision of Hon'ble Supreme Court in the case of Ahmed G. H. Arif Vs. CWT (1970) 76 ITR 471 (SC), wherein it is held that the word property is a term of widest material and subject to any limitation which the context may require it signifies every possible interest which a person can clearly hold and enjoys. In the present case, the assessee is having interest in the property i.e. he is in occupation of the property. We find from West Bengal Premises Tenancy Act, 1956 and noted that it does not create any tenancy rather it merely protects the tenant whose tenancy is determined, from eviction if he fulfills certain conditions specified in it. According to this Act, where a tenant has obtained previous consent in writing of the landlord to transfer his right and interests in the tenancy he is entitled to transfer it in view of section 14(1)(b) of the West Bengal Premises Tenancy Act, 1956. From the above Act, it is clear that transfer of the rights and interests in the tenancy is not absolutely prohibited and, therefore, it must hold that even whether a tenancy is governed by West Bengal Premises Tenancy Act, 1956 or otherwise such tenancy is transferable property. The West Bengal Premises Tenancy Act, 1956 does not take away the right of the landlord and the tenant to agree to determined or extinguish the tenancy. Even otherwise upon the death of deceased his interest as a tenant from month to month passed on to his heirs and it 7 ITA 1571/K/2011 Bakhtiar Ali Shah. A.Y. 08-09 is settled view of Hon'ble Allahabad High Court that the interest of a tenant from month to month holding over possession u/s. 116 of Transfer of Property Act is heritable. This was decided by Hon'ble Allahabad High Court in Ramnath Vs. Neta AIR 1962 All 604. The facts in that case was that the lease expired on October 24, 1916 but the tenant continued in possession and in such circumstances Hon'ble Allahabad High Court held that section 116 of the Transfer of Property Act he became a tenant from month to month and on his death the right to the monthly tenancy devolved on his heirs. Even Hon'ble Calcutta High Court in the case of Anwar Ali AIR 1940 Cal 89 held that a tenancy at will was determined by the death of either the tenant or the landlord but a tenancy from month to month resulting from a tenant holding over u/s. 116 of Transfer of Property Act, which was a right and is transferable and heritable. The facts in the present case, as narrated above, is clearly devolves that Fateh Ali Shah became tenant on the demise of Prince Md. Kamgar Shah, who was the tenant and Fateh Ali Shah was one of the legal heirs. In such circumstances, Baktihar Ali Shah, the assessee has received this amount for extinguishing his right in the above property by way of renouncing occupation in favour of Ideal by way of surrender deed dated 30.07.2007. In such circumstances, the assessee's right in the above such property is a capital asset in terms of section 2(14) of the Act and surrender of such right was a transfer within the meaning of section 2(47) of the Act. Hence, the income earned by assessee on transfer of his right is assessable as capital gains and that has rightly been held by CIT(A). The assessee is eligible for consequential deductions u/s. 54, 54EC of the Act. Hence, we confirm the order of CIT(A) and this issue of revenue's appeal is dismissed.
6. In the result, appeal of revenue is dismissed.
7. Order pronounced in open court on 20.04.12.
Sd/- Sd/-
सी.डȣ.राव, लेखा सदःय महावीर िसंह, Ûयायीक सदःय
(C. D. Rao) (Mahavir Singh)
Accountant Member Judicial Member
तारȣख)
तारȣख) Dated : 20th April, 2012
(तारȣख
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
8 ITA 1571/K/2011
Bakhtiar Ali Shah. A.Y. 08-09
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - ITO, Ward-32(3), Kolkata.
2 ू×यथȸ/ Respondent - Sh. Bakhtiar Ali Shah, 9, A.J.C. Bose Road, Kolkata-
700 017
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/CIT, Kolkata
5. वभािगय ूितनीधी / DR, Kolkata Benches, Kolkata
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
सहायक पंजीकार/Asstt. Registrar.