Judgment:
This is assessee's appeal directed against the order of the Commissioner (Appeals) 17, New Delhi, dated 26-11-1996, relevant to assessment year 1991-92 and following grounds have been raised by the assessee: "(1) That the learned Commissioner (Appeals) has erred both in law and on facts in upholding the inclusion of a sum of Rs. 15 lakhs received by the assessee on surrender of tenancy rights. The aforesaid inclusion is totally against the ratio laid down by their Lordships of the jurisdictional High Court in the case of Bawa Shivcharan Singh v. CIT (1984) 149 ITR 29 (Del).
(2) That the findings of the learned Commissioner (Appeals) that the receipt in question is taxable as casual and non-recurring receipt under section 10(3) and the provisions of sections 2(24) and 45 of the Act are inapplicable in respect of such receipt, is totally misconceived and is based upon incorrect interpretation of the relevant provisions of law.
(3) That the further finding recorded by the learned Commissioner (Appeals) that the amount received by the assessee has got the character of income and that the revenue has established that the receipt is taxable and represented as casual income under section 10(3) of the Act, is totally misconceived and is not based on valid material on record.
(4) That the learned Commissioner (Appeals) has arbitrarily ignored the amended provisions of section 55(2) of the Act w.e.f. 1-4-1995, and has failed to appreciate that the amount received on transfer of tenancy rights was taxable as capital gains under section 45 of the Act.
(5) That the learned Commissioner (Appeals) has arbitrarily disregarded the case law relied upon by the assessee and the reliance placed upon the judgment of the Hon'ble Allahabad High Court in the case of CIT v.Gulab Chand (1991) 192 ITR 495 (All) and the decision of the Special Bench of Bombay Tribunal in the case of Cadell Wvg. Mills Co. (P) Ltd. v. Assistant CIT (1995) 55 lTD 137 (Bom-Trib)(SB) is totally misconceived. The learned Commissioner (Appeals) has failed to appreciate that the ratio laid down in the aforesaid cases was not applicable on the facts of the instant case.
It is, therefore, prayed that it be held that the amount of Rs. 15 lakhs received by the assessee on surrender of tenancy rights was not taxable as casual income assessable under section 10(3) of the Act and instead the same represented a receipt under section 55(2) of the Act and was assessable as capital gains." The facts in brief are that the assessee filed the return of income on 31-8-1991, declaring income of Rs. 90,395. The assessee's source of income is profit-sharing income from couple of firms and income from other sources. In the computation of income enclosed along with the return the assessee, in a note, wrote as under : "Received as security Rs. 15 lakhs for surrender of tenancy of my premises 16A/8, W.E.A. Karel Bagh, New Delhi. Vide bank drafts Rs. 1 lakh, vide D.D. No. 004354 of Bank of Baroda, New Delhi, Rs. 9 lakhs vide D.D. No. 585708 and Rs. 5 lakhs vide D.D. No. 585709 dated 27-12-1990, of Punjab National Bank, Delhi deposited with Andhra Bank, Karol Bagh, New Delhi." The assessee was called upon by the assessing officer to justify the claim of exemption relating to the receipt of Rs. 15 lakhs received on the surrender of tenancy rights.
It was explained by the assessee in the course of hearing of the case that the assessee was a tenant in the property i.e., 16A/8 W.E.A. Karol Bagh, New Delhi since, 1946. It was clarified that for taking the premises on rent, there was only an oral agreement with the landlord.
The assessee was, as stated, holding the tenancy rights right from 1946 without any written, agreement. Thereafter, on 7-11-1990, an agreement was drawn up with the landlord who wanted to get the premises vacated for the purpose of rebuilding the same. To be more detailed, the agreement was entered into between the assessee (the first party) and Smt. V.K.S. Bawa and Mrs. Ushmi Sethi (the second party). The assessing officer reproduced the relevant clauses of the agreement in the assessment order and while scrutinising the clauses of the agreement vis-a-vis the receipt issued by the assessee and found a lot of variations and contradictions between them. On the basis of these contradictions as detailed in the assessment order, the assessing officer concluded that the assessee had not given true picture of agreement and receipts were fabricated thereon. The assessing officer further analysed section 20 of Delhi Rent Control Act in the assessment order and concluded that the payment in question cannot be treated as compensation under Delhi Rent Control Act. After a critical analysis of the provisions of Delhi Rent Control Act, the assessing officer came to the conclusion that the assessee does not qualify for obtaining the benefit of section 20 of the Delhi Rent Control Act and in view of the provisions of section 14 of the Delhi Rent Control Act, there was no compulsion or order in the instant case by which the tenants can be deprived of the tenancy rights. The assessing officer further found that the assessee could not furnish before him the details of the amount spent in respect of the renovation, repairs and maintenance of the said property. Pursuant thereto the assessing officer came to the finding that the receipt in question can be taxed as casual and non-recurring receipt, if not under the head 'capital gain'. For bringing the said receipt under the ambit of taxability as causal and non-recurring receipt, the assessing officer has dwelt upon, in details, the essential ingredients of section 10(3) in the assessment order. In addition, the assessing officer has also analysed the connotation of the word 'income' and held that even if a receipt does not fall within the ambit of any sub-clause of section 2(24) of the Act, it may still be the income if it partakes the characteristics of income. He, accordingly, concluded that the receipt was covered within the meaning of clause (3) of section 10 of the Act. Accordingly, the amount in question was added to the total income of the assessee.
Aggrieved by this action of the assessing officer the assessee took up the matter in appeal and it was vehemently contended by the learned counsel for the assessee that the assessing officer has erred in taxing the receipt of Rs. 15 lakhs on account of surrender of tenancy rights under the head 'casual and non-recurring receipt'. It has also been argued that receipt in question was on account of transfer of tenancy rights being a capital asset, and hence it could be taxed only under the head capital gains'. However, the assessing officer has failed to appreciate that the assessee had not incurred any expenditure for acquiring tenancy rights and, therefore, it could not be subjected to tax by way of capital gains in view of the Hon'ble Delhi High Court's judgment in the case of Bawa Shivcharan Singh v. CIT (supra). The learned counsel further submitted before the first appellate authority that once a particular receipt falls to be taxed under a particular head, the same cannot be taxed under any other head. According to him, the receipt on account of surrender of the tenancy rights is undoubtedly taxable under the head 'capital gains' and could have been charged to the said tax also, if at all there had been a cost of acquisition involved therein. Arguing strongly since it has to be taxed under the head 'capital gains' it cannot be brought to tax under any other head. The learned counsel in this regard relied heavily on the decision of Hon'ble Supreme Court in the case of Nalini Kant Ambalal Modi v. CIT (1966) 61 ITR 428 (SC). While assailing the stand of the revenue, the learned counsel for the assessee summed up his arguments as under : "(i) All receipts are not income as held by the Supreme Court in Parimisetti Setharamamma v. CIT (1965) 57 ITR 532 (SC). In the instant case, the amount has been received under an agreement in lieu of providing an alternative accommodation at the instance of the landlord and the said amount has been realised for the aforesaid purpose.
(ii) The judgment of the Supreme Court in the case of the CIT v. G.R.Kartikeyan (1993) 201 ITR 866 (SC) was not applicable to the facts of the present case because in the said case it was not disputed that the receipt was not income whereas in the instant case, the things are not like that.
(iii) If a receipt falls under a particular head, merely because of the fact that such receipt becomes not taxable, will not pave the way for taxability, as decided by the Apex Court in the case of N.A. Modi (supra).
(iv) There has been amendment in the law in section 55(2) introduced by the Finance Act, 1994 with effect from I-4-1995, and the receipt obtained on transfer of tenancy rights would be taxable as capital gains even if the cost of acquisition is nil, so it is clear that the legislature wanted to be taxed only under the head "capital gains".
Arguing the case further, reliance was placed on the following decisions to support the contention : It was further submitted by the learned counsel for the assessee before the first appellate authority that the stand of the Allahabad High Court to tax the receipt under the head "casual and non-recurring" as in CIT v. Gulab Chand (1991) 192 ITR 495 (All) is not correct stand and the same has been dissented to by Calcutta High Court in B.K. Roy (P) Ltd v. CIT & Ors. (1995) 211 ITR 500 (Cal). The learned counsel further tried to contend that the assessee by virtue of living in the said premises for more than 40 years, acquired statutory rights and any transfer of statutory rights would lead to the taxability under the head "capital gains" only. It was thus urged that the addition of Rs. 15 lakhs merits deletion.
The learned Commissioner (Appeals) while considering the submissions of the learned counsel for the assessee, case law as cited and relevant provisions of law in paras 3.1 to 3.2 of his order, has concluded in para. 3.3 while rejecting all the contentions of the assessee and his conclusion is reproduced below: "3.3. In the light of the foregoing, the receipt in question is very much taxable as casual and non-recurring receipt. Besides, the Supreme Court in the case of CIT v. G.R. Kartikeyan (1993) 201 ITR 866 (SC) held that it would be a wrong approach to try to place a given receipt under one or the other sub-clause of section 2(24) and if it does not fall within the ambit of any of the sub-clauses of section 2(24) it may still be income if it partakes of the nature of income. In the instant case, amount in question has no doubt got the character of an income The Apex Court in Janaki Ram Bahadur Shah (1957) 57 ITR 21 (SC) held that it is for the revenue to establish that a profit earned in a transaction is within the taxing provision, and the nature of transaction is to -be determined on a consideration and all facts and circumstances which are brought on record by revenue . On this touchstone, the revenue has established in the present case that the receipt in question is taxable. The action of the assessing officer in treating the amount as casual income is thus in consonance with the provisions of law and is accordingly upheld." Aggrieved by this action of the learned Commissioner (Appeals) the assessee is in further appeal and while reiterating the submissions as made before the authorities below it was pleaded for deleting the addition made by the assessing officer and confirmed by the learned Commissioner (Appeals). It was also submitted that issue as involved in this case is squarely covered by the decision of Special Bench of the Tribunal in the case of J. C. Chandiok v. Deputy CIT (1999) 11 DTC 797 (Del-Trib) (SB) : (1999) 69 ITD 75 (Del-Trib) (SB) which has been followed in number of decisions including in ITA No. 6454/Del/1993 for the assessment year 1990-91 in the case of Asstt. CIT v. Bhardwaj & Bhardwaj & Associates (P) Ltd. (ITA No. 6454/Del/1993) vide ITAT Delhi Bench 'C's order dated 11-1-2000. Therefore, appeal of the assessee is to be accepted.
The learned Departmental Representative while relying upon the reasoning and basis given by the authorities below, had pleaded for confirming the order of the learned Commissioner (Appeals). Reliance was placed on (1991) 192 ITR 495 (All) (supra) and it was submitted that income is not on account of surrender of tenancy rights but for other consideration. It was thus pleaded that the assessing officer has rightly treated the amount received by the assessee as income of casual and nonrecurring nature to be taxable.
After having heard both the sides, going through the orders of the authorities below and material placed on record, we find that receipt of Rs. 15,00,000 is on account of surrender of tenancy right, which came into existence in 1946 and continued with the assessee till it was surrendered during the year under consideration and since such right was acquired by the assessee without incurring any cost, therefore, in our considered view, the said receipt is not exigible to tax as capital gain in view of Hon'ble Delhi High Court's decision in the case of Bawa Shiv Charan Singh (supra) which has been followed by later decision of CIT v. Arun Kumar Sen (1998) 231 ITR 945 (Del). As regards taxability of the same under section 10(3) is concerned, we, while following Special Bench's decision in the case of J.C. Chandiok (supra), Assistant CIT v. Bhardwaj & Bhardwaj Associates (P) Ltd. (ITA No, 6454/Del/1993 assessment year 1990-91) Delhi 'C' Bench dated 11-1- 2000, decide this issue also in favour of the assessee. As regards Allahabad High Court's decision in the case of Gulab Chand (supra), in view of contrary decision of the same court in Anand Bala Bhushan's case and Calcutta High Court's decision in B.K. Roy's case, cannot be said to have overriding effect.
Thus, in view of conclusions as arrived at in preceding paragraphs, we, while accepting the appeal of the assessee, vacate the orders of the authorities below and hold that receipt of amount of Rs. 15 lakhs, on account of surrender of tenancy right, by the assessee is not taxable in the hands of the assessee.