Sum received on surrender of tenancy right is capital receipt and hence, not taxable

CIT Vs Meera Chatterjee (Delhi High Court)-

There is no dispute that a tenancy right is a capital asset the surrender of which would attract Section 45 so that the value received would be a capital receipt and asses-sable if at all only under Item (E) of Section 14. That being so, it cannot be treated as a casual or non-recurring receipt under Section 10 (3) and be subjected to tax under Section 56. The argument of the appellant that even if the income cannot be chargeable under Section 45, because of the in applicability of the computation provided under Section 48, it could still impose tax under the residuary head is thus unacceptable. If the income cannot be taxed under Section 45, it cannot be taxed at all. [See S.G. Mercantile Corpn. (P) Ltd. v. CIT].  Furthermore, it would be illogical and against the language of Section 56 to hold that everything that is exempted from capital gains by statute could be taxed as a casual or non-recurring receipt under Section 10(3) read with Section 56. We are fortified in our view by a similar argument being rejected in Nalinikant Ambalal Mody v. S.A.L. Narayan Row, ITR at pp. 432, 435.

In the present case, the Assessing Officer has not held that it is possible to compute and calculate the cost of acquisition of the tenancy rights in the hands of the original tenant Ram Krishan Dalmia. The said exercise was not undertaken by him in the assessment order. In view of the aforesaid position, we are not required to determine, decide and compute income from capital gains under Section 45. A similar situation had had arisen in the case of D.P. Sandu Bros. Chembur (P) Ltd. (supra) and the Supreme Court had refused to examine and go into the said question, in view of the stand taken by the Revenue that it was not possible to compute the cost of acquisition of the tenancy rights when they were acquired.In view of the aforesaid, the question of law is answered against the appellant and in favour of the assessee.

HIGH COURT OF DELHI

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