Law:

Section:

Section 2(47), read with section 2(14), of the Income-tax Act, 1961 - Capital gains - Transfer - Assessment year 1986-87 - Whether transfer of leasehold rights in a property by an assessee by way of a sub-lease to another person would amount to transfer of capital asset within meaning of section 2(47) and, therefore, consideration received by assessee would partake character of capital gains liable to tax - Held, yes FACTS The assessee had taken on lease an immovable property under a lease agreement, under which it had to pay Rs. 10 lakhs to the lessor as interest-free advance. The lease was to be for a period of 22 years. Rent for the first 15 years was fixed at Rs. 20,350 per month and for the remaining 7 years, the monthly rent payable was Rs. 84,428. There was a renewal clause. The assessee had sub-leased the property by a lease deed in favour of another company for a period of 20 years. Under that sub-lease agreement the sub-lessee had to pay Rs. 10 lakhs as interest-free advance to the assessee; the rent payable for the first 15 years was Rs. 77,500 per month and for the remaining period, the rent payable was Rs. 92,500 per month. The Assessing Officer held that transfer of lease by the assessee in favour of sub-lessee would amount to transfer of a capital asset and the consideration received by the assessee under that transaction would partake the character of capital gains and, therefore, liable to tax. On appeal, the Commissioner (Appeals) held that no capital gain was involved in the hands of the assessee. On revenue‘s appeal, the Tribunal agreed with the finding of the Commissioner (Appeals). On appeal : HELD Transferring an immovable property by way of a lease creates an interest in the land. According to section 2(14), the word ‘capital asset‘ means, ‘property of any kind held by an assessee‘. Therefore, it does not necessarily mean that the property, which the assessee holds, must be his own. Any kind of property held by an assessee would come within the definition of ‘capital asset‘. From the decisions of the Supreme Court inA. Gasper v. CIT [1991] 192 ITR 382 and the Madras High Court in A.R. Krishnamurthy & A.R. Rajagopalan v. CIT [1982]…

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