Law:

Section:

Section 45 of the Income-tax Act, 1961 [Corresponding to section 12B of the Indian Income-tax Act, 1922] - Capital gains - Chargeable as - Whether expression 'Transfer' in section 12B of 1922 Act includes not only a permanent transfer but also a temporary transfer of title to property and lease of mines for any period would fall within ambit of section 12B of 1922 Act - Held, yes - Whether a lease of land is transfer of interest in land and creates a right in rem and there is a transfer of title in favour of lessee though lessor has right of reversion after period of lease terminates - Held, yes - Whether legislation enacted in section 12B of 1922 Act is in pith and substance legislation relating to tax on capital value of assets and enactment of section 12B is constitutionally a valid piece of legislation - Held, yes FACTS During the relevant accounting year, the assessee-company executed an indenture of lease in favour of 'K' for 99 years and received certain consideration. The lease related to surface right together with nine mica mines located in the area demised. The ITO determined the cost of the mineral right with respect to the nine mines transferred to the company on a proportionate basis. After deducting this amount from the salami which the assessee received from 'K', the ITO found that the assessee had made a capital gain and taxed this amount under section 12B. On appeal, the AAC as also the Tribunal upheld the view taken by the ITO. On reference: HELD The expression 'transfer' in section 12B includes not only a permanent transfer but also a temporary transfer of title to the property in question and lease of mines for any period would fall within the ambit of section 12B. A lease of land is transfer of interest in the land and creates a right in rem; and there is a transfer of title in favour of the lessee though the lessor has right of reversion after the period of the lease terminates. For these reasons, the transaction of the lease granted by the assessee in favour of 'K' was a transfer of a capital asset within the meaning of section 12B of the 1922 Act and the gains arising to the assessee on account of this transfer of the capital asset was…

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