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[2007] 293 ITR 35 (Karnataka) HIGH COURT OF KARNATAKA Commissioner of Income-tax v. M. N. Enterprises N. ANANDA AND V. GOPALA GOWDA, JJ. ITR C. NO. 26 OF 2002 JUNE 20, 2007 Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of â–  Where assessee had acquired, by transfer, hotel business of one 'RA' and leasehold rights of premises where said party was running hotel business and assessee carried on hotel business for a period of 5 months and thereafter granted licence rights to one 'CH' to carry on business as licensee and, subsequently, assessee transferred leasehold rights and all interest to 'CH' for a consideration, consideration received by assessee was liable to capital gain and cost of acquisition of leasehold right was to be determined by Assessing Officer ; amendment of section 55 providing for a deeming provision to determine cost of acquisition in cases falling under section 55(2)(a)(ii ) had no relevance to facts of present case, nor was CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC) applicable to assessee's case [Assessment year 1987-88] It is necessary for the ITO to determine the cost of acquisition in every case falling under section 45. One 'RA' had transferred its hotel business and leasehold rights in premises in which it was running such business to the assessee. However, the documents of transfer dated 1-11-1983, made no reference to any consideration for the capital value. The assessee carried on the hotel business from 30-10-1983, to 31-3-1984. On 1-4-1984, under a deed of licence, the assessee granted licence to carry on the business in the said premises to 'CH' on payment of licence fee of Rs. 60,000 per quarter. On 31-3-1987, the assessee transferred its interest in the business and leasehold rights to 'CH' for a consideration of Rs. 5,53,166. In the document of transfer it was recited that a sum of Rs. 5,00,000 was received as consideration for transfer of goodwill and the remaining sum of Rs. 53,166 for sale of tangible articles. In the return filed for the assessment year 1987-88, the assessee claimed the receipt of Rs. 5,00,000 as capital receipt on account of transfer of goodwill in favour of 'CH' under…

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