JUDGEMENT
A.V. Balasubramanyam, Judicial Member -
(1.)THESE cross appeals arise out of the assessment for the year 1984-85. We find it convenient to dispose them of by a common order inasmuch as one of the grounds in the assessee's appeal has reference to the ground raised by the revenue in its appeal.
(2.)The assessee is a company by name Joy Ice Creams (Bangalore) Private Ltd. It started its business in the manufacture and sale of ice-creams in the year 1966. The factory premises of the assessee were situated in a portion of the premises bearing No. 82, Annie Besant Road, Worli, Bombay. The said premises belonged to a firm called M/s. Joy Ice Cream. The lease had been granted by the owners (firm) on 24-8-1981. The owners agreed to sell the premises to M/s. Indage Engineering Company Pvt. Ltd. in August, 1981. The sale was subject to lease. The purchasers had initially agreed to provide alternate accommodation to the assessee (tenants). However, they were unable to procure one. Therefore, the purchasers made further negotiations with the assessee. As per that, the assessee was to yield up possession of the leased premises and relinquish all their rights on account of which the purchasers should pay Rs. 45 lakhs. This amount was received by the assessee from the purchasers during the previous year relevant to this assessment
The character and complexion of Rs. 45 lakhs are the subject of controversy. It appears to us that the assessing officer initially was inclined to process this receipt under the provisions of capital gains. He, however, treated this as a revenue receipt and brought the entire amount to charge and he placed reliance upon the decision of the Supreme Court in the case of CIT v. Shamsher Printing Press [1960] 39 ITR 90.
(3.)THE addition had been disputed in appeal by the assessee. THE stand of the assessee was that Rs. 45 lakhs received from the purchasers was a capital receipt inasmuch as it was consideration received for giving up leasehold rights in respect of a factory premises. But it was claimed that the said receipt was not susceptible to capital gains as the assessee had not incurred any cost for acquiring that asset. When this position was canvassed before the Commissioner of Income-tax (Appeals), he disagreed with the Income-tax Officer that it was a revenue receipt. He held that it was a capital receipt. He also held that the cost of acquisition of the asset was nil. In conclusion, the Commissioner (Appeals) directed that the entire receipt of Rs. 45 lakhs should be charged for capital gains after allowing permissible deductions.
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