- (1.) This is an appeal instituted by the department against the order of the Commissioner (Appeals) for the assessment year 1986-87. Although the revenue has raised in all 13 grounds, the sum and substance of all of them is that the Commissioner (Appeals) erred in law as well as on facts in deleting the inclusion of capital gains in the total income, in identifying that the capital asset transferred as right to possess the floor space, in wrongly assuming that the capital gain was taxed on the basis of decision in the case of A. Gaser v. CIT, 1979 117 ITR 581, in appreciating the cost of maintenance of right to possess the floor space, as determined by the assessing officer and in holding that capital gains tax could not be levied on the transfer of 15,000 sq. ft. of floor space while the actual transfer was of the right to possess the floor space.
(2.) Briefly stated, the facts of the case are that the assessee Shri G. D. Thirani was a tenant of the house at 2/6, Sarat Bose Road, Calcutta - 20 of M/s. Landsdown Properties Ltd. at a monthly rent of Rs. 1,200 as per the Memorandum of Agreement dated 27-12-1982 with the Landlord M/s. Landsdown Properties Ltd. The assessee vacated the premises in question on 20-9-1983 to facilitate construction of a multi-storeyed building in which he was to get floor space admeasuring 15,000 sq. ft, be the same, a little more or less in one or more upper floors together with car parking space for six Cars and proportionate undivided right, title and interest in the leasehold land comprised in the said premises viz. in the said upper floor or the proposed multi-storeyed building. In the other words, M/s. Landsdown Properties Ltd., in exchange, agreed to deliver 15,000 sq. ft. area of floor space to the assessee and according to the agreement the assessee became the absolute owner of the 15,000 sq. ft. area of floor space in the said premises with the right to deal with or dispose it in any manner he deems fit. After the assessee vacated the premises on 20-9-1983 the old building was demolished but the assessee continued to pay the rent till October, 1984. As per Memorandum of Agreement dated 27-12-1982 the assessee was to pay rent till the date of delivery of the said 15,000 sq. ft. floor space to him. The assessee transferred the 15,000 sq. ft. floor space to different parties and received a sum of Rs. 45,50,000 within the period from 8-1-1985 to 31-8-1986.
(3.) According to the assessing officer, the assessee had a right to possess 15,000 sq. ft. floor space and, therefore, the right of transfer was a capital asset falling under the definition of 'Capital asset' under section 2(14) of the Income Tax Act, 1961. The assessing officer further observed that since this right to possess is transferred to different parties for Rs. 45,50,000, transfer of capital asset automatically attracts capital gains under section 45(1) of the said Act. He also found that although there was no record that the assessee had paid any rent after October 1984, he was liable to pay rent till the floor space of 15,000 sq. ft. came to his possession on 24-6-1985, when he transferred the said floor space to different parties and got Rs. 45, 50,000 as consideration of such transfer. He also pointed out that the rent paid or payable during the period from October 1983 when the assessee vacated the premises for demolition and June 1985 when the assessee got possession of 15,000 sq.ft. floor space amounting to Rs. 24,000 (20 months X Rs. 1,200) can be taken to be the cost of acquisition of the right to possess the said floor space with garage, etc. In this way, the assessing officer computed the capital gain under section 48 at Rs. 45,26,000 (Rs. 45, 50,000 minus Rs. 24,000). While doing so, the assessing officer mentioned in his order that his view regarding the right to possess the capital asset is supported by the decision of the Hon'ble Calcutta High Court in the case of A. Gasper (supra). He further observed that as the right to possess the floor space had a cost of acquisition, the decision of the Hon'ble Supreme Court in the case of CIT v. B.C. Srinivasa Setty, 1981 128 ITR 294 did not bar the assessment under the head 'capital gains'in this case.;