N.P.GUPTA, J. - (1.) THIS appeal by Revenue, has been filed against the judgment of the Tribunal dt. 23rd March, 2004 reported as Addl. CIT v. Lake Palace Hotels and Motels Ltd. (2004) 83 TTJ (Jd) 1031. The learned CIT(A) has allowed the appeal of the assessee, and set aside the order of the learned AO, assessing capital gain at an amount of Rs. 51,39,366, on the ground of treating it to be the income, derived by the assessee by way of capital gain, as the difference in the rate of interest, on the security amount, deposited with the assessee, which interest was stipulated to at the rate of 9 per cent, while according to the assessing authority, interest rate was 18 per cent, therefore, this difference between 9 to 18 per cent, has been taken to be capital gain.
(2.) THE appeal was admitted on 7th Nov., 2005, by framing the following substantial question of law: Whether capital value of such deemed interest to the extent it has been charged lesser than the market rate can be considered as consideration for grant of lease in respect of which the capital gains has to be computed? In very brief, the facts are, that the assessee had leased out certain property, i.e. land, to one East India Hotels Ltd. for a period of 72 years, and a proper lease deed was executed in that regard, stipulating annual rent at a gradually increasing rate, and also stipulating that a sum of Rs. 2.5 crores shall remain as deposit with the lessor, which shall be received by the lessor, on the dates, and in the manner, stipulated in Clause 15 of the lease deed, which was repayable by the lessor in 10 yearly instalments of Rs. 25 lacs each, to start from 1st May, 2005 and the amount was to bear simple interest @ 9 per cent per annum, with effect from the date of receipt of the amount. After the assessment was complete by serving a notice under Section 148, on 6th March, 1996, and then again on 28th Nov., 1997, under Section 143(2), assessment was reopened under Section 147(1)(a), and after such reopening, the assessing authority found, that during the accounting year 1992 -93, the market rate of interest was clearly between 18 to 24 per cent. However, the rate at which the loans were normally advanced by the banks during that period was 18 per cent, therefore, 18 per cent interest rate was considered as most reasonable rate, as the AO 'did not see that any person was ready to part with the money at a lesser rate than 18 per cent during the relevant time', therefore, the benefit by way of concessional rate of Interest to the assessee company, on the deposit made by the lessee, must be computed at the rate of 9 per cent per annum, and accordingly the assessment was made as above.
(3.) IT may be observed here, that in the assessment order, many things were considered and decided, but then, since the present appeal is confined only to the question, as referred to above, we need not go into other aspects of the matter.;