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IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "B", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.278/LKW/2014 Assessment year:2006-07
| Income Tax Officer-3(4), Lucknow. | Vs. | Late Vijay Kr. Soi, Through L/H Shri Sunil Kr. Soi/ Mrs. B. Soi, S-7, Basera Plash, New Hyderabad, Lucknow. PAN:AQKPS3963Q |
| (Appellant) | (Respondent) | |
| Appellant by | Shri Ajay Kumar, D.R. | |
| Respondent by | Shri Rakesh Garg, Advocate | |
| Date of hearing | 28/05/2014 | |
| Date of pronouncement | 13/06/2014 |
O R D E R
PER A. K. GARODIA, A.M.
This is Revenue's appeal directed against the order passed by learned CIT (A)-I, Lucknow dated 21/01/2014 for assessment year 2006-
2007.
2. The grounds raised by the Revenue are as under:
"1. The Ld. CIT(A) has erred in law on facts of the case in treating the capital gains on sale of property no. 36, Amrita Shergil Marg, New Delhi on 09/11/2005 as long term capital gains ignoring the fact that the said property was converted into free hold property only on 09/08/2005 and was sold as free hold property within 3 months on 09/11/2005.
2. The Ld. CIT(A) has erred in law and on facts of the case in not following the judgment of the Karnatak High
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Court delivered in the case of CIT vs Dr. V.V. Moody
218 ITR 001 wherein the facts and issue involved are similar to that of instant case.
3. Appellant craves leave to add of amend the ground of appeal, as stated above as and when need of doing so arises with the prior permission of the Hon'ble Bench."
3. Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of CIT(A).
4. We have considered the rival submissions. We find that this issue has been decided by CIT(A) as per Paras 6, 6.1 and 6.2 of his order and for the sake of ready reference, the same are reproduced below:
"6. I have considered the matter. It is noted that the Hon'ble ITAT while quashing the order u/s 263 of the CIT-I, Lucknow passed in the case of the appellant, Sh. Vijay Kumar Soi held that the AO has taken one of the possible views on the facts of the case and the provisions of section 263 are not applicable. The same issue was considered by my predecessor in the case of other three co-owners Sh. Sunil Kumar Soi (son), Sh. Anil Kumar Soi (son) and Smt. Brigitta Soi (wife). Vide appellate orders A.No. CIT(A)-I/Lko/10-ll/204 to 206 dated 07.10.2011 the OT(A) has decided the issue in favour of other three co-owners.
6.1 The Hon'ble Allahabad High Court recently in case of Rama Rani Kalia, 358 ITR 499 has held that conversion of leasehold property to freehold property amounts to improvement of title since the lessee has rights as owner of the property subject to lease covenants, even prior to such conversion. Accordingly, such conversion would not have any impact on determination of holding period for classifying the capital asset as long term capital asset or short term capital asset. The High Court while deciding the issue made reference to the decision of the Supreme Court in the case of Narang Dairy Products, 219 ITR 478 relied on by the CIT(A)/ wherein the Supreme Court observed that the definition of
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transfer u/s 2(47) of the Act is an inclusive definition and does not rule out other mode of transfers. The High Court also referred to the derision, of the Karnataka High Court in the case of V.V. Modi (supra). The High Court referred to the definition of the short term capital asset and long term capital asset under the Act and pointed out the difference between two is the period over which the property is held and not the nature of the title over the property and that the lessee of the property has rights as owner of the property subject to covenants of the lease, for all purposes. He may subject to covenants of the lease deed transfer the leasehold rights of the property with the consent of the lesser. The conversion of the rights of the lessee in the property from having leasehold to freehold is only by way of improvement of her rights over the property which she enjoyed. It was finally held that the conversion of the rights of the lessee in the property from leasehold to freehold is only by way of improvement of her rights over the property that she enjoyed; which would not have any effect on the period of holding which would run from the original date of acquiring the leasehold property. Respectfully following the judgment I hold that the gain arising on sale of property is long term capital gains and the appellant is entitled for deduction u/s 54 which has been denied by the AO treating the capital gains as short term. Ground nos. 3 & 4 are decided in favour of the appellant.
6.2 In ground nos. 1 & 2 the appellant objected to the initiation of proceedings u/s 147 and submitted that the same being without jurisdiction is void ab-initio, bad in law and the re-assessment order so framed be annulled. Since the appellant has been allowed relief on merits while deciding ground nos. 3 & 4, ground nos. 1 & 2, are not being adjudicated."
4.1 From the above paras of CIT(A), it is found that the CIT(A) has followed the judgment of Hon'ble jurisdictional High Court rendered in the case of Commissioner of Income-tax Vs Smt. Rama Rani Kalia [2013] 358 ITR 499 (All), wherein it was held that conversion of leasehold property to
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freehold property amounts to improvement of title and therefore, such conversion could not have any impact on determination of holding period for qualifying long term capital gain or short term capital gain. Since the order of CIT(A) is by following this judgment of Hon'ble Allahabad High Court, we do not find any reason to interfere in the order of CIT(A).
5. In the result, the appeal of the Revenue stands dismissed. (Order was pronounced in the open court on the date mentioned on the caption page)
Sd/. Sd/.
(SUNIL KUMAR YADAV) ( A. K. GARODIA )
Judicial Member Accountant Member Dated:13/06/2014.
*C.L.Singh
Copy of the order forwarded to :
1. The Appellant
2. The Respondent.
3. Concerned CIT
4. The CIT(A)
5. D.R., I.T.A.T., Lucknow Asstt. Registrar
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