Calcutta H.C : Whether the money which has been received by the assessee for surrendering his tenancy right can be considered to be capital gains or not ?

ORDER

BY THE COURT :

This appeal is directed against the order passed by the learned Single Judge whereby the learned Single Judge, by his order dt. 5th Aug., 1993 [reported as B.K. Roy (P) Ltd. vs. CIT (1995) 125 CTR (Cal) 50 : TC 32R.412— ED.], has quashed the show-cause notice issued by the CIT under s. 263 of the IT Act. Aggrieved by that order, the present appeal has been preferred.

2. It is not necessary to go into the detail facts. Suffice it to say, a question of law has arisen as to whether the money which has been received by the assessee for surrendering his tenancy right can be considered to be capital gains or not ?

3. The brief facts which are necessary for disposal of this appeal are that the assessee received a sum of Rs. 21,20,000 from Shaw Wallace Company as compensation on surrendering his monthly tenancy. The said tenancy was capital asset of the assessee and no cost was incurred for its acquisition. In the assessment proceedings, the AO held that the said sum could not be assessed to tax since there was no cost of acquisition of the said monthly tenancy. However, the CIT issued a notice under s. 263 of the Act to the effect that the order passed by the AO was prejudicial to the interest of the Revenue. Therefore, he exercised revisional power and issued show-cause notice. Against this show-cause notice the writ petition was filed by the petitioner by challenging that the order passed by the CIT on the face of it, was illegal and contrary to the law laid down by this Court in the case of A Gasper vs. CIT (1979) 12 CTR (Cal) 149 : (1979) 117 ITR 581 (Cal) : TC 20R.219. Therefore, the learned Single Judge embarked upon further equity.

4. It is submitted on behalf of the Revenue that the present case is squarely covered by the decision of the Allahabad High Court given in the case of CIT vs. Gulab Chand (1992) 101 CTR (All) 226 : (1991) 192 ITR 495 (All) : TC 32R.411. Therein the Division Bench of the Allahabad High Court took the view that such kind of windfall shall be treated to be casual and non-recurring under sub-s. (3) of s. 10 of the Act.

5. The learned Single Judge, after considering the matter, observed that since the Calcutta High Court had taken different view from that taken by the Allahabad High Court and the same had been confirmed by the Hon’ble Supreme Court in the case of A Gasper vs. CIT (1992) 102 CTR (SC) 161 : (1991) 192 ITR 382 (SC) : TC 20R.218, the learned Single Judge found that the show-cause notice issued by the CIT in exercise of power under s. 263 of the Act was not correct and he quashed that notice. Aggrieved by this order, the present appeal has been preferred by the Revenue. We have heard the learned counsel for the parties and perused the records. Apparently, both the decisions, i.e., the decision given by the Allahabad High Court in the case of Gulab Chand (supra) and that of the Calcutta High Court in the case of A Gasper (supra) are in conflict with each other. It appears that the attention of the learned CIT has escaped the judgment of the Calcutta High Court and he relied on a judgment of the Allahabad High Court and issued a show-cause notice. For the purpose of judicial hierarchy and for the purpose of judicial comity it is necessary that once a Division Bench judgment is given by this Court, that should be normally followed unless for some compelling reasons or discriminatory facts the same is overruled by the apex Court. In the case of A Gasper (supra) and in an almost identical situation when the assessee surrendered his leasing right and he was paid certain compensation, that amount has been treated to be capital gain and it has not been treated as casual and non-recurring receipt. As against this, the Allahabad High Court has taken contrary view and, treated the same to be casual and non-recurring receipt. But this question is now no more res integra in view of the amended s. 55 of the IT Act and now such kind of incomes have been specifically mentioned as capital gains. This has been introduced by the Finance Act of 1994, w.e.f. 1st April, 1995. Thus, it is not necessary for us to determine that which of the judgments is to be followed as the controversy now has already been cleared by the legislature by amendment of s. 55. However, so far as the present case is concerned, since the property is in Calcutta and the Calcutta High Court Division Bench has taken a view that the same should be treated to be capital gain, therefore, we propose to accept the view taken by the Calcutta High Court and the judgment of the learned Single Judge, relying on the decision of the Calcutta High Court, is confirmed. Consequently, we do not find any merit in this appeal. The same is dismissed. There will be no order as to costs.

[Citation : 248 ITR 245]