LexR.K. PALSHIKAR (HUF) versus COMMISSIONER OF INCOME-TAX, MADHYA PRADESH, NAGPUR, BHANDARA, NAGPUR
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t
R.K. PALSHIKAR (HUF)
v.
COMMISSIONER OF INCOME-TAX, MADHYA PRADESH,
NAGPUR, BHANDARA, NAGPUR
MAY 5, 1988
[R.S. PATHAK, CJ, AND M.H. KANIA, J.]
Indian Income-tax Act, 1922-Whether grant of leases by assessee
amounts to transfer of Capital assets as contemplated under Section
12-B of-Whether capital gains tax is payable by assessee on amounts of
'salami' or premium received by assessee in respect of leases granted by
assessee.
This was an appeal on a certificate of fitness granted by the High
Court against its judgment on a reference made under Section 66( 1) of
the Indian Income-tax Act ("the said Act").
The appellant(assessee owned some agricultural land, which the
assessee developed into building sites. The assessee leased out the build-
ing sites to various parties. The leases were for 99 years. The assessee
received amounts of 'salami' or premium for the said leases.
Question arose whether the assessee was liable to pay capital gains
tax on the amounts of 'salami' or premium received. The assessee con-
tended before the Incom~-tax Officer that no capital gains tax could be
levied on the said leases as the land was agricultural and that Section
12-B of the said Act did not come into play as only lease-hold rights
had been conveyed by the assessee to the lessees under the leases in
question. Both these contentions were rejected by the Income-tax
Officer, the Appellate Assistant Commissioner and the. Income-tax
Appellate Tribunal. Arising from the decision of the Tribunal, two
questions were referred to the High Court, viz. (1) Whether the land
sold by the assessee constituted a capital asset within the meaning of
Section 12-B of the said Act· or was agricultural land as defined in
Section 2(4A) of the Act, and (2) Whether the transaction of lease
effected by the assessee amounted to a transfer within the meaning of
Section 12-B of the said Act so as to attract liability for capital gains tax.
The High Court answered both the questions in the affirmative and
against the assessee .' Leave was granted by the High Court to the asses-
A
B
c
D
E
F
G
see to ·appeal to this Court only in respect of the second question.
· H
989
A
B
c
990
SUPREME COURT REPORTS
[1988] 3 S.C.R.
The appellant-assessee had contended that Section 12-B of the
said Act could have no application as the land in question was loam
land which must have been granted as a pure gift., to the ancestor of the
assessee, and that Section 12-B was applicable only in the case of assets
where there was a cost of acquisition. The respondent had urged that
the assessee could not raise this contention as it did not arise out of the
decision of the Tribunal and was not reflected in the questions referred
by the Tribunal particularly in the question in respect of which the
certificate of appeal had been granted.
The Court dismissed the appeal upholding the submissions of the
respondent. It was,
HELD: that the question in respect of which certificate of fitness
had been granted, clearly related to one controversy, namely, whether
the provisions of Section 12-B could be brought into play in this case as
the transfer was of lease-hold interest in inunovable property for 99 years
and not an outright sale or transfer of the complete interest of the trans-
D feror in the . immovable property. The question as to whether Section
12-B could be brought into play where the property sold had not cost
anything to acquire as it was gifted, had not been urged before the
income-tax authorities, the Tribunal or the High Court and was not
covered by the decision of_ the Tribunal or the High Court. This case fell
within the category of cases where the question of law concerned is
E
neither raised .before the Tribunal nor considered by it, and in such a
case the question would not be a question arising out of the order of the
Tribunal notwithstanding that it may arise on the findings given by it, as
held by this Court in Commissioner of Income Tax, Bombay v. Scindia
Steam Navigation Co. Ltd., [1961] 42 ITR 589. Merely because a question
of law might arise on the facts found by the Tribunal, this would not ren·
F
der it a question arising out of the decision of the Tribunal. [995B·C, G]
As regards the question whether the provisions of Section 12-B
could be brought into play, although what was transferred was only
lease-hold interest in the lands in question, it was significant that the
leases were for a loExcerpt shown. Read the full judgment & AI analysis in Lexace.