Surrender of tenancy right is capital gain

lawBy Legal Cell, Accommodation Times Bureau

It is to be noted that in the instant case what has been transferred by the assessee is the tenancy right which is very much part of the capital asset as envisaged in sub-section (2)(a) of section 55.  Sub-section (2)(a) of section 55 stipulates that cost of acquisition in relation to asset, inter alia, tenancy rights not falling under sub-clause (1)(iv) of sub-section (1) of section 49 shall be taken to be nil.Hence, as per the amended provisions of section; 55, cost of acquisition of tenancy rights shall be taken at nil and, therefore, there will be no effect even if the actual cost of acquisition oftenancy rights is nil. The assessee has received the consideration of Rs. 1.40 crores against surrender of tenancy right which is clear from clause(1) of agreement dated 29-10-2005.

In view of the above discussion and in the facts and circumstances of the case, consideration received by the assessee against surrender of tenancy right is assessable as capital gain and, therefore, there is no substance or merit in the ground/plea raised by the assessee and the same is rejected.


Smt. Maharukh Murad Oomrigar


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