Shavo Norgren (P) Ltd Vs DCIT ITA No.8101/Mum/2011 dtd 14.12.2012 [Mumbai ITAT] Background: Assessee had taken a plot of land on lease from MIDC in the year 1967 for a lease of 95 years commencing from 1st January, 1967. Assessee had also paid premium to MIDC as per their rules prevalent at that time. In the previous year 2007-08 assessee entered into a MOU for transfer of part of the said land on 9th April 2007, received an advance of Rs.30 lacs and applied to MIDC for their consent. The two plots together with Building thereon were transferred for a total sum of Rs.2,01,57,606. Assessee worked out capital gain of Rs.1,60,38,687 after deducting the value of building at Rs.14,30,220/- and the market value as on 1/4/1981 increased by indexation cost to Rs.26,88,699. The AO applied Sec. 50C of the Income tax Act and considered the market value of the plot of land at Rs.2,39,91,000 and considered this as long term capital gain for the purpose of computation of income.
Lease
Krishak Bharati Cooperative Ltd v DCIT [IT APPEAL NO. 205 OF 2010 dtd 12.07.0212] Delhi High Court Facts of the case: The assessee had entered into a lease agreement with NOIDA on 06.01.1989 by which the land in question was demised for a period of 90 years. The assessee was entitled to construct an office complex on the land. The assessee was required to pay premium of Rs. 2,53,96,993/- to NOIDA at the time of the allotment, or demise. In addition, under the lease deed, the assessee had to pay annual lease rent @ 2.5 per cent of the premium. The lease rent could be enhanced after 12 years. The assessee amortized the expenditure by way of premium over the period of lease, and claimed deduction of Rs. 2,75,045/- in the assessment year. The AO held that lease of land for 90 years conferred a benefit of enduring nature to the assessee, particularly in the light of the definition of the expression “immovable property” furnished in section 269UA(d)(i) and, consequently, it was in the nature of capital expenditure. This amount was, as a result not allowed as deduction.