Per Bench These cross appeals arise from order dt. 22nd Feb., 1995 of CIT(A)-XXXIII, Mumbai and are disposed off by this common order as under : 2 . first issue which is common for both appeals pertains to determination of assessee s income chargeable to tax and head of income under which it can be so charged, on transfer by assessee company s business of entire credit card operations to City Bank NA during previous year relevant to assessment year under appeal. Ground No. 1 raised by Department and relevant to this issue is as under : "On facts and in circumstances of case and in law, learned CIT(A) erred in his decision that applicant must have been taken to have transferred intangible assets of its credit card business to Citibank for consideration of Rs. 5,61,10,725 ( 15 lakhs + 3,46,10,725 + 2 crores) and these assets should be treated as long-term assets and long-term capital gains should be accordingly computed contrary to decision or AO treating this as short- term capital gain." On other hand, assessee has raised following two grounds with regard to this issue : "1. learned CIT(A) erred in holding that membership subscription received in advance amounting to Rs. 2,21,30,123 and magazine subscription received in advance amounting to Rs. 11,50,944 which appellant did not have to refund or transfer to Citibank as on date of transfer and as such credited to P&L a/c, would constitute business receipts in appellant s hands. 2. learned CIT(A) failed to appreciate that membership subscription received in advance amounting to Rs. 2,21,30,123 and magazine subscription received in advance amounting to Rs. 11,50,944 ought to have been taxed under head "Long-term capital gains" since, as per cl. 6 of Agreement for Sale dt. 26th Oct., 1989 it was agreed that appellant would retain these amounts on transfer of credit card business and accordingly these sums formed part of sale consideration." 3 . First of all relevant facts may be set out. assessee company, formerly known as Diners Club of India Ltd., was engaged in business of credit card operations under franchise from Diners Club International Ltd. incorporated in USA, as per agreement executed on 14th Sept., 1979 between aforesaid two companies. This agreement was initially made effective for period of 10 years and was renewable upon same terms and conditions for further period of 5 years, at option of franchisee. Either party had right to terminate agreement earlier in event of certain specific defaults of breach of any of requirements of agreement committed by other party. period of 10 years expired on 14th Sept., 1989 and assessee company opted for further extension of agreement up to 31st March, 1990 and finally up to 30th June, 1990. Thus assessee company continued business of credit card operations within territories of India and Nepal till 30th June, 1990. In meanwhile assessee company entered into agreement with Citibank NA on 26th Oct., 1989, agreeing to transfer to Citibank, subject to consent of Diners Club International Ltd., entire credit card operations of assessee company in India and Nepal. It was stipulated that transfer would be effective from 1st Feb., 1990 or within such extended period as may be mutually agreed upon. Para 4 of Preamble of this agreement dt. 26th Oct., 1989 summarises subject-matter of transfer in following manner : "Diners and Citibank have prior to execution of this Agreement for Sale, arrived at arrangement pursuant to which Diners has agreed, subject to consent of Diners Club International Limited being obtained, to transfer to Citibank and Citibank, subject to such consent being granted, has agreed to acquire from Diners entire Credit Card operation of Diners in India and Nepal including all goodwill pertaining thereto, but not including movable and/or immovable properties of Diners, employees/ personnel/workmen of Diners or its associate concerns, operational and technological systems/hardware of Diners." 4. Cl. 1 of agreement stipulates that transfer would take place on "the appointed date" and that all credit card operations will be transferred on appointed date including following : "(i) benefit of and exclusive right to Data Bank; (ii) benefit of restrictive covenant contained in cl. 8(B) hereto; (iii) All rights of Diners under and flowing from Franchise Agreement dt. 14th Sep., 1979 between Diners Club Inc. (the predecessor-in-interest of Diners Club International Limited) as renewed up to 31st Dec., 1989 by letter dt. 1st Sept., 1989 addressed by Diners Club International Limited to Diners; (iv) benefit of all arrangements between Diners and its Member Establishments and exclusive right to issue, service, continue and carry on Credit Card operations of Diners in India and Nepal and all goodwill pertaining to Credit Card operations;" 5. However, following are excluded from this transfer. (a) all premises and properties, both movable and immovable belonging to or in occupation or use of Diners; (b) and all personnel/employees/workmen of Diners and/or its associate concerns; and (c) all operational and technological systems/hardware belonging to Diners; and (d) all payments, if any, due and outstanding by Diners to its Member Establishments and foreign franchises; and (e) all receivables due to Diners from its Card Members including receivables from foreign franchises on account of overseas members having incurred commercial charge in India. 6. consideration was tentatively determined in cl. 2 of agreement at approximately Rs. 6,75,00,000 subject to variation on further scrutiny. This consideration of Rs. 6,75,00,000 was split as under : S. Amount Details No. (Rs.) (a) Transfer of Data Bank 2,00,00,000 In consideration of restrictive (b) 90,00,000 covenant contained in cl. 8(B) Transfer of all rights of Diners (c) under and flowing from franchise 15 ,00,000 agreement dated 14-9-1979 Being residual purchase price (d) 3,70,00,000 of business transfer Total 6,75,00,000 7 . ultimate deed of transfer was executed on 16th June, 1990, after receipt of permission from Diners Club International Ltd. and Reserve Bank of India and appointed date was fixed as 15 th June, 1990. As per this deed total consideration, after verification and scrutiny, was re-deter- mined at cl. 5 at Rs. 6,51,10,725. Other terms and conditions as per agreement dt. 26th Oct., 1989 were reiterated. In revised consideration only last item was re- determined at Rs. 3,46,10,725 as against Rs. 3.7 crores stated in agreement. 8 . assessee company consistently followed practice to collect membership subscription as well as subscription for Signature magazine in advance, 4 months prior to beginning of term of 2 years for which such subscription was payable. Such advance subscription was credited to separate accounts styled as "membership subscription received in advance" and "advance magazine subscription". Such advance subscriptions were shown by assessee as part of current liabilities in Balance Sheet. However, these amounts were transferred to credit of P&L a/c in relevant accounting year to which such subscriptions relate. It appears that assessee company was in possession of such advance membership subscription of Rs. 2,21,30,123 and advance magazine subscription of Rs. 11,50,944 which pertained to period after appointed date of 15 th Oct., 1990, i.e., after date of transfer. These amounts were not transferred to Citibank but were retained by assessee and P&L a/c was credited during year under consideration. 9 . In return of income filed, assessee disclosed long-term capital gain of Rs. 2,75,45,166 on transfer of credit card business. For computing such capital gain, total consideration was adopted at Rs. 7,93,88,532. For adopting aforesaid total consideration, consideration shown in deed of transfer i.e., Rs. 6,51,10,725 was reduced by consideration of Rs. 90,00,000 for restrictive covenant, and by adding advance subscription retained by assessee. From sale consideration thus determined, initial franchise fees paid by assessee to Diners Club International in year 1979, of Rs. 1,17,750 and expenditure in connection with transfer of Rs. 10,69,080 were deducted to arrive at capital gain of Rs. 7,82,01,752. After claiming deduction under s. 54E, net capital gain was disclosed at Rs. 2,75,45,166. 10. In backdrop of above-mentioned factual scenario, we come to ground Nos. 1 and 2 raised by assessee. advance membership subscription of Rs. 2,21,30,123 and advance magazine subscription of Rs. 11,50,944 as mentioned above were treated by assessee as part of consideration for transfer. During course of assessment proceedings it was contended by assessee that Citibank by not taking over these amounts, had in fact constructively included such amounts as part of total consideration for transfer. assessee relied on Supreme Court decision in case of CIT vs. West Coast Chemicals & Industries Ltd. (In Liquidation) (1962) 46 ITR 135 (SC). It was contended that assessee had transferred its credit card business as whole and it agreed with transferee that it would retain these amounts, which in fact amounted to payment of consideration by transferee through particular mode of settlement of accounts. AO rejected these arguments relying on Bombay High Court s decision in case of CIT vs. Batliboi & Co. (P) Ltd. (1984) 41 CTR (Bom) 388 : (1984) 149 ITR 604 (Bom), and held that advance payments were in nature of revenue receipts. Since assessee did not refund these amounts to revenue receipts. Since assessee did not refund these amounts to customers and credited to P&L a/c, these advances were chargeable to tax as revenue receipts. learned CIT(A) concurred with AO. 11. learned counsel appearing for assessee contended before us that aforesaid amount received by assessee in form of advances pertained to period after appointed date and, therefore, these amounts represented assessee s liability to Citibank. With regard to advance membership subscription, all services to such members after appointed date have to be rendered by Citibank and not by assessee company. Similarly, magazines have to be supplied by Citibank after appointed date against advance subscription. It is argued that assessee company was thus under legal liability to pay these advances to Citibank. However, as per mutual agreement, assessee was allowed to retain these advances . learned counsel invited our attention to cl. 5 of agreement dt. 26th Oct., 1989 which is reproduced below : "5(a) Diners further specifically agrees that all claims whatsoever when so ever arising against Diners in respect of Credit Card operations of Diners prior to Appointed Date will be sole responsibility and liability of Diners and Diners specifically agrees to keep Citibank fully and effectually saved, harmless and indemnified there against and all consequences and proceedings arising therefrom. (b) Citibank specifically agrees that all claims whatsoever arising against Diners pertaining to credit card operations of Citibank on and from Appointed Date shall be sole liability of Citibank and Citibank specifically agrees to keep diners duly and effectually saved, harmless and indemnified there against and all consequences and proceedings arising therefrom." 12. From above it is seen that all liability for rendering services after appointed date is on Citibank. learned counsel also laid emphasis on recitals contained in cl. 6 of aforesaid agreement, which is also reproduced below : "(6)(A) consideration amount referred to in cl. 2 hereinabove appearing has been arrived at on basis of classification of Current Card Members as holding Active Cards, Less Active Cards, Least Active Cards or Delinquent Cards. In respect of New card Members, their classification as aforesaid will be determined as on Appointed Date and consideration paid accordingly. (B) In relation to New Card Members: (a) All entrance fees will be to account and for benefit of Diners; (b) All annual membership fees received shall be apportioned between Diners pro rata, with Appointed Date being considered as cut-off date for t h e purpose of determining proportions applicable prior to and after Appointed Date. (c) In relation to Current Card Members, all membership fees for renewals due on or after Appointed Date, whenever collected, shall accrue for benefit of Citibank. (d) Subscriptions received in advance for Signature magazine shall accrue and be to benefit of Citibank in respect of unexpired period, subject to Citibank taking over contract. (e) All monies received from new applicants pending approval of membership as on Appointed Date shall be transferred to Citibank for further processing and necessary action." 13. learned counsel submitted before us that terms and conditions of agreement clearly show that Citibank was entitled to receive advance subscriptions referable to period after appointed date. However, as part of entire transfer of credit card operations, assessee company was allowed to retain these amounts. It is, therefore, contended that such advances retained by assessee are only in nature of overall consideration receivable by assessee for transfer of business of credit card operations. It is argued that assessee had option to pay these amounts to Citibank and then to receive back same amount forming part of overall consideration and in that case Department could not have objected to such advances being treated as part of consideration. learned counsel relied on Supreme Court s decision in case of CIT vs. West Coast Chemicals & Industries Ltd. (In Liquidation) (supra). In this case apex Court held that where slump price is paid and no portion thereof is attributable to sale of stock-in-trade it cannot be said that any profit has arisen other than what results from appreciation of capital. It is reiterated that assessee transferred its credit card business as whole and it was agreed with transferee that assessee would retain these amounts on transfer of business, which is only mode of settlement of accounts. He relied on Supreme Court s decision in case of J.B. Boda & Co. (P) Ltd. vs. CBDT (1997) 137 CTR (SC) 287 : (1997) 223 ITR 271 (SC) and invited our attention to facts and ratio of this case which are reproduced below from head-note of report : "The Oil and Natural Gas Commission had insured all their offshore oil and gas exploration and production operations with Indian insurance company. In respect of this risk, appellant, reinsurance broker, contacted company in London who were brokers for placement of reinsurance business. appellant furnished all details about risk involved, premium payable, period of coverage and portion of risk sought to be reinsured. London brokers contacted various underwriters and after getting confirmation about portion of risk foreign reinsurers were prepared to undertake, informed appellant about such reinsurance coverage. Thereafter Indian ceding company handed over total premium to be paid by it to foreign reinsurance company, to appellant for onward transmission. appellant applied to Reserve Bank of India for permission with statement showing sum of 1,060,891.68 U.S. dollars as total reinsurance premium payable to foreign parties, and after deducting brokerage of 71,004.48 U.S. dollars due to appellant for technical services rendered, sum of 989,887 U.S. dollars as balance to be remitted. This balance amount after deducting brokerage, was remitted to London brokers with permission of Reserve Bank of India. appellant sought approval of CBDT in terms of s. 80-O of IT Act, 1961, on ground that reinsurance brokerage retained in India under agreement with London brokers amounted to receipt of income in convertible foreign exchange. CBDT refused approval. High Court, dismissed writ petition, filed by appellant against Board s order, holding that by retaining fees, appellant did not receive any foreign exchange in India. On appeal to Supreme Court : Held, allowing appeal, that remittance to foreign reinsurance company was made through Reserve Bank of India in conforming with agreement between appellant and foreign reinsurers, and that remittance statement filed along with application to Reserve Bank showed that amount due to foreign reinsurers as also brokerage due to appellant and balance due to foreign reinsurers were expressed and remitted in U.S. dollars. entire transaction effected through medium o f Reserve Bank of India was expressed in foreign exchange and in effect retention of fee due to appellant for services rendered was in U.S. dollars. This was receipt of income in convertible foreign exchange. formal remittance to foreign reinsurers first and thereafter receipt of commission from foreign reinsurer was unnecessary. Moreover, Central Board had by circular dt. 20th Dec., 1995, clarified real scope and impact of s. 80-O stating that receipt of brokerage by reinsurance agent in India from gross premia before remittance to his foreign principal would also be entitled to deduction under s. 80-O of Act, This was binding on Board. (The Court directed Board to process agreement in light of principles laid down in judgment.) By Court: two-way traffic is unnecessary. To insist on formal remittance first and thereafter to receive commission from foreign reinsurer, will be empty formality and meaningless ritual, on facts of this case. learned counsel argued that Revenue authorities were not justified in treating advances as revenue receipts in hands of assessee. 1 4 . learned Departmental Representative forcefully supported orders of Revenue authorities and argued that advances received by assessee by way of membership subscription and magazine subscription were in nature of revenue receipts from very beginning. These advances were credited by assessee to P&L a/c and, therefore, it is obvious that assessee did not pay these amounts to Citibank. These amounts were also not refunded to members or subscribers of magazine. Thus assessee c o m p n y appropriated these amounts. learned Departmental Representative relied on Bombay High Court s decision in case of CIT vs. Batliboi & Co. (P) Ltd. (1984) 41 CTR (Bom) 388 : (1984) 149 ITR 604 (Bom) in support of his contention that receipt of money or deposits to be adjusted in price of goods or services to be supplied or rendered are merely advance payments and such amounts are in nature of revenue receipts. learned Departmental Representative also drew support from Allahabad High Court s decision in case of Bijli Cotton Mills (P) Ltd. vs. CIT (1971) 81 ITR 400 (All), for proposition that taxability of receipt is fixed with reference to its character at moment it is received and merely because recipient treats it subsequently in his own accounts as his own does not alter that character. learned Departmental Representative also relied on Delhi High Court s decision in case of CIT vs. Motor & General Finance Ltd. (1974) 94 ITR 582. It is pointed out that Delhi High Court observed that quality and nature of receipt for income-tax purposes is fixed once and for all, when it is received. Receipts of money or deposits for adjustment in price of goods to be supplied or services to be rendered, may be mere advance payments and, therefore, Revenue receipts and not borrowed money. Such receipts are integral part of commercial transaction and are related to price of goods or to charges for services. They are trade receipts and hence in nature of revenue income. 1 5 . We have given careful consideration to rival submissions and have gone through relevant facts, relevant stipulations of agreement as also judicial pronouncements cited before us. It may be mentioned that each case turns on its own facts and this issue requires adjudication in light of peculiar facts of present case. assessee company has been following consistent practice of receiving membership subscription and magazine subscription in advance. These amounts are shown on liabilities side of Balance Sheet. However, these receipts are credited to P&L a/c in year in which services are rendered or magazines are supplied. assessee company received advance subscriptions which were bifurcated by assessee in two parts i.e., amount pertaining to period before appointed date and amount pertaining to period after appointed date. amount referable to period up to appointed date has been shown by assessee as its revenue income. On other hand, amount referable to period after appointed date has been treated as capital receipt forming part of overall consideration for transfer of credit card business. There is no universal principle that nature and character of such advances cannot change on happening of certain material event subsequent to receipt of such advances. There is no dispute that impugned amounts are advance payments to be adjusted against services rendered after appointed date, which is responsibility and liability of Citibank. This is clearly stipulated in agreement, relevant part of which is reproduced (supra). Therefore, these amounts, as matter of fact, were payable by assessee company to Citibank. However, as part of entire transaction of transfer of credit card business and by mutual agreement, assessee company retained these amounts and same were credited to P&L A/c. assessee company could have easily adopted other method of paying these amounts to Citibank and then receiving back as part of consideration. However, this was exercise in futility because assessee company was already holding these amounts and it was allowed to retain same. Considering entire facts and circumstances, in our view these advances cannot be treated as revenue receipts in hands of assessee. Because of mutual agreement at time of transfer, Citibank did not claim these amounts and assessee was allowed to retain. In our view, these amounts must be treated as part of overall sale consideration for business of credit cards. We, therefore, set aside finding of learned CIT(A) on this issue and AO is directed to compute income under head Capital gain by treating these amounts as part of sale consideration. 16. We now come to ground No. 1 of Department s appeal which has been reproduced (supra). This ground has two parts. Firstly, Department is aggrieved on account of finding of CIT(A) that assessee transferred credit card business for consideration of Rs. 5,61,10,725 (Rs. 15 lakhs + Rs. 3,46,10,725 + Rs. 2 crores). Secondly, Department is not happy with finding of learned CIT(A) that assets transferred should be treated as long-term capital assets and not short-term as held by AO. first part of ground of appeal is rather vague. It may be mentioned that AO himself had adopted consideration at Rs. 3,76,10,725 and other item of Rs. 2 crores being consideration for transfer of exclusive right to data bank has been treated by AO as revenue receipt. learned CIT(A) has held that this cannot be revenue receipt and same is to be added to total consideration. In grounds of appeal raised by Revenue there is no challenge to this finding of learned CIT(A). Thus only grievance which is reflected in grounds raised by Revenue is that learned CIT(A) erred in directing AO to assess income from transfer of credit card business as long-term capital gain as against short-term capital gain assessed by AO. 17. learned Departmental Representative forcefully contended before us that assessee company got franchise for carrying out credit card business from Diner s Club International Ltd., as per agreement executed on 14th Sept., 1979. This agreement was for period of 10 years and was renewable upon same terms and conditions for further period of 5 years at option of franchisee. period of 10 years expired on 14th Sept., 1989 and assessee company opted for extension up to 31st March, 1990 and finally up to 30th June, 1990. learned Departmental Representative argued that each renewal of original agreement is to be treated as fresh grant of franchise. For this proposition he relied on following cases : (i) Ajmer High Court s decision in case of Kanhaiyalal Azad vs. District Magistrate AIR 1955 Ajmer 32. (ii) Supreme Court judgment in case of Delhi Development Authority vs. Durga Chand Kaushish (1973) 2 SCC 825. learned Departmental Representative pointed out that in above cases it has been held that renewal of lease shall be treated as fresh lease. He submitted that assessee company held franchise and other intangible assets by virtue of renewal of agreement, firstly up to 31st March, 1990 and again up to 30th June, 1990. It is argued that such renewals must be treated as fresh acquisition of franchise and, therefore, when credit card business is transferred w.e.f. appointed date i.e., 15 th June, 1990, assessee company held assets for period of less than 36 months and, therefore, income is in nature of short-term capital gains. 18. learned counsel appearing for assessee argued that cases relied upon by learned Departmental Representative have no relevance to facts of present case. assets have been continuously held by assessee since 14th Sept., 1979 and when agreement is renewed on same terms and conditions it cannot be said that fresh franchise was acquired by t h e assessee on date of such renewal. learned counsel relied on Tribunal Madras Bench decision in case of ITO vs. R. Perumal (1980) 10 TTJ 182 (Mad). In this case it was held that where permit is held for period longer than 60 months immediately preceding transfer, capital gains resultingm from such transfer is assessable as long-term capital gain and fact that licence was renewable is clearly irrelevant since what is material is period for which it was held. learned counsel also relied on Tribunal Delhi Bench decision in case of Frick India Ltd. vs. Jt. CIT (2002) 75 TTJ (Del) 274 : (2001) 79 ITD 582 (Del) and invited our attention to brief head- note which is reproduced below : "Sec. 2(29A) of IT Act, 1961-Capital gains- Long-term capital asset-Asst. yr. 1997-98 -Agreement of lease for tenancy rights in building, which was entered into by assessee company during financial year 1972-73 for period of 3 years, was not renewed but assessee company continued to occupy property on same terms and conditions - During financial year 1996-97, assessee surrendered tenancy rights and in consideration received amount from third party - It claimed exemption on said amount under s. 54EA on ground that amount was received on account of transfer of long-term capital asset, being tenancy rights AO disallowed claim on ground that on expiry of lease, tenancy turned into one on month-to-month basis and assessee always acquired new right at beginning of each month on payment of rent and thus it was short-term capital asset under s. 2(42A) Assessee claimed that though tenancy was from month-to-month, it did not come to end on last day of each month and remained in existence till its determination and as such assessee was tenant holding over within meaning of s. 116 of Transfer of Property Act - whether, status of assessee was that of tenant holding over which was to continue even after expiry of contracted tenancy till it was terminated as determined - Held, yes - Whether, therefore, assessee s possession extended from date of expiry of lease to date of surrender of tenancy rights and it was long-term capital asset - Held, yes - Whether, therefore, exemption under s. 54EA was to be allowed - Held, yes" 1 9 . It is contended that franchise and all other intangible assets including goodwill have been continuously held by assessee for several years. It is also submitted that if renewal is taken as grant of fresh franchise, there would be no cost of acquisition of such franchise and for that reason no income under head Capital gain can be brought to charge of IT. 20. We have carefully gone through facts and have considered elaborate submissions made before us by both parties. learned Departmental Representative laid great emphasis on argument that renewal of lease is tantamount to grant of fresh lease and, therefore, when intangible assets acquired by assessee on grant of such fresh lease are transferred within period of less than 36 months, capital gains arising from such transfer have to be treated as short-term capital gain. learned Departmental Representative strongly relied on Ajmer High Court decision in case of Kanhaiyalal Azad (supra) and Supreme Court s decision in case of Durga Chand Kaushish (supra). It may be mentioned that AO also supported h i s finding by above mentioned two cases and learned CIT(A) has considered facts of these cases in great detail and has recorded finding that these cases are not applicable to case of assessee. It may be appropriate to reproduce below part of order of learned CIT(A) dealing with these two cases. "The decision of Ajmer High Court cited by AO (Kanhaiyalal Azad vs. District Magistrate), is with reference to interpretation of provisions of Arms Act. Under said Act, person must obtain licence from district authorities before possessing Arms. licence is valid for specific period, after expiry of which person must seek renewal of such licences. district authorities have right either to refuse to grant licence originally or refuse to renew licence after expiry of stipulated period, even without assigning any reason. authorities were also entitled to cancel or suspend licence already granted any time during its validity after assigning reasons. issue had arisen in said case whether act of non-renewal of licence, amounts to its cancellation. Court, while negating such claim had observed that - "The Indian Arms Act does not deal with case of grant of licence. renewal must ordinarily be deemed to be fresh grant..." (p. 102). Evidently, in view of power of district authorities to refuse to renew licence, after its expiry, even without assigning any reason, every renewal of licence has to be logically treated as fresh grant of licence. But such is not situation in present case, in view of unquestionable right of appellant to renew agreement. In other case before Supreme Court, cited by AO (D.D.A. vs. Durga Chand Kaushish), issue was interpretation of deed of lease of immovable property. plaintiff had taken immovable property on lease from Govt. of India in 1931. deed had mentioned at outset that lease was for term of ninety years in consideration of fixed annual rent, subject to certain conditions. One of conditions was that lessor would at request and cost of lessee at end of term execute to lessee new lease of premises by way of renewal for further terms totalling to seventy years. lease rent was however to be enhanced on such renewals. deed had also mentioned that total term of lease including renewed periods would not exceed ninety years. issue was whether lease rent could be enhanced within period of ninety years. Court held that in view of specific recital in deed regarding initial term (ninety years) of lease granted (at fixed rent) lease rent could not be enhanced within period of ninety years. It could only be enhanced subsequently during renewed periods of lease. In above connection Court had observed - "if plaintiff was not entitled initially to lease of ninety years for rent agreed upon, but rent was liable to be increased within that period, as appeared to be real case of defendants in High Court, there was no question of grant of fresh lease. renewal of lease is really grant of fresh lease. It is called renewal simply because it postulates existence of prior lease which generally provides for renewals as of right. In all other respects it is really fresh lease. Thus initial term of lease of ninety years could not coexist with renewals of that very lease within ninety years." (p. 829). Court was faced with situation that while during initial term of lease agreement lease rent was fixed and could not be enhanced, it could be raised during subsequent renewal of lease agreement. As such if renewal was considered as extension and part of original lease agreement, conclusion would arise that lease rent cannot be enhanced. In above light Court held that renewal of lease was grant of fresh lease. Evidently renewal of lease upon different terms and conditions will not stand in same light as renewal upon same terms and conditions. These are however cases under Arms Act and T.P. Act." 21. We have gone through both cases, copies of which have been filed by learned Departmental Representative and we agree with view of learned CIT(A) that facts are totally different and these cases cannot be applied to assessee s case. As already discussed above, assessee company acquired business of credit card operations by virtue of agreement dt. 14th Sept., 1979. This agreement was effective for period of 10 years and was renewable upon same terms and conditions at option of franchisee. All rights accruing to assessee company by virtue of aforesaid agreement including intangible assets and goodwill have been continuously held by assessee since 14th Sept., 1979 without any interruption and these assets which have been transferred to Citibank are clearly in nature of long-term capital assets. If case of Department that fresh lease was acquired by assessee by virtue of renewal agreement dt. 1st April, 1990, is accepted even for sake of argument, cost of acquisition would be nil and, therefore, by virtue of Supreme Court s decision in case of CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC), no capital gain can be brought to charge of tax. We see no merit in observation made by AO that original cost of acquisition in year 1979 should be taken to be cost of acquisition of renewal of agreement. Once it is accepted that cost of acquisition was paid in year 1979, it would automatically follow that assets have been held by assessee since year 1979 and case of Department would fall down. Considering entire facts and circumstances, we confirm finding of learned CIT(A) that capital gains are assessable as long-term capital gain. 22. Ground No. 2 of Departmental appeal is as under : 22. Ground No. 2 of Departmental appeal is as under : "On facts and in circumstances of case and in law, learned CIT(A) erred in directing that AO could bring to tax during year only gross amount of interest on such IDBI bond which would accrue at specific rate deeming previous year under consideration and balance amount received under discount scheme would have to be ignored further for purpose of taxation and assessment should be modified accordingly." 23. We have heard both sides on this issue vis-a-vis facts and legal position. assessee invested Rs. 3.89 crores in IDBI capital bonds with maturity period of 3 years. Under scheme of IDBI assessee opted for entire interest receivable by it over period of 3 years to be discounted and accordingly during present assessment year assessee received discounted interest of Rs. 91,91,500. assessee claimed that only such interest income can be brought to charge of tax which had accrued during previous year relevant to asst. yr. 1991-92. AO rejected claim. learned CIT(A) accepted assessee s claim and Department is aggrieved on that account. In our view Supreme Court decision in case of Madras Industrial Investment Corporation Ltd. vs. CIT (1997) 139 CTR (SC) 555 : (1997) 225 ITR 802 (SC) can be applied to facts of present case. In that case it Was held by apex Court that when debentures are issued at discount, debenture premium is allowable proportionately in each year during total period of currency of debentures and such revenue expenditure cannot be allowed in one year when debentures are issued at discount. In our view, learned CIT(A) has rightly held that interest should be brought to charge of tax on accrual basis each year. His order on this issue is, therefore, confirmed. 24. Reverting back to assessee s appeal, ground Nos. 3 and 4 are as under : "3. learned CIT(A) erred in law in upholding action of learned Dy. CIT in taxing compensation of Rs. 31,23,900 received in respect of Delhi & Bangalore property as income under head "Income from house property" as against income under head "Profits & gains of business or profession" as per return of income filed by appellant and further erred in law in upholding action of learned Dy. CIT in disallowing sum of Rs. 5,48,300 under head "Profits & gains of business or profession" as expenses relating to house properties for separate consideration. 4. learned CIT(A) holding appellant to be owner of Delhi and Bangalore properties under s. 27(i) and (iii) of IT Act, 1961." 25. These grounds pertain to bringing to charge of tax rental income as income from house property. facts are that assessee is receiving rental income from two properties located in Delhi and Bangalore. property at Delhi was originally in form of land which was leased out by New Delhi Municipal Committee to Bharat Hotels Ltd., for period of 99 years as per agreement dt. 11th March, 1981. Bharat Hotels Ltd., was allowed to construct five star hotel on said land. After construction of hotel, Bharat Hotels Ltd., entered into agreement of sub-licence with assessee company for unexpired period of lease on 8th Oct., 1985 under which 8000 sq. ft. of covered area on first floor was leased out to assessee company and assessee company was also allowed to sub-lease property. In its turn assessee company sub-leased premises for unexpired period of lease and is receiving rental income. Bangalore property was taken on lease by assessee for initial term of 12 years with option for renewal of lease. This lease agreement was not registered. In respect of both properties, assessee claimed that rental income is assessable as business income. A O rejected claim and held that case of assessee falls under s. 27(iiib) of IT Act and accordingly he assessed income as income from house property. learned CIT(A) concurred with AO. 26. learned counsel appearing for assessee argued before us that provisions of s. 27(iiib) would apply to case of lease and not sublease or sub-licence. It is pointed out that Delhi property is only sub-leased to assessee and, therefore, income from such property cannot be treated as income from house property. With regard to Bangalore property it is contended that lease agreement was not registered and, therefore, assessee cannot be treated to have acquired any legal lease rights. learned counsel relied on Tribunal Cochin SMC Bench decision in case of M. Damodaran Nair vs. ITO (2004) 84 TTJ (Cochin) 942 : (2004) 90 ITD 758 (Cochin). He invited our attention to short head-note of this case which reproduced below : "Sec. 27(iiia)(iiib), r/w s. 269UA, of IT Act, 1961-Income from house property-Owner of house property Asst. yr. 1995-96-Whether s. 269UA(i) gives extended meaning of transfer , which makes it very clear that lease for term of not less than 12 years includes allowing possession of such property to be taken or retained in part performance of contract of nature referred to in s. 53A of Transfer of Property Act, 1881-Held, yes-Whether if there is no intention to transfer building, mere possession of same for twelve years or more will not constitute change of ownership -Held, yes-Assessee had taken buildings on lease and derived income from subletting them -Whether, according to s. 27(iiib), transaction should be one referred to in s. 269UA(f), and then only person concerned will be owner of building or part thereof on basis of extended meaning of transfer in s. 269UA -Held, yes - Whether, therefore taking of building on lease, in instant case, had no relevance in absence of any agreement or apparent considerations for transfer except giving immovable property on rent by real owners to assessee who, in turn, sub-let it-Held, yes-Whether, therefore, it being not transfer or transaction under s. 269UA, extended meaning of ownership could not be applied and, hence, income derived by assessee from subletting of said building was business income and not income from house property -Held yes." 27. Alternatively learned counsel submitted that lease rent paid by assessee in respect of both properties should be deducted from lease rental income received by assessee and only net income can be brought to charge of tax under s. 23(1)(b) of IT Act. actual rent received by assessee is only net amount. For this proposition learned counsel relied on following Tribunal decisions : (i) Varma Family Trust vs. ITO (1984) 7 ITD 392 (Bom); (ii) Neelam Cable Manufacturing Co. vs. Asstt. CIT (1997) 59 TTJ (Del) 474 : (1997) 63 ITD 1 (Del); (iii) ITO vs. Mrs. Niroben D. Choksi 1 SOT 608. 28. learned Departmental Representative argued that case of assessee is fully covered under s. 27(iiia) r/w s. 269UA(f). It is submitted that sub-lease obtained by assessee will not change legal position. He also contended that non-registration of sub-lease agreement in respect of Bangalore property is also not relevant because assessee is receiving rental income and it has to be considered owner for purpose of s. 22. For this proposition learned Departmental Representative relied on following cases : (i) CIT vs. Podar Cement (P) Ltd. Etc. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC); (ii) R.B. Jodha Mal Kuthiala vs. CIT (1971) 82 ITR 570 (SC). Regarding deduction of lease rent paid by assessee learned Departmental Representative contended that, once income is brought to charge of tax under head "Income from house property", only such deductions can be allowed as are admissible under s. 24 of IT Act. For this proposition he relied on following case : (i) Indian City Properties Ltd. vs. CIT (1965) 55 ITR 262 (Cal); (ii) Piccadily Holiday Resorts Ltd. vs. Dy. CIT (2005) 97 TTJ (Del) 362 : (2005) 94 ITD 267 (Del); (iii) Asst. CIT vs. Piccadily Hotels (P) Ltd. Piccadily Hotels (P.) Ltd. (2005) 97 TTJ (Chd) 411 : (2005) 97 ITD 564 (Chd). 29. We have given careful consideration to rival submissions and have gone through facts about which there is no dispute. only question is whether income arising to assessee can be assessed as income from house property by virtue of s. 27(iiib) r/w s. 269UA(f). Under s. 27(iiib), for purposes of ss. 22 to 26 "owner of house property" is defined as under : "a person who acquires any rights (excluding any rights by way of lease from month to month or for period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in cl. (f) of s. 269UA, shall be deemed to be owner of that building or part thereof." 3 0 . aforesaid provision stipulates that person who acquires any rights by virtue of any transaction referred to in cl. (f) of s. 269UA, shall be deemed to be owner and accordingly relevant income has to be taxed as income from house property. Sec. 269UA defines "transfer" and sub-cl. (i) thereto reads as under : "(f) transfer , (i) in relation to any immovable property referred to in sub-cl. (i) of cl. (d), means transfer of such property by way of sale or exchange or lease for term of not less than twelve years, and includes allowing possession of such property to be taken or retained in part performance of contract of nature referred to in s. 53A of Transfer of Property Act, 1882 (4 of 1882). Explanation. For purpose of this sub-clause, lease which provides for extension of term thereof by further term or terms shall be deemed to be lease for term of not less than twelve years, if aggregate of term for which such lease is to be granted and further term or terms for which it can be so extended is not less than twelve years." 3 1 . In our view, irrespective of whether rights have been acquired under lease or sub-lease, s. 27(iiib) shall apply. Sec. 27(iiib) refers to cl. (f) of s. 269UA which applies to transfer of property by way of sale or exchange or lease for term of not less than 12 years. In present case assessee acquired sub-lease in respect of Delhi property and lease in respect of Bangalore property for period of not less than 12 years. Accordingly, relevant provisions of IT Act referred to above will be applicable. Tribunal Cochin Bench decision in case of M. Damodaran Nair (supra) cannot be applied to facts of assessee s case. In that case facts were different. Firstly there was no intention to transfer property and mere possession was given. There was no agreement for apparent consideration for transfer except giving immovable property on rent by real owners to assessee and assessee in turn, subletting property. In present case, assessee acquired rights under agreement. In case of Podar Cement (P) Ltd. (supra), Supreme Court held that "owner" for purposes of s. 22 is person who is entitled to rental income from property in his own right and requirement of registration of sale deed is not warranted. In case of R.B. Jodha Mal Kuthiala (supra), Supreme Court observed that owner must be that person who can exercise rights of owner in his own right. In present case agreements executed between assessee and sub-lessees have been duly acted upon and assessee is receiving rental income by virtue of these agreements. In our view s. 27(iiib) would apply in present case. 32. Regarding alternative claim of assessee that lease rent paid by assessee should be deducted from lease rent received, there can be no dispute that income under head Income from house property is to be computed in accordance with provisions of ss. 22 to 27 of IT Act. reference may be made to cases relied upon by learned counsel for assessee. In case of Varma Family Trust (supra), Mumbai Tribunal held that annual value for purposes of s. 23(1)(b) should be determined after deducting from actual rent, out goings like stamp charges and legal fees for executing lease deed. It was observed by Tribunal in this case that such expenditure was similar to services charges like security, passage light, operation of lift, etc., which are in any case allowable under s. 24. In case of Neelam Cable Mfg. Co. (supra) Tribunal Delhi held that security service charges were deductible from gross rent received. Similarly it was held that in view of proviso to s. 23, house tax should be allowed as deduction. In case of Mrs. Niroben D. Choksi (supra) Tribunal observed that service charges for common amenities including insurance of property are deductible. We may now refer to cases cited by learned Departmental Representative case of Indian City Properties Ltd. (supra) arose under Indian IT Act, 1922. In this case Calcutta High Court laid down following principles : "Held, (i) assessment of rent income arising out of properties should be made under s. 9, as income from property and not as income from should be made under s. 9, as income from property and not as income from business under s. 10 of Act; (ii) as assessment of income derived from property has to be made under s. 9, question of allowing any depreciation of buildings under s. 10(2) did not arise; (iii) as managing agents had rendered services in respect of properties, remuneration paid to them in respect of such services should be allocated under head "Property" under s. 9, and there being no provision for deducting such allowance under this section, such portion of commission was not deductible allowance; (iv) Tribunal was right in holding that interest paid on money borrowed for construction for new houses should be disallowed as income itself was exempted under s. 4(3)(iii); and (v) interest paid on sum of Rs. 13,00,000 was rightly disallowed by Tribunal as inadmissible under s. 10(3)(iii) of IT Act." 33. In case of Piccadily Holiday Resorts Ltd. (supra), Tribunal Delhi held that commission paid by assessee to property agent is not deductible in computing income from house property. Similarly in case of Piccadily Hotels (P) Ltd. (supra) Tribunal Chandigarh Bench held that brokerage paid is not allowable deduction while computing income from house property. 34. From cases cited by both parties it may be seen that deductions admissible while computing income from house property have to be within parameters of ss. 22 to 27. There is no specific provision in any of these sections warranting deduction of lease rent paid by assessee. Such deduction is neither available while determining ALV under s. 23 or while considering deductions under s. 24. Considering entire facts and circumstances, we confirm order of learned CIT(A) on this issue. 35. In result, assessee s appeal is partly allowed and Departmental appeal is dismissed. *** DEPUTY COMMISSIONER OF INCOME TAX v. D.B.S. 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