Opinion Of Eminent Legal Luminaries On Controversial Issues

Who Is Liable For Capital Gain On Transfer Of Tenancy Right?

QUERY: Mr. T existing tenant wants to surrender his tenancy right in favour of Mr. N as Landlord’s permission is to be taken for transfer they enter into tripartite agreement. Mr. N has to pay Rs. 1 crore and out this Rs. 70 lakhs is paid to Mr. T an existing tenant and Rs. 30 lakhs is to be paid to landlord. Please explain about the taxability of the amount. Whether in the hands of both amount will be charged as capital gain? Who is transferring tenancy rights in favour of N.
ANSWER: As per section 55(2) of the Act, tenancy right is a capital asset, hence on transfer of it is liable to tax under the heads “Capital gains” in the hands of T as well as landlord , as both are transferring tenancy rights to N.

Posted in Income-tax
One comment on “Who Is Liable For Capital Gain On Transfer Of Tenancy Right?
  1. Nitin N Varia says:

    In an ancestral property a shop valued at 5 crore.

    Two coowners signed rental agreement to the new tenant of the shop

    They received 1.5 crore in cash.

    There was strong objection from a few coowners not to sign rental agreement and not register and take money in cash.

    As this would mount to benami transaction involving 7 years imprisonment.

    Dis regarding other coowners they collected cash.

    Now what would you advise.

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