1. The appeal has been filed by the revenue on a short ground. The assessee filed a cross-objection challenging the assessment regarding capital gains on a broader issue. Before we deal with the appeal, it may be necessary in this case to deal with the cross-objection in the first instance as we will presently show that the same has to be dismissed in Hmine.
2. The cross-objection has been filed 245 days late. The assessee came forward with an explanation for the long delay. We have heard the learned counsel for the assessee as also the learned departmental representative on the question of limitation, in filing the cross-objection. We are not satisfied with the explanation given by the assessee. The question whether the assessee is liable to tax on capital gains was the basic question involved in the assessment which was the subject-matter of appeal before the Commissioner (Appeals). On this question the Commissioner (Appeals) negatived the assessee's plea, though on another aspect the assessee got relief. The order of the Commissioner (Appeals) was served on the assessee through the secretary of the trust, which is the assessee before us. The immediate reaction of any assessee whether he or she is conversant with the tax laws or not will be to find out as to what happened in the appeal and what is the result. At any rate, the normal reaction is only to approach the tax lawyer and know the result and the future action to be taken.
Nothing of that sort was done in this case. Even when the notice was sent calling upon the assessee to file cross-objections no action was taken. That notice was served on the assessee as early as on 30-5-1981.
The cross-objection should have been filed within 30 days thereafter, but it has been filed on 1-3-1982. The only explanation of the assessee before us is that the legal heir, Mrs. I. Lawrence (the managing trustee), is not conversant with the tax matters and she came to know about the necessity of filing crosss-objection only after the hearing notice of the appeal was received by her. This explanation is not satisfactory. The entire conduct after the receipt of the appellate order till the date of filing of the cross-objection has not been fully explained. It is not understandable as to why the assessee kept quiet firstly after the receipt of the appellate order and secondly after the receipt of first notice from the Tribunal. There is non explanation nor any whisper about the receipt of the order of the Commissioner (Appeals) or the receipt of the first notice from the Tribunal. We, accordingly, refuse to condone the delay in filing the cross-objection.
The cross-objection has, therefore, to be dismissed.
3. Coming to the appeal, we need to notice a few facts. The assessee is the owner of a vacant land situated at Pali Hill, Bandra, bearing Survey No. 329 and measuring 2,299 sq. yards. This land was leased out for a period of 98 years to one Shri Tejumal Hemraj. The agreement to lease the property is dated 15-5-1973. The consideration stipulated therein is that the lessee shall pay rent of Rs. 900 per month commencing from the expiry of one year from the date of the execution of the lease deed. By a letter dated 16-5-1973 it was agreed that the lessee shall pay a sum of Rs. 2,82,500 to the assessee-lessor in addition to the monthly rent of Rs. 900. It was, however, mentioned therein that the aforesaid amount of Rs. 2,82,500, which is styled premium, shall be paid on the condition that the lessor would obtain an access to the leased property from the church authorities (perhaps because the access to the land is through the church premises). On 3-2-1974 the formal lease deed was executed incorporating various terms agreed to by the parties. The consideration for the lease was mentioned as : (1) Rs. 900 per month as rent, and (2) premium of Rs. 2,82,500.
Upon the above facts the question arose before the ITO as to the levy of tax on capital gains by virtue of the transfer by way of lease.
Objections were raised by the assessee that there was no transfer which resulted in capital gains. It has been negatived by the ITO. The first contention raised was that there was no transfer. This has been negatived. The ITO thereupon computed the capital gains by taking the premium stipulated in the lease deed plus the capitalisation of the monthly rent determined at Rs. 1,94.500. Thus, he fixed the consideration for the transfer at Rs. 4,76,900. Then he determined the cost of acquisition as on 1-1-1954 in accordance with Section 48(ii) of the Income-tax Act, 1961 ('the Act'), at Rs. 10,000. Thus, he determined the long-term capital gain at Rs. 4,76,900.
4. The assessee carried the matter in appeal before the Commissioner (Appeals). It was contended by the assessee that there was no transfer which resulted in capital gains. Secondly, at any rate, the determination of the capitalised value of rent as consideration is erroneous. Thirdly, the cost of acquisition determined by the ITO is very low.
5. The Commissioner (Appeals) rejected the first submission and held that the lease resulted in transfer of property, thereby attracting levy of tax on capital gains. With regard to the alternative contention, as regards the capitalised value of rent, the Commissioner (Appeals) accepted the assessee's contention and deleted the sum of Rs. 1,94,500. So far as the value as on 1-1-1954 is concerned, the Commissioner (Appeals) determined it at Rs. 43,000. Consequently, he directed the recomputation of the capital gains.
6. The revenue has come up in appeal on two grounds. The first ground relates to the deletion of Rs. 1,94,500 being the capitalised value of the rent. The second ground is against the determination of the value of the property as on 1-1-1954 at Rs. 43,000 by the Commissioner (Appeals). In support of the first ground the learned departmental representative contended that the consideration for the lease consists of two parts, one is premium and the other is monthly rent and, therefore, in order to determine the consideration for the transfer full consideration has to be taken into account. He, therefore, urged that the capitalised value of the rent should also be taken as a part of the consideration for the transfer. He invited our attention to the decision of the Supreme Court in the case of CIT v. George Henderson & Co. Ltd.  66 ITR 622.
On behalf of the assessee it was contended that the order of the Commissioner (Appeals) deleting the capitalisation of the rent is very well justified and in accordance with law. Shri Harish, learned counsel for the assessee, further pointed out that there is no accrual of capital gains insofar as the monthly rent is concerned, since it accrues in future. It is also pointed out that the monthly rent is assessable as ground rent under the head 'Income from other sources' and as such there is no question of taking this as a part of the consideration for determination of capital gains. He invited our attention to the observations of the Hon'ble Bombay High Court in the case of CIT v. Smt. Khorshed M. Mistry  113 ITR 850. Shri Harish also argued, alternatively, that there was no transfer involved in the transaction and as such no capital gains is leviable and this plea he is entitled to raise even though his cross-objection is dismissed on the ground of limitation, inasmuch as, as a respondent, he is entitled to support the order of the Commissioner (Appeals) on any ground which has been decided against him. On these premises, he addressed arguments on the question as to whether the lease would amount to transfer resulting in capital gain. Naturally, therefore, the learned departmental representative also replied to the submissions made by Shri Harish.
7. So far as the basic and fundamental question raised by Shri Harish as to whether there is transfer or not, we need not decide that issue in this appeal as we are inclined to agree with him on his submission that the consideration for the transfer by way of lease would not include the capitalised value of the rent. In this view of the matter, we are not adverting to the various arguments and the decisions cited on the issue by both the sides. We accordingly confine ourselves to the first ground which is raised by the revenue. So far as this aspect is concerned, we are in agreement with the assessee's counsel. Section 45 of the Act deals with the levy of tax on capital gains. The transfer attracts levy of tax on capital gains on the basis that the profits or gains must arise on the transfer of capital asset and secondly that the transfer should take place in the previous year relevant to the assessment year under consideration. This clearly shows that the capital gains must arise. There is no capital gains arising in this case insofar as the monthly rent is .concerned. It arises in future, month after month. In fact the agreement shows that monthly rent is payable after the expiry of one year after the commencement of the lease. It is, therefore, difficult to hold that so far as the monthly rent is concerned it has accrued. If the rent itself does not accrue in this year, it is not understandable as to how the capitalised value of the rent can be said to arise or accrue in this year.
8. Secondly, the rent stipulated in the agreement is for the use and enjoyment of the land. It is not a consideration for the transfer of the land. The income by way of monthly rent which is nothing but ground rent is taxable as income from other sources. When such income is assessable under the head 'Income from other sources', there cannot be a levy of tax on capital gains on the basis of capitalisation of rent.
We, accordingly, hold that the Commissioner (Appeals) rightly deleted the capitalised value of Rs. 1,94,500 in determining the capital gains.
9. The second ground relates to the value as on 1-1-1954. Here again we are one with the Commissioner (Appeals). He has examined the question of valuation on the basis of several instances of sale at the relevant time. In para 6 of his order, he noticed several instances of sale. He has also considered the report of the valuer. He has taken into account the value as on 1-1-1954 at Rs. 57,000 and after discounting it in view of the fact that what was given was only leasehold right, he determined it at Rs. 43,000. After hearing the learned departmental representative we do not find any flaw in the reasoning or conclusion arrived at by the Commissioner (Appeals). There is evidence on record regarding the sale instances at the relevant time and the value determined by the Commissioner (Appeals) is quite reasonable having regard to the facts and circumstances of the case. The second ground also fails.