This is an appeal filed by the Revenue challenging the order of the Income Tax Appellate Tribunal, which confirmed the order of the CIT (Appeals) cancelling the assessment of short term capital gain on the respondent assessee for the assessment year 1993-94.

2. We have heard Shri.P.K.R.Menon, learned senior counsel appearing for the Revenue, and Shri.K.Gopalakrishna Kurup, learned senior counsel appearing for the respondent assessee.

3. The facts leading to the controversy are as follows:-

The respondent assessee, which is a partnership firm consisting of close relatives, executed several lease deeds on various dates in August, 1992 and amended some of the lease deeds in December, 1994, whereunder 11.46 acres of land and building thereon belonging to the assessee-firm were given on long term lease for a period of 99 years to a Private Limited Company, the shares of which are held by the partners of the assessee firm for a total consideration of Rs.3,76,43,000/-. In fact, the consideration was paid by the lessee Company by allotment and issue of fully paid up shares of the Company for the entire value of the lease to the partners of the assessee firm. The respondent assessee relied on the terms of the lease deeds and contended that the consideration received for assignment of the lease is rent receivable @ Rs.3,80,232/- each year for the entire period of the lease i.e. 99 years but received fully and in bulk in advance. However, the Assessing Officer treated the consideration received in the form of allotment of fully paid up shares of the lessee Company to the partners of the assessee firm as sales consideration received, and assessed the same as short term capital gains. The assessee challenged the assessment in appeal before the CIT (Appeals), who allowed the appeal by holding that the entire consideration received is assessable as regular income for all the 99 years, in terms of the claim made by the assessee. On second appeal filed by the Revenue, the Tribunal confirmed the order of the CIT (Appeals), against which, this appeal is filed.

4. Before us, learned senior counsel for the Revenue contended that the transaction of lease for 99 years granted for the land and building by the assessee firm, is nothing but a transfer within the meaning of Section 2(47)(vi) of the Income Tax Act and so much so, it is assessable for capital gains. Learned senior counsel for the assessee, on the other hand, submitted that the consideration received in the form of allotment of fully paid up shares is the advance rent received for 99 years and in terms of the lease agreement the assessee is returning the income on year to year basis for all the succeeding years, which is being accepted by the Department. In the first place, learned senior counsel for the Revenue contended that when the assessment for the year 1993-94 is pending in appeal, subsequent proceedings such as filing of return for the subsequent years and acceptance of the same by the Revenue do not affect the decision of this Court on merits for 1993- 94.

5. Learned senior counsel appearing for the assessee relied on the decisions of the Supreme Court in Commissioner of Income Tax, Assam, Tripura and Manipur v. Panbari Tea Company Ltd. reported in 1965 (LVII) ITR 422, Maharaja Chintamani Saran Nath Sah Deo v. Commissioner of Income Tax, Bihar & Orissa reported in 1966 (LXII) ITR 167, Durga Das Khanna v. Commissioner of Income Tax, Calcutta reported in 1969(72) ITR 796, A.R.Krishnamurthy and Another v. Commissioner of Income Tax, Madras reported in 1989 (176) ITR 417 and the decision of the Andhra Pradesh High Court in Mrs.G.Seetha Kumarajj v. Commissioner of Income Tax reported in 2006 (284) ITR 54 (AP), and contended that the amount received by the partners of the assessee firm by way of fully paid up shares cannot be assessed as short term capital gains, and it is only rent received in advance as held by the first appellate authority as well as the Tribunal.

6. We proceed t