The Delhi Bench of The Income Tax Appellate Tribunal held that S. 50C of the Income Tax Act is not applicable on the transfer of leasehold rights.
The Division bench of C.N. Prasad (Judicial Member) and Brajesh Kumar Singh (Accountant Member) observed that the Karnataka High Court in the case of V.S. Chandra Shekhar vs. ACIT had considered the expression “Land” appearing in section 50C and held that from the clear plain and unambiguous language employed in section 50C, lease rights in land the provision of section 50C does not apply to a case of rights in “Land”.
Background
During the Assessment Year, the assessee sold industrial unit at Narela, Delhi for a consideration of Rs.60 lakhs on 28.08.2008. Assessee paid stamp duty on the valuation adopted by the Sub Registrar at Rs.1,20,00,000/-. Assessee objected to the value adopted by the stamp
value authority and therefore, the AO made a reference to the DVO on 28/01/2016. The DVO wrote to the AO that the purchaser of the property has not allowed his team to enter the premises.
The Assessee requested the AO to refer the matter back to the DVO for determination of fair market value in the interest of natural justice. The AO did not refer the matter hack to the DVO rejected the request without assigning any reason. Even the assessment order was passed just the next day.
Arguments
Advocate V.K. Agarwal, Counsel for the assessee submitted the property was a leasehold property and the Assessee transferred the leasehold rights in the property. The AO has made the addition u/s 50C ignoring the fact that the Assessee has not sold free hold property and the transfer is of leasehold rights.
The Department strongly relied on the decision of the Bombay High Court, Nagpur Bench in the case of Vidharbha Vineer Industries Ltd. vs. ITO in tax appeal and submitted that the Bombay High Court considered an identical issue as to whether the lease rights would fall under the purview of section 50C of the Act or not and held that the provisions of section 50C do apply for the lease rights.
Tribunal Observation
The bench stated that the primary issue in the appeal to be adjudicated is as to whether the provisions of section 50C are applicable to the leasehold right in the property sold by the assessee.
The Tribunal observed that recently the coordinate bench of the Tribunal in the case of Rajiv Kumar Sharma vs. CIT, NFAC following the decision of the Supreme Court in the case of CIT vs. Vegetables Products Ltd. and applying the ratio of the decision of the Karnataka High Court in the case of V.C. Chandra Shekhar vs. ACIT held that provisions of section 56(2)(vii) of the Act which are peri-materia to the provisions of section 50C held that these provisions have no application to the lease rights involved in a capital asset of “Land and Building”.
The bench held that provisions of section 50C has no application to the facts of the assessee’s case since what was sold by the assessee was not “land or building” or both but only the lease rights in the land.
Case Details
Case Title: Neha Gupta V/S ITO
Case No.: I.T.A No.2412/Del/2018
Counsel for the Assessee: V.K. Agarwal, Adv. and Hrithik Lamba, Adv.
Department by: Harpreet Kaur Hansra, Senior DR
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