TMI Blog2013 (1) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... - A complete conclusion whether assessee had complete rights over the land and to what extent the valuation has to be determined u/s 50C is not to be arrived in the absence of complete details like the application made to ULC, the copy of the ULC order and further the agreements entered by M/s Unnati Technology Pvt. Ltd subsequent to construction of building with third parties for sale or assignment of rights therein. Nothing was brought on record either by assessee or by the Revenue to examine whether the said M/s Unnati Technology Pvt. Ltd has only constructed the building for development or has transferred further rights to some other parties - direct AO to obtain the complete information and examine of facts and also to make further inquiries to establish assessee’s rights over the properties. Reduction of value of the building and adjusting in the block of assets - Held that:- AO was not correct in excluding the value altogether. He has not examined the issue in its entirety. Since already observed that the building was also transferred, it is necessary for AO to examine how much property was transferred and whether the same has to be adjusted under the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has not followed this procedure, the learned CIT (A) ought to have held the order of the Assessing Officer to be illegal and invalid/unsustainable. 6. Without further prejudice to the above, even if section 50C of the Act is held to be applicable, the stamp duty rate applicable as on April, 2007, i.e. the date of the Memorandum of Understanding ought to have been considered instead of stamp duty rate as on February 2008. 7. The learned CIT (A) has erred in law and on facts in sustaining the computation of long-term capital gain without even giving the indexed cost of acquisition as deduction. The learned CIT (A) ought to have held that computation of capital gain made by the Assessing Officer without reducing cost of acquisition/indexed cost of acquisition is unsustainable in law. 2. Briefly stated, from the statement of facts submitted before the CIT (A), Assessee had taken a plot of land on lease from Maharashtra Industrial Development Corporation (MIDC) in the year 1967 for a lease of 95 years commencing from 1st January, 1967. Assessee had also paid premium to MIDC as per their rules prevalent at that time. In the previous year 2007-08 assessee entered into a MO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed view AO was completely justified in his action while applying the deeming provisions of section 50C of the Act as the appellant company had transferred the plot to the transferee. This fact is clearly evident from Para d , g , h , I and j of the transfer deed wherein the area of transfer has been specified. In view of the afore stated facts of the appellant s case, I am of the considered view that AO was completely justified in his action in applying the deeming provision of section 50C in the case of the appellant company. Accordingly, the addition so made by AO is held to be justified and thereby confirmed. Thus, appellant s this ground of appeal is dismissed . Hence assessee is aggrieved and raised the above grounds. 3. The learned Counsel referred to the facts of the case and summarized the issues for consideration as under: a) Total consideration: Assessee received an amount of Rs.2,01,57,606 as part of the sale of the asset, whereas invoking the provisions of section 50C AO took the amount at Rs.239,91,000. b) valuation of building which was taken by assessee at Rs.14,30,220 which was reduced from the total consideration. In the absence of separate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of value of transfer of building, it was submitted that the plot contained a building which was also transferred and AO was not correct in excluding the valuation of the building. Assessee, it was submitted, has adjusted the cost of acquisition in the block of assets whereas AO did not take cognizance of the above and denied the benefit of exclusion of value of the building in the computation. 7. With reference to the cost of acquisition, the learned Counsel submitted that at the time of acquisition and subsequently the registration, assessee had paid the premium for leasehold right and this value was shown in the fixed asset schedule of the company account as leasehold assets . Therefore, assessee is entitled for the claim of cost of acquisition on the proportionate amount of premium paid, valued as on 01.04.1981. It was his submission that there is no reason for not allowing assessee s contention on cost of acquisition. 8. The learned DR in reply, referring to the agreement particularly page No.56 of the paper book, submitted that assessee has constructed the building after the agreement to submit that assessee not only transferred plot of land but also building. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opted or assessed or assessable by stamp valuation authority, the value so adopted etc. shall, for the purposes of section 48, be deemed to be full value of consideration received or accruing as a result of such transfer. This section has been inserted by the Finance Act, 2002 with effect from 1-4-2003 with a view to substitute the declared full value of consideration in respect of land or building or both transferred by the assessee with the value adopted or assessed or assessable by stamp valuation authority. But for this provision, there is nothing in the Act, by which the full value of a consideration received or accruing as a result of transfer of land or building or both is deemed to be any amount other than that actually received. From the language of sub-section (1), it is clear that the value of land or building or both adopted or assessed or assessable by the stamp valuation authority shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such a transfer. Two things are noticeable from this provision. Firstly, it is a deeming provision and secondly, it extends only to land or building or both. It is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, being land or building or any right in land or building, forming part of an industrial undertaking ..". It is palpable from section 54D that 'land or building' is distinct from 'any right in land or building'. Similar position prevails under the Wealth-tax Act, 1957 also. Section 5(1) at the material time provided for exemption in respect of certain assets. Clause (xxxii) of section 5(1) provided that "the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in land or building or any asset referred to in any other clauses of this sub-section) forming part of an industrial undertaking" shall be exempt from tax. Here also it is worth noting that a distinction has been drawn between 'land or building' on one hand and 'or any rights in land or building' on the other. Considering the fact that Tribunal is dealing with special provision for full value of consideration in certain cases under section 50C, which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. As section 50C applies only to a capital asset, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee was a lessee in the property which was sold by the KSCT; there is no dispute on this aspect of the matter. Yet, the Assessing Officer has treated the assessee a seller of property apparently because the assessee was a party to the sale deed, and because, according to the Assessing Officer, "consideration is paid on sale of the property for giving up right of the owner of the property" and that "in the case of leasehold property, the right of owner is divided between lessor and lessee". We are unable to share this line of reasoning. It is not necessary that consideration paid by the buyer of a property, at the time of buying the property, must only relate to ownership rights. In the case of tenanted property, as is the case before us, while the buyer of property pays the owner of property for ownership rights, he may also have to pay, when he wants to have possession of the property and to remove the fetters of tenancy rights on the property so purchased, the tenants towards their surrendering the tenancy rights. Merely because he pays the tenants, for their surrendering the tenancy rights, at the time of purchase of property, will not alter the character of recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainable merits and is not supported by the plain words of the statute. Section 50 C can come into play only in a situation " where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, (emphasis supplied by us by underlining) is less than the value adopted or assessed or assessable by any authority of a State Government ...... for the purpose of payment of stamp duty in respect of such transfer". Clearly, therefore, it is sine qua non for application of Section 50 C that the transfer must be of a "capital asset, being land or building or both", but then a leasehold right in such a capital asset cannot be equated with the capital asset per se. We are, therefore, unable to see any merits in revenue's contention that even when a leasehold right in "land or building or both" is transferred, the provisions of Section 50C can be invoked. We, therefore, approve the conclusion arrived at by the CIT(A) on this aspect of the matter . 14. Thus there are Coordinate Bench decisions which states that the transfer of leasehold rights does not attract application of provisions of section 50C. 15. On the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces; (iv) There is no decree, order, attachment or restraint order passed by any court or authority or any statutory body having jurisdiction in India, which restrains the Assignor from dealing with or disposing off the said Larger Property or any part thereof including for any statutory dues or otherwise; (v) Neither the said Larger Property nor any part/s thereof is the subject matter of any pending litigation and/or any order or decree of any court, tribunal or quasi-judicial body or authority whereby or by reason whereof the Assignor is prevented or restrained from dealing with or disposing of the same, and the Assignor s right, title and interest therein have not been attached either before or after judgment or by or at the instance of any tax or other authorities. (vi) The Assignor is exclusive quiet, vacant and peaceful possession of the said Larger Property and there are no tenants, sub-tenants, lessees, licensees or occupants in possession of the said Larger Property or any part thereof; (vii) There is no agreement, arrangement, contract or commitment either for sale or lease or license to develop or to enter into any Joint Venture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilizing the development rights. In view of this, since both land and building were assigned by these deeds, we are of the opinion that provisions of section 50C are attracted in this case. As seen from the report of the valuation placed on record from page Nos.95 to 99 the valuation report also indicate that the valuation was undertaken as plot of land and not as leasehold rights . This also supports our opinion that assessee has more than leasehold rights on the plot of land. 19. Legal proposition on the transfer of leasehold rights has already been discussed above with which we are in agreement. However, we cannot completely come to a conclusion whether assessee had complete rights over the land and to what extent the valuation has to be determined u/s 50C, in the absence of complete details like the application made to ULC, the copy of the ULC order and further the agreements entered by M/s Unnati Technology Pvt. Ltd subsequent to construction of building with third parties if any, for sale or assignment of rights therein. Nothing was brought on record either by assessee or by the Revenue to examine whether the said M/s Unnati Technology Pvt. Ltd has only constructed the buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his issue. 22. The contention of cost of acquisition is also restored to the file of AO. Just because assessee has not claimed at the time of filing the return, statutory obligation of deducting the cost of acquisition cannot be brushed aside. There is information on record that assessee did pay premium at the time of acquiring property by way of lease and assessee has filed a valuation report before the AO claiming the value as on 01.04.1981 and subsequent indexation as per the provisions of law. AO is directed to examine this claim and allow the cost of acquisition as per the facts and law. The other contention about date of adopting valuation (whether date of MOU or date of Registration) has become academic as the application of Section 50C itself was restored to AO in its entirety. Assessee is free to raise relevant objections before AO. With these directions, the matters are restored to the file of AO for fresh adjudication on computation of long term capital gain. Assessee should be given due opportunity in the proceedings to furnish the documents and make submissions. Accordingly, the grounds are considered allowed for statistical purposes. 23. In the result, appeal file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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