TMI Blog2024 (2) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... een passed on to the tenant. From the terms of the agreement between the assessee who was one of the four (4) owners of the facts in question, we find it is a tenancy agreement and the terms of the agreement shows that provisions of MRC Act, 1999 are incorporated and therefore applies to the agreement between parties. Moreover, there was no evidence of any consideration being passed between the assessee and Shri Chunnilal and Shri Tejaram. The agreement between parties was for giving the flats in question on rent. Thus, the Ld. CIT(A) erred to upholding the action of the as AO erroneously treated the transaction of tenancy/rental agreement to be that of transfer of property without any material to hold otherwise. Therefore, we are inclined to delete the addition made by AO, that also by applying section 50C of the Act, which deeming provision in no case is applicable to the facts of the case. Appeal of assessee allowed. - SHRI ABY T. VARKEY, JM AND SHRI PRASHANT MAHARISHI, AM For the Appellant : Shri Vimal Punmiya For the Respondent : Shri Manoj Kumar Sinha (Sr. AR) ORDER PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that since no sale took place, question of capital gain arising from such a transaction doesn t arise. However, the AO did not accept the contention of the assessee. According to him, the transaction entered into with two parties i.e. Chunilal Velaji Prajapati Tegaram Navaji Prajapati are nothing but surrendering of rights in the properties to Shri Chunilal Velaji Prajapati and Shri Tejaram Navaji Prajapati through a registered agreement for tenancy in respect of Second floor/Third floor (approximately 600 sq.ft) for very nominal rent. And according to AO, the transaction is a colourable device to avoid taxation. And therefore he was of the opinion that the entire transaction needs to be treated as transfer in the hands of the assessee and he computed the Long Term Capital Gain (LTCG) from the transaction by applying deeming provision of section 50C of the Act. And according to AO, since the stamp duty value was of Rs. 71,07,480/- and original cost is Rs. Nil, he determined the LTCG from both the properties at Rs71,07,480/- by holding as under:- 8. The assessee s submission Is not acceptable as the same is nothing but the assessee has surrendered his rights in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries since they were not using the premises for their own use but illegally given away by way of sub tenancy. They were also not paying the rent to the landlord. In the month of Oct 2010 a settlement was finally arrived at and the tenancy of these two persons were recognized by entering into agreement of tenancy. The decision in the case of P.N. Amersey-HUF vrs. ITO [2012] 20 taxmann.com 704 (Mum.), the Tribunal has summarized the legal position correctly Where assessee was having substantial rights in property as tenant (sub-tenant) and it was not merely a licence holder, amount received on surrender of such tenancy/sub. tenancy rights would be taxable as capital gains. Considering the facts of the case the assessing officer's decision of taxing transfer of Tenancy Rights for a consideration of Rs 71,07,480 is upheld. 5. Aggrieved, the assessee is before us. 6. We have heard both the parties and perused the records. The assessee along with four (4) brothers had entered into an agreement of tenancy on 15.12.2010 with Shri Chunilal Velaji Prajapati and Shri Tejaram Navaji Prajapati. As per the terms of agreement placed at page no. 32 to 49 of PB in the case of Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the said premises to the original tenants i.e. Tilok Chand D Shah and Dinesh Metal Industries who had illegally given away the said properties by way of sub-tenancy, to Shri Chunilal and Tejaram. According to the Ld. CIT(A), since both these sub-tenants were not paying rent to the land-lord, a settlement was finally arrived at in the month of Oct, 2010 and the tenancy of these two persons were recognized by entering into agreement of tenancy by the land-lord [assessee being one among the four (4) co-owner brother]. Therefore, according to Ld. CIT(A), the AO rightly taxed the transfer of tenancy right and dismissed the appeal of assessee. 7. According to assessee, the registered documents in question was evidencing only tenancy agreement terms of which was in accordance to Maharashtra Rent Control Act, 1999 (hereinafter the MRCA 1999) and the tenancy was governed by MRCA Act, 1999. According to assessee, the AIR information was triggered since assessee registered the tenancy agreement of two floors of property in question to Shri Chunilal Shri Tejaram as per the MRCA 1999, which makes it compulsory on the part of land-lord to register the tenancy/rent agreement as per Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain cases u/s 50C of the Act, which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. (2) ACIT v M/s. Munsons Textiles (ITAT Mumbai) Only for the limited purpose of computation of capital gain in respect of sale of land and building, stamp duty value has to be substituted for sale consideration in view of specific provisions of section 50C of the Act. Therefore, provisions of section 50C of the Act cannot be applied in case of transfer of tenancy rights in respect of land or building or both. (3) DCIT v Tejinder Singh (2012) 19 taxmann.com 4/50 SOT 391 The Tribunal held that the phrase land or buildings or both will not include rights in land or building or both such as tenancy rights. (4) Kishori Sharad Gaitonde v ITO (ITAT Mumbai) ITA No.1561/M/09 In case of Kishori Sharad Gaitonde v ITO (ITAT Mumbai) ITA No. 1561/M/09 take a same view that section 50C of the Act not applied on tenancy right. Observation of Tribunal is as follows: Section 50C of the Act does not apply to rights in land and building like tenancy rights The assessee, a tenant in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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