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2014 (2) TMI 1212 - AT - Income TaxCapital gains from transfer of industrial property - Held that - Section 50C of the Act applies only to capital asset being land or building or both but it cannot apply to lease rights in a land. Since the assessee has transferred the lease right for 99 years in the plot and not ownership in land itself the provision of Section 50C cannot be invoked. Therefore full value of consideration in this case has to be taken at Rs. 42.25 lacs. The decisions relied on by the assessee in its written submissions also support our above finding. - Decided in favour of assessee.
Issues Involved:
1. Application of Section 50C of the Income Tax Act, 1961. 2. Refusal to refer the matter to the Valuation Officer. Issue-wise Detailed Analysis: 1. Application of Section 50C of the Income Tax Act, 1961: The primary issue in this appeal is whether the provisions of Section 50C of the Income Tax Act, 1961, which deals with the adoption of the value assessed by the stamp valuation authority as the sale consideration for the purpose of calculating capital gains, are applicable to the transfer of leasehold rights in land. The assessee declared capital gains from the transfer of industrial property, calculating the same based on an actual sale consideration of Rs. 42.25 lakhs. However, the Assessing Officer (AO) adopted the value of Rs. 58,98,653/- as per the stamp valuation authority's determination under Section 50C, thereby increasing the capital gains. The assessee contended that Section 50C applies only to capital assets being "land or building or both" and not to leasehold rights. The assessee argued that the leasehold rights in the plot, which were transferred, do not fall under the purview of "land or building or both" as envisaged by Section 50C. The assessee supported this argument by citing various judicial precedents, including the cases of DCIT vs. Tajinder Singh, Kishori Sharad Gaitonde vs. ITO, and Atul G Puranik vs. ITO, which held that Section 50C does not apply to the transfer of tenancy or leasehold rights. The Tribunal, after considering the written submissions and the judicial precedents cited by the assessee, accepted that Section 50C applies only to capital assets being land or building or both and not to lease rights in land. Since the assessee had transferred the lease rights for 99 years and not the ownership of the land itself, the provisions of Section 50C could not be invoked. Therefore, the full value of consideration was taken at Rs. 42.25 lakhs, as declared by the assessee. Consequently, the Tribunal allowed Ground No. 1.1 of the assessee's appeal. 2. Refusal to Refer the Matter to the Valuation Officer: The second issue was the ld. CIT(A)'s refusal to refer the matter to the Valuation Officer despite the assessee's request. The assessee argued that the value adopted by the stamp valuation authority exceeded the fair market value of the property and sought a referral to the Valuation Officer to ascertain the correct value. The Tribunal noted that the ld. CIT(A) had rejected the assessee's request without providing any evidence or cogent arguments to support the claim that the value taken by the stamp valuation authority exceeded the fair market value. However, since the Tribunal had already decided that Section 50C was not applicable to the transfer of leasehold rights, this ground became redundant. Therefore, the Tribunal did not need to address the issue of referral to the Valuation Officer separately. Conclusion: The Tribunal concluded that Section 50C of the Income Tax Act, 1961, does not apply to the transfer of leasehold rights in land. As a result, the full value of consideration was taken at Rs. 42.25 lakhs, as declared by the assessee. The appeal of the assessee was partly allowed. The order was pronounced in the open Court on 26-02-2014.
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