2011 (5) TMI 576 - ITAT, MUMBAI

Capital gain on account of transfer of the Plot - assessee was allotted a plot of land under the 12.5% Gaothan Expansion Scheme by CIDCO - plot not allotted on ownership basis for perpetuity but only on lease basis for 20 years - Held that:- There are two distinct transactions in this case. The first, is the acquisition of lands of assessee's father against which the assessee, as legal heir, was given lease of the Plot on 16-08-2004. This transaction got completed when the assessee got the leasehold rights in the Plot on such date, which falls in the previous year relevant to the asstt. year 2005-06. Whatever was the amount of profit or gain on this transaction was accordingly chargeable to tax in A.Y. 2005-06. The second transaction is the transferring of such leasehold rights in the Plot to M/s. Pathik Construction on 25-08-2005 for a consideration of ₹ 2.50 crores, which event falls in the previous year relevant to the assessment year under consideration.

The full value of the consideration received or accruing as a result of the acquisition by the Govt. is the amount given as consideration for such acquisition or in the alternative the market value of any other capital asset given to the assessee against such acquisition. As in the instant case the Govt. has allotted rights in the Plot as the full value of consideration on the acquisition of lands by it in the years 1970/72, the market value of such right is to be considered as full value of consideration at the time of computing capital gain on the first transaction in the preceding year. Once a particular amount is considered as full value of consideration at the time of its purchase, the same shall automatically become the cost of acquisition at the time when such capital asset is subsequently transferred. Thus, the full value of consideration should mean the market value of the lease rights in the Plot for sixty years at the time of the first transaction which was completed on 16-08- 2004, and the same amount shall become the cost of acquisition when such rights in the Plot became subject matter of transfer in the current year on 25-08- 2004.

Full Value of Consideration and Section 50C - Held that:- As sec. 50C applies only to a capital asst, being land or building or both, it cannot be made applicable to lease rights in a land. As the assessee transferred lease right for sixty years in the Plot and not land itself, the provisions of sec.50C cannot be invoked. It is a settled legal proposition that a deeming provision cannot be extended beyond the purpose for which it is enacted. Capital gain on the transaction of assignment of lease rights in the Plot is to be computed in the year in question by adopting the full value of consideration on 25-08-2005 at ₹ 2.50 crores and the cost of acquisition shall be worked out afresh as per law by the AO by taking the market value of lease rights for sixty years in the Plot as on 16-08-2004.