TMI Blog2012 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... y of this appeal, the appellant Assessing Officer has challenged correctness of learned Commissioner (Appeals) s order dated 9th August 2011, in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), on the following ground: 1. That, on the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting addition of Rs 14,64,692 on account of long term capital gain. 2. That, in doing so, learned CIT(A) erred in holding that Section 50C has no application on transfer of leasehold right in building. 2. In the related cross objection filed by the assessee, following grievance has been raised: For that the learned CIT(A) is not justified in not considering the alternative ground that Section 50 C is not applicable when full value of the consideration is invested under section 54F as far as meaning of full value of consideration under section 54F is concerned. 3. The grievances, which have been raised in the appeal and the cross objections, are interconnected and centre around treatment of capital gains on sale of a property in which the assessee had tenancy rights. We will, therefore, take up all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of capital gains in the hands of the assessee. He then proceeded to compute cost of acquisition as the lease rentals paid by the assessee over the years, and after indexing the same, computed the cost of acquisition at Rs 28,79,698. On this basis, long term capital gain was computed at Rs 1,84,17,692. The Assessing Officer then noted that since while the gross sales consideration under section 50 C in the hands of the assessee is Rs 2,12,97,390, the assessee had made an investment of Rs 1,96,03,685 in qualifying investments under section 54 F, and, accordingly, assessee is entitled to 54F deduction only to the proportionate extent. The deduction under section 54 F was thus computed at Rs 1,69,53,000, and the balance capital gain of Rs 14,64,692 was brought to tax in the hands of the assessee. While doing so, and almost as a postscript to the assessment order, the Assessing Officer also noted as follows: The authorised representative of the assessee argued that no capital gain is chargeable on account of sale of leasehold property at 5/1 Ripon Street Kolkata because the assessee had no absolute right to the sell the property. The assessee is simply a lessee of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before us, and the assessee has also filed a cross objection before us. 7. We have heard the rival contentions, perused the material on record and duly considered applicable legal position in the light of the facts of the case. 8. A plain look at the undisputed facts of this case clearly shows 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 poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of receipts for transfer of tenancy rights, and, accordingly, as the learned CIT(A) rightly holds, Section 50 C could not have been invoked on the facts of this case. Revenue s contention that the provisions of Section 50 C also apply to the transfer of leasehold rights is devoid of legally sustainable 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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