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TMI Blog2012 (12) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... de and that of the Assessing Officer be restored." 2. The relevant facts for adjudication of the issues involved are that, during the year the assessee has transferred the leasehold rights in respect of the land at Palghar along with factory premises situated therein, to M/s Karamtara Engineering (P) Ltd. for a consideration of Rs. 1,10,00,000/-. On perusal of the agreement for the said transaction, the Assessing Officer noticed that the market value of the said property is much higher than the consideration at which the assessee has transferred the said leasehold rights which should be at Rs. 3,17,40,000/- in terms of provisions of Section 50C (1). He required the assessee as to why the value as per Section 50C should not be considered and profit as short term capital gain instead of long term capital gain since the said asset has been shown as capital asset, in balance sheet. 2.1 In response, the assessee submitted that it had purchased MIDC lease plot at Tarapur in 1974. The said plot admeasuring 20989 sq.mtrs. along with factory building admeasuring 732.268 sq.mtrs. was sold for a total consideration of Rs. 1,10,000/-. It was further explained that the activities of the facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in perpetuity by the purchaser. 5. The nature of this transaction is accepted by the learned AO to be that of transfer of leasehold rights as he has described it as such in para 5 of his assessment order itself which says a. Assessee had transferred leasehold rights in respect of land at Palghar. b. Why value of leasehold rights should not be adopted at Rs. 3,17,40,000/- as against value of Rs. 1,10,00,000/- at which it has transferred the said rights in terms of provisions of sec.50C of the I.T. Act, 1961. The finding that it was transfer of leasehold rights in land being a pure finding of fact cannot be subsequently enlarged to convert it into transfer of land itself without any concrete proof or facts justifying this change of opinion. Further the case of Kishori Gaitonde ITA No.1561/M/09 (BCAJ FEB 2010) decided by our jurisdictional tribunal i.e. ITAT, Mumbai is squarely applicable to your appellant and hence, Section 50C of the I.T.Act, 1961 cannot be made applicable to the present case." 5. Learned CIT(A) after going through the material placed on record like copy of agreement dated 5-11-1974 between MIDC and the assessee and the agreement dated 16-10-2006 between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut as long term capital gains after replacing the market value as on 1.4.1981 and after giving benefit of indexation. Factory building at the said plot. It has been submitted by the appellant that the factory building is part of the block of assets and depreciation is claimed for the same under the Income Tax Act 1961. The WDV of the factory building as on 1.4.2006 is Rs. 2,72,787/- as mentioned in page 4 of the assessment order. Thus the factory building being depreciable asset forming part of block of assets, sec. 50 of the I.T.Act, 1961 is applicable and the capital gains arising from the same will be treated as short term capital gain. The consideration after bifurcation as above will be taken at Rs. 8,16,200/- and the difference between this consideration and its WDV as on 1.4.2008 being Rs. 2,72,787/- will be taxed as short term capital gain." 6. Learned AR appearing on behalf of the assessee at the very outset submitted that whether the provision of Section 50C would be applicable on transfer of lease hold rights in the land or not, stands squarely covered by the decision of the ITAT including Mumbai Bench. List of such decisions relied upon by the learned AR are as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both. If the capital asset under transfer cannot be described as Rs.land or building or both', then sec. 50C will cease to apply. From the facts of this case narrated above, it is seen that the assessee was allotted lease right in the Plot for a period of sixty years, which right was further assigned to M/s. Pathik Construction in the year in question. It is axiomatic that the lease right in a plot of land are neither Rs.land or building or both' as such nor can be included within the scope of Rs.land or building or both'. The distinction between a capital asset being Rs.land or building or both' and any Rs.right in land or building or both' is well recognized under the I.T. Act. Sec. 54D deals with certain cases in which capital gain on compulsory acquisition of land and building is charged. Sub-sec.(1) of sec. 54D opens with : "Subject to the provisions of sub-section (2), where the capital gain arises from the transfer by way of compulsory acquisition under any law of a capital asset, being land or building or any right in land or building, forming part of an industrial undertaking.....". It is palpable from sec. 54D that Rs.land or building' is distinct from Rs.any right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession 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 receipt in the hands of the tenant receiving such payment. What is paid for the tenancy rights cannot, merely because of the timing of the payment, cannot be treated as receipt for ownership rights in the hands of the assessee. This distinction between the receipt for ownership rights in respect of a property and receipt for tenancy rights in respect of a property, even though both these receipts are capital receipts leading to taxable capital gains, is very important for two reasons - first, that the cost of acquisition for tenancy rights, under section 55(2)(a), is, unless purchased from a previous owner - which is admittedly not the case here, treated as 'nil'; and, - second, since the provisions of Section 50 C can only be applied in respect of "transfer by an assessee of a capital asset, being land or building or both", the provisions of Section 50 C will apply on receipt of con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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