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2016 (1) TMI 70 - ITAT MUMBAI

2016 (1) TMI 70 - ITAT MUMBAI - TMI - Applicability of section 50C on lease hold rights - CIT(A) deleted the addition - Held that:- As the assessee was having only lease hold rights for a period of 60 years, he cannot be considered to be the owner of the property so as to compute capital gain by adopting the market value as per the provisions of section 50C of the Act. In the aforesaid view of the matter, we agree with the decisions of the learned Commissioner (Appeals) in deleting the additions .....

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ntention that there is violation of section 46A should not be accepted. Having considered the submissions of the parties, we are of the view that the learned Commissioner (Appeals) has violated provisions of rule 46A by considering additional evidence produced by the assessee without affording an opportunity to the Assessing Officer to examine the same. That being the case, without entering into the merits of legality / validity of computation of short term capital gain, we restore the matter ba .....

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nt is directed against the order dated 31st October 2012, passed by the learned Commissioner (Appeals)-34, Mumbai, for the assessment year 2009-10. The Department has raised the following effective grounds:- "1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of ₹ 2,13,02,298/- and holding that the section 50C is not applicable on leasehold rights by ignoring the fact that lease was for a very long period i.e 60 years, thus ig .....

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f acquisition taken by the Assessing officer at NIL as no cost was incurred by the assessee to acquire the said rights. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in admitting additional evidence in the form of purchase and sale invoices in contravention to Rule 46A, despite the assessee failing to produce the documents during assessment proceedings, and further erred in deleting the addition of Short Term Capital Gain of ₹ 18,42,146/- made by the .....

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he Assessing Officer, on the basis of information available on record, noticed that the assessee has sold a property during the relevant previous year for a consideration of ₹ 2,35,07,298. He, therefore, called upon the assessee to furnish the details relating to the property sold. After verifying the details furnished by the assessee, he found that in the computation of capital gain, the assessee has worked out short term capital gain of ₹ 14,47,029, on sale of factory premise and l .....

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ignment and the assessee is not the owner of the land and further the land is a lease hold land. It was submitted by the assessee that the lease hold land was assigned to M/s. Scan Orbit, vide deed of assignment dated 21st May 2008, along with factory shed having constructed area of 2,205 sq.ft. The assessee also bifurcated the sale consideration of ₹ 1 crore between the building and land by apportioning an amount of ₹ 22,05,000, towards building by taking the cost of construction at .....

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see has not shown the land in block of assets in the Balance Sheet, whereas he has only shown the factory premise at ₹ 3,50,464. He observed that when the assessee has shown an asset forming part of block of asset on which the depreciation has been allowed, the income arising from sale of such capital asset has to be treated as short term capital gain. The Assessing Officer observed that the lease for 60 years is a very long period and the lease is also not revocable for all practical purp .....

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ncerned, the learned Commissioner (Appeals) deleted the addition made by the Assessing Officer by invoking provisions of section 50C of the Act by holding that section 50C of the Act cannot be applied in respect of lease hold rights. In this context, he relied upon the decision of the Tribunal, Mumbai Bench, in Atul G. Puranik v/s ITO, 132 ITD 499 (Mum.). The learned Commissioner (Appeals) held that the assessee was not the owner of the land was only having lease hold rights, hence, for transfer .....

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her submitted that the assessee has not shown the land as part of block of asset in the Balance Sheet, whereas he claimed depreciation on factory shed, therefore, the Assessing Officer was justified in computing long term capital gain by invoking provisions of section 50C of the Act. In support of his contention, the learned Counsel for the assessee relied on the decision of the Tribunal, Mumbai Bench inShavo Norgren Pvt. Ltd. (Ts 898-ITAT-Mum-2012) . 5. The learned Counsel for the assessee, on .....

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2012; and iii) Kancast Pvt. Ltd. v/s Income Tax Officer, 55 Taxman.com 171 (Pn.) 6. As far as the decision of the Tribunal, Mumbai Bench, in Shavo Norgren Pvt. Ltd. (supra), the learned Counsel for the assessee submitted that the fact involved in that case being distinguishable will not apply to the facts of the present case. He submitted that while in the case of Shavo Norgren Pvt. Ltd. (supra), the assessee has paid premium for the land, in case of the assessee no such premium has been paid. H .....

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at even for the purpose of assigning his lease hold rights the assessee had to take permission from the concerned authority. In this context, he referred to the letter dated 28th January 2008 of the assessee and permission granted by Brihan Mumbai Nagar Palika on 14th February 2008. The learned Counsel submitted that in assessee's case not only the assessee has segregated the plot and building for the purpose of capital gain but the Assessing Officer has also considered them separately. Wher .....

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that the lease hold rights are for 60 years, hence, for all practical purpose, the assessee should be held to be the owner of the property. However, as could be seen from the terms of the allotment letter, the lease hold rights conferred on the assessee is on certain terms and conditions attached thereto. Therefore, it cannot be said that the assessee has absolute rights of an owner. In this context, a reference can be made to the decision of the Tribunal, Pune Bench, in Kancast Pvt. Ltd. v/s I .....

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Counsel for the assessee also express similar view. Therefore, as the assessee was having only lease hold rights for a period of 60 years, he cannot be considered to be the owner of the property so as to compute capital gain by adopting the market value as per the provisions of section 50C of the Act. In the aforesaid view of the matter, we agree with the decisions of the learned Commissioner (Appeals) in deleting the additions made on account of long term capital gain. Thus, ground no.1, raised .....

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on sale of factory shed by reducing from the sale consideration the cost of new factory premises along with WDV. By adopting this process, the assessee has computed capital gain of ₹ 14,47,029. The Assessing Officer, however, did not agree with the assessee on the ground that new factory premises was purchased only on 26th March 2009. The learned Commissioner (Appeals), taking into consideration the purchase invoice and sale invoice produced by the assessee as additional evidence and rely .....

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