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Income Tax Officer 2 (2) , Kanpur Versus Shri. Hari Om Gupta

2016 (1) TMI 486 - ITAT LUCKNOW

Long Term Capital Gain on sale of lease hold property by the assessee - invocation of the provisions of section 50C in transfer of leasehold right - Held that:- From the transactions, it appears that it was a distress sale and the market value of the property cannot be assessed for computing the long term capital gain. Moreover, we have also examined the other aspects of invocation of provisions of section 50C of the Act relating to leasehold rights. The issue was examined by different Benches o .....

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Tribunal. We accordingly confirm the same. - Decided against revenue. - ITA No.222/LKW/2013, C.O. No.08/LKW/2015 - Dated:- 3-11-2015 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER For The Department : Shri. Amit Nigam, D.R. For The Assessee : Shri. Rakesh Garg, Advocate ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on the following grounds:- 1. The Ld. Commissioner of Income Tax (Appeal .....

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erred in law and on facts by holding that the lease right had been enjoyed by the assessee till 27.10.2006 (Date of Transfer) and after that the lease right were transferred to M/s Med Sassomeccanica (I) Pvt. Ltd. for remaining period of lease. 4. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts by holding that section 50C of the I.T. Act, 1961 is related only to transfer of capital assets and not to the transfer of lease hold right in capital assets. 5 .....

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is required to do so. 2. The assessee has also filed cross objection assailing the validity of reopening of the assessment. The cross objection is filed late by 203 days, for which application for condonation of delay has been filed by the assessee explaining the delay in filing of the cross objection. 3. Having carefully examined the explanations for delay in filing of the cross objection, we find that there is a reasonable cause for delay in filing of the cross objection. Accordingly we condon .....

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Block-A, Scheme No.40, Panki, having an area of 7990.40 SM situated at Panki Industrial Area, Kanpur, on lease for 99 years from Kanpur Development Authority vide lease deed dated 27.2.1984. The assessee, in the impugned assessment year, has executed the registered lease deed of the aforesaid plot on 27.10.2006 in favour of M/s Med Sassomeccanica (I) Pvt. Ltd. and thereby leasehold rights of the assessee in the said property was transferred to the said company. The assessee did not file the ret .....

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43,80,320/- adopted by the Stamp Valuation Authority. The Assessing Officer accordingly completed the assessment for the impugned assessment year and worked out the capital gain at ₹ 2,03,09,196/- and the same was added to the income of the assessee. 6. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) with the submission that the assessee is simply lessee of the properties in question, therefore, had only the right to transfer the leasehold rights in the prosperities. Henc .....

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d reliance upon the order of the Kolkata Bench of the Tribunal, in which it is held that the transfer of leasehold rights, denoted as sale agreement, cannot qualify for sale of property. Hence provisions of section 50C of the Act are not applicable to the instant case involving transfer of leasehold rights. The ld. CIT(A) re-examined the claim of the assessee and being convinced with the explanations furnished by the assessee, held that on transfer of leasehold rights, the provisions of section .....

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mentioned that the appellant ".........obtained on lease for a term of 99 years, Factory premises on plot No. 34E, 34D, 34C part, Block-E, Scheme No] 40, Panki having an area 7990.40 sq. meters situated at Panki Industrial Area from Kanpur Development Authority by virtue of lease deed dated 27-2-1984.................." 6.4- It reveals that undisputedly appellant possessed lease hold rights in the properties in question for a term of 99 years. Thus, the appellant was not the owner of t .....

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page-12 which runs as under :- 1- That in pursuance of aforementioned agreement and in lieu of consideration of ₹ 45,00,000/- (Rupees Forty five lacs) being paid by the Transferee to the Transferor as per his wish in the manner hereinafter stated at the foot of the deed, the receipt of which the transferors hereby acknowledges and as having received and now nothing remains due, the transferor doth hereby assigns conveys and alienates and transfers by way of absolute Assignment/Transfer to .....

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ogether with all Rights, Title, Interest, Easements and appurtenances etc. whatsoever unto and upon the said property to the transferee to have and to hold the said property hereby assigned for the remainder terms of the lease or as may be extended from time to time and transferor has delivered actual physical vacant possession over the said property to the transferee and who are now entitled to use, possess and enjoy and occupier the same as own property in any way wise or manner." 6.6- Li .....

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read with lease deed dated 27-9-1984 executed by Kanpur Development Authroity, Kanpur, in favour of Sri Hari Om Supta (the appellant) that the appellant was a lessee in the properties in question and the appellant transferred lease hold rights in favour of M/s. Ved Sassomeccanica (I) Pvt. Ltd. There is no dispute of this aspect of the matter, yet the A.O. treated the appellant as an owner and seller of the properties in question because of the facts that the deed dated 27-10-2006 is captioned a .....

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2003-04) by Division Bench, Income Tax Appellate Tribunal, Mumbai Benches, Mumbai; and Dy. Commissioner of Income Tax Mr. Tajendra Singh, ITA No. 1459/KOL/2011 (Assessment Year 2008-09) 72 DTR (KOL) (Trib.)-160. Ratio of these cases are to the effect that transfer of capital asset cannot be equated with a transfer of lease hold rights in property. In Dy.CIT v/s Tajendra Singh, (2012) 72 OTR (KOL) (Trib.)-160 it has been clearly held that "It is sine qua non for application of Section 50C t .....

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asset, being land or building or both, 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." It is established that the appellant was not owner of the land but was only the holder of lease hold rights for 99 years as per lease deed (captioned as sale deed) dated 27-09-1984 and the such rights have been enjoyed by the assessee till 27-10-2006 when the lease rights has been tra .....

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ddition made by the Assessing Officer u/s.50C is hereby deleted. 7. Aggrieved, the Revenue is in appeal before the Tribunal and placed heavy reliance upon the order of the Assessing Officer; whereas the ld. counsel for the assessee has invited our attention to the fact that the assessee had agreed to sell the property initially to Shri. Monu Dua under distress, as he was not in a position to repay the loan obtained from the SBI, IFB, Kanpur against equitable Mortgage on the property in question. .....

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distress sale and transfer was of only leasehold rights in favour of M/s. Ved Sassomeccanica (I) Pvt. Ltd., the provisions of section 50C of the Act cannot be invoked. In support of his contention, the ld. counsel for the assessee has placed reliance upon the following judgments:- 1. CIT vs. Dadha and CO., 142 ITR 792. 2. Ram Narain and Brothers vs. CIT, 73 ITR 423 3. Abdul Kareemia and Bros. vs. CIT, 145 ITR 442. 4. CIT vs. Bharati Engineering Corporatiion, 180 ITR 32. 5. Atul G. Puranik vs. IT .....

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acquired the impugned property on lease from Kanpur Development Authority vide lease deed dated 27.9.1984 for a period of 99 years. From a perusal of the agreement to sell of the impugned property executed by the assessee in favour of Shri. Monu Dua, we find that it was a distress sale, as the assessee was not in a position to pay all bank dues and the property in question was kept as collateral security with bank by creating equitable mortgage. As per this agreement to sell, Shri. Monu Dua has .....

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nt of ₹ 40 lakhs was made to Shri. Monu Dua, for which acknowledgement was given by the assessee. 9. From these transactions, it appears that it was a distress sale and the market value of the property cannot be assessed for computing the long term capital gain. Moreover, we have also examined the other aspects of invocation of provisions of section 50C of the Act relating to leasehold rights. The issue was examined by different Benches of the Tribunal in a number of cases referred to by t .....

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ted hereunder for the sake of reference:- 9. We have carefully considered the rival submissions. Section 50C of the Act provides that if the consideration received or accruing is less than the value adopted or assessed or assessable by the stamp valuation authority of the State Government for such transfer then the value so adopted or assessed or assessable shall be deemed to be the full value of consideration and the capital gains will be computed accordingly. The phraseology of section 50C of .....

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nue. So however, every kind of a capital asset is not covered within the scope of section 50C of the Act for the purposes of ascertaining the full value of consideration. In-fact, the heading of section itself provides that it is Special provision for full value of consideration in certain cases . Therefore, there is a significance to the expression a capital asset, being land or building or both contained in section 50C of the Act. The significance is that only capital asset being land or build .....

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ined in Explanation below section 269UA(d)(i) of the Act. According to the CIT(A), the Explanation below section 269UA(d)(i) of the Act makes it clear that the land, building, etc. included in the phrase immovable property also includes any rights therein. The CIT(A) has correlated this to section 2(47) of the Act which defines the expression transfer in relation to capital asset. As per the CIT(A), section 2(47) of the Act contains a reference to the meaning of the immovable property contained .....

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considered opinion, the point made by the CIT(A) is quite fallacious. Firstly, it has to be understood that the meaning of the expression immovable property contained in section 269UA(d) of the Act has been referred to in section 2(47) of the Act only in relation to sub-clause (v) and (vi) thereof. Secondly, from the meaning of expression immovable property contained in section 269UA(d) of the Act, the only thing that can be inferred is that even leasehold rights in land is a capital asset. How .....

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rt from the aforesaid discussion, we find that the Mumbai Bench of the Tribunal in the case of M/s Pradeep Steel Re-Rolling Mills Pvt. Ltd. (supra) has considered an identical controversy wherein it has been held that section 50C of the Act would apply only to capital asset, being land or building or both and it would not apply in relation to leasehold rights in land or building. To the similar effect is the decision of the Jaipur Bench of the Tribunal in the case of M/s Jaipur Times Industries .....

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