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Shri Farid Gulmohamed Versus Income Tax Officer (Internationla Tax) 3 (1) , Mumbai

2016 (4) TMI 1053 - ITAT MUMBAI

Invocation of the provisions of section 50C - Held that:- We do not find any justification in the orders of the authorities below in invoking the provisions of section 50C of the Act and adopting the value of property as determined by the stamp valuation authority, for the purpose of computing the capital gain on transfer of the assessee’s leasehold rights in the said foreshore land at Napean Sea Road, Mumbai.

We direct the AO to compute the capital gains on the transfer of the leaseh .....

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S. No. 2, seeking a direction to be issued to the AO for making a reference to the Departmental Valuation Officer (DVO) would not now require adjudication. - ITA No. 5136/Mum/2014 - Dated:- 16-3-2016 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain, Judicial Member For The Appellant : Shri Dharmesh Shah For The Assessee : Shri Javed Akhtar ORDER Per Jason P. Boaz, A.M. This appeal by the assessee is directed against the order of the CIT(A)- 10, Mumbai dated 28.02.2014 for A.Y. 20 .....

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ean Sea Road, Mumbai to M/s. Orbit Dwelling Pvt. Ltd. for a total consideration of ₹ 90,00,000/-, whereas the market value of the said property was determined by the Stamp Valuation Authority, Mumbai at ₹ 3,41,59,500/-. On the basis of the view that income escaped assessment due to the difference between the value of the property determined by the Stamp Valuation Authority and the consideration as declared by the assessee, the Assessing Officer ( AO ) initiated proceedings under sect .....

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,674/-. On appeal, the learned CIT(A)-10, Mumbai dismissed the assessee s appeal vide the impugned order dated 28.02.2014. 3. Aggrieved by the order of the CIT(A)-10, Mumbai dated 28.02.2014 for A.Y. 2010-11, the assessee has preferred this appeal raising the following grounds of appeal: - 1) a) The Learned Commissioner of Income Tax (Appeals) - 10, Mumbai [hereinafter referred to as "the learned CIT(A)"] erred in upholding the action of the Income tax Officer (International Taxation), .....

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d is not owned by him but has been leased to him and he has only 16.66% share in it; (ii) as per a covenant on the lease land, it is to be used only as garden, swimming pool etc. and no structure can be built on the same; (iii) the land fills in the CRZ Zone and hence does not fetch a fair market value; (iv) the fore-shore land has always been barren and till date of sale, there was no permanent structure on it. The appellant, therefore, submits that the learned CIT(A) filed to appreciate that t .....

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bjection vide his computation of total income filed during the course of assessment proceedings as well as vide submissions made during the said proceedings. 3) The appellant submits that the Assessing Officer be directed to accept the sales consideration for the said land at ₹ 1,35,00,000/- and modify the assessment accordingly as per the provisions of law. 4) Each of the above grounds of appeal are independent and without prejudice to each other. 5) The appellant craves leave to add, to .....

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. for the assessee prayed for admission of the additional grounds raised (supra) for consideration and adjudication in this appeal, reiterating the arguments put forward by the assessee in his prayer for admission of the same. It was submitted that the instant appeal has been filed by the assessee in respect of the learned CIT(A) confirming the addition made by the AO by applying the provisions of section 50C of the Act and in adopting the stamp duty value in respect of assignment of leasehold r .....

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e Tribunal has powers to admit and consider question of law not raised earlier, reliance was placed on the following judicial pronouncements: - (i) National Thermal Power Corporation (229 ITR 383) (SC) (ii) Jute Corporation of India Ltd. (187 ITR 688 (SC) (iii) Ahmedabad Electricity Co. Ltd. ()199 ITR 351) (Bom) 4.2 We have heard the rival contentions of the learned A.R. for the assessee and the learned D.R. for Revenue and perused and carefully considered the material on record; including the j .....

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e off the additional grounds of appeal. 5. Additional grounds of appeal (S. Nos. 1 & 2) 5.1 In the additional grounds and the grounds at S. Nos. 1 & 3 the assessee alleges that the authorities below had erred in law and on facts in not appreciating that the provisions of section 50C of the Act are not applicable in respect of transfer of leasehold rights. The learned A.R. for the assessee vehemently argued that in the case on hand since the assignment of leasehold land did not involve th .....

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hts in land and the said expression land is only with respect to lands which are owned by the assessee as such. It is further submitted that section 50C of the Act being a deeming provision, the fiction created therein cannot extend to any other asset than those provided for specifically. In support of this proposition, that the provisions of section 50C of the Act are not attracted in case of transfer of leasehold rights in land, the learned A.R. for the assessee placed reliance on the followin .....

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ties below and contended that section 50C of the Act is a special provision for computing capital gains in certain cases and would include not only land as such but also leasehold rights in land. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. The facts that emanate from the record are that the assessee had inherited 16.66% leasehold rights in land situated at Napean Sea Road, Mumbai. The assessee .....

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at ₹ 3,41,51,500/- by the registering authority for stamp duty purpose. The AO, instead of taking the consideration for the transfer of the leasehold rights in the said property at Napean Sea Road at ₹ 1,35,00,000/-, invoked the provisions of section 50C of the Act, took the value of consideration for transfer of the said foreshore property at Napean Sea Road at ₹ 3,41,59,500/-, as adopted by the registering authority for stamp duty purposes, and computed the capital gains ari .....

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amp duty valuation authorities. The assessee also raised an additional ground for referring the matter to the Valuation Officer. The learned CIT(A), however, was of the view that the AO was justified in applying the provisions of section 50C of the Act and consequently rejected the assessee s plea. The learned CIT(A) also did not find any justification in the assessee s contentions raised in the additional ground for getting the said property referred to Valuation Officer. In these circumstances .....

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issue has been examined by various Benches of the Tribunal, wherein it has been consistently held that the provisions of section 50C of the Act cannot be invoked in transaction involving transfer of leasehold rights in land or building. Relevant portions thereof are extracted hereunder. 5.3.5 In the decision of the Coordinate Bench of this Tribunal in the case of Nadir Nazarali Dhanani (ITA No. 100/Mum/2013 dated 09.10.2015) at para 7 thereof it was held as under: - 7. We have considered the riv .....

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ease 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 ITO, 55 Taxman.com 171, wherein the co-ordinate bench, while considering the application of provisions of section 50C, in respect of transfer of lease hold rights of 99 years, held that as the assessee is only hav .....

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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 by the Revenue is dismissed. 5.3.6 In the case of Kumarpal Mohanlal Jain (ITA No. 7231/Mum/2010 dated 30.11.2015) the Coordinate Bench of this Tribunal at para 6 has held as under: - 6. We have considered the ri .....

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icable for the transfer of land or building or both, however, the leasehold rights or the tenancy rights are different from the ownership of land or building itself. Reliance in this respect can be placed on the following decisions: 1. Kancast (P.) Ltd. vs. ITO - 2015 68 SOT 110 (Pune - Trib.) 2. M/s. Fordham Pressings (India) Pvt. Ltd. vs. DCIT [ITA No.6033/Mum/2010] decided on 25.04.2012 3. M/s. Heatex Products Pvt. Ltd. vs. ACIT [ITA No.8197/Mum/2010] decided on 24.07.2013 4. ITO vs. M/s. Paw .....

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essee by adopting the sale value of the property at ₹ 25 lakhs as offered by the assessee. 5.3.7 In the case of Atul G. Puranik vs. ITO (132 ITD 499) the Coordinate Bench of this Tribunal at para 11.4 has held as under: - 11.4 In view of the aforenoted judgments rendered by the Hon ble Apex Court and that of the Hon ble jurisdictional High Court, it is clear that a deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit m .....

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d 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 land or building or both as such nor can be included within the scope of land or building or both . The distinction between a capital asset being land or building or both and any right in land or building or both is well recognized under the I.T. Act. Sec. 54D deals with certain cases in whi .....

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prevails under the W.T. Act, 1957 also. Section 5(1) at the material time provided for exemption in respect of certain assets. Clause (xxxii) of sec. 5(1) provided that the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in land or building or any asset referred to in any other clauses of this sub-section) forming part of an industrial undertaking shall be exempt from tax. Here also it is worth noting that .....

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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. 5.3.8 In the case of Hari Om Gupta (45 ITR (Trib) 137) (Lucknow), the Tribunal at para 9 to 11 thereof have observed and held as under: - 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 as .....

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al pronouncements and has categorically held that section 50C of the Act does not come into operation in transfer of leasehold rights. The relevant observations of the Tribunal are extracted 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 .....

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ion land by itself cannot include within its fold leasehold right in land also. Of-course, leasehold right in land is also a capital asset and we find no fault with this stand of the Revenue. 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. Infact, the heading of section itself provides that it is Special provision for full value of consideration in certain cases . Therefore, ther .....

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position. In our view, the said decision of the Tribunal has been wrongly disregarded by the CIT(A). The plea of the CIT(A) is based on the meaning of expression immovable property contained 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 Ac .....

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when the CIT(A) further goes to say that because of the aforesaid provisions, it was not necessary to mention rights in land or building specifically u/s 50C of the Act also . 11. In our 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, fro .....

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d or building. The stand of the CIT(A) that it was not necessary to mention rights in land or building specifically in section 50C of the Act, in our view, is quite misconceived. 12. Apart 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 .....

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bad Bench of the Tribunal in the case of Shri Yasin Moosa Godil (supra) is also on similar lines. 13. In view of the aforesaid legal position and in the absence of any decision to the contrary brought out by the Revenue, we conclude by holding that section 50C of the Act does not come into operation in the present facts where what is transferred by the assessee is only the leasehold rights in land which were acquired by it from Maharashtra Industrial Development Corporation (i.e. MIDC) on a 99 y .....

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Act cannot be invoked in respect to the transfer of leasehold rights, we find no infirmity in the order of the ld. CIT(A), who has rightly adjudicated the issue following the order of the Tribunal. We accordingly confirm the same. 5.3.9 In the case of Kancast (P) Ltd. (ITA No. 1265/PN/2011 dated 19.01.2015) the ITAT Pune Bench at para 13 of its order has held as under:- 13. In view of the aforesaid legal position and in the absence of any decision to the contrary brought out by the Revenue, we c .....

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