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2017 (1) TMI 731 - ITAT MUMBAI

2017 (1) TMI 731 - ITAT MUMBAI - TMI - Transfer u/s. 45(2) - scope of deeming provisions u/s.50C - CIT(A) held that deeming provisions of Section 50C being a legal fiction cannot be invoked for the purpose of valuation of transfer of tenancy rights - whether mere letting out of property by assessee to the tenant does not envisage any transfer u/s. 45(2)? - Held that:- AO has not disputed the fact that assessee was in receipt of any consideration other than monthly rent. CIT(A) has also considere .....

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pital gain is not applicable. We also found that no finding has been recorded by the AO to the effect that any sale consideration was received by the assessee other than rent and maintenance charges. The detailed findings so recorded by CIT(A) are as per material on record, therefore, do not require any of our interference. Accordingly, grounds taken by the Revenue are dismissed. - ITA No. 5674/Mum/2014, CO No. 42/Mum/2016 - Dated:- 9-1-2017 - Shri R. C. Sharma, AM And Shri Ravish Sood, JM Reven .....

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rties on rent for a monthly consideration of ₹ 3080/- and monthly maintenance charges of ₹ 1765/- to Shri Lalit Kumar Jain. However, AO applied provisions of Section 50C by taking the stamp duty value adopted for registration of tenancy deed as full value of consideration and made an addition on account of short term capital gains amounting to ₹ 82,31,000/- 4. By the impugned order CIT(A) deleted the addition after observing as under:- 2.2. I have considered the facts of the ca .....

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the Act by taking the stamp duty value adopted for the registration of the tenancy deed as the full value of the consideration received as a result of the alienation of the asset by creation of the tenancy rights. The first issue whether there is a "transfer" of an asset or a right by the appellant is taken up first. The basic facts of the case is that appellant is the owner of the property i.e. room no.14, on 3rd floor, in the bldg. named Laxmi Bhavan situated at 158/164, Kalbadevi r .....

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herefore observed that the property has been continuously let out without any break in the period. On perusal of the tenancy agreement it is observed that the landlord at all times holds exclusive use and possession of the impugned property and the tenant is only entitled for the commercial exploitation of the same, in lieu of the monthly rent paid by him. Further, it has also been clarified in the tenancy agreement that the tenant is not entitled in any way to alienate the said property in any .....

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en given very limited right of occupation of the property for his commercial purposes, other than that he has not been given any kind of right, title or interest in the ownership of the said property. Tenancy rights accrue to a tenant by the fact that he has been occupying a particular property for a considerable length of time. It is to be noted that tenants who have occupied a property for a number of years develop tenancy rights in the said property by virtue of the fact of occupation and als .....

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s as narrated above, there is no "transfer" of an asset as envisaged under section 45 (2) of the IT. Act. In fact it is mere letting out of property by the appellant to a tenant. Therefore, the first issue in appeal is answered in favour of the appellant and the finding of the AO is deleted. As the first issue has been decided in favour of appellant the second issue becomes in fructuous However. without prejudice for the sake of clarity even the second issue is adjudicated. It has been .....

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gains in this case. Now it has to be examined whether the assessing officer was right in adopting the value as per stamp duty authorities for computing the capital gains in case of transfer of tenancy rights. Let us peruse the provisions of section 50C which states that "where the consideration received or accruing as a result of the transfer by an appellant of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a sta .....

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rther it is observed that this is a deeming provision under the Act and its application would be limited strictly to the class of assets specified in this Act. The scope of the deeming provision under section 5OC has been discussed by the Hon'ble Mumbai Tribunal in the case of Atul G Puranik (2011-(132) ITD 0499 TBOM) where in it has been held as follows: "In view of the aforesaid judgments rendered by the Hon'ble Apex Court and that of the Hon'ble Jurisdictional High Court, it .....

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n 5OC will cease to apply. On a similar issue regarding applicability of Section 50C in cases of transfer of tenancy rights the Hon ble Mumbai Tribunal in the case of Munsons Textiles ITA No.6320/M/2010 have held that as under: "There is no dispute that the transfer of tenancy rights is a capita! asset and income is assessable as capital gain. The dispute is only about sale value. Appellant had shown value of ₹ 55 lacs in respect of transfer of tenancy rights relating to about 1800 sq .....

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provisions of Section 50C. Therefore, provisions of section 50C cannot be applied in case of transfer of tenancy rights in respect of land or building or both. This view is supported by the decision of the Tribunal in case of Atul G Puranik vs ITO (supra), in which it was held that right in plot of land cannot be considered as land or building or both and therefore, provision of section 50C could not be applied in case of lease hold rights in land. Further the Lucknow Bench of the Tribunal in th .....

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ere is no material to show that the appellant had understated the sale consideration. We, therefore, see no infirmity in the order of the CIT(A) and the same is, therefore upheld." It is therefore seen that now it is a well settled principle that section 50 C, being a legal fiction, cannot be invoked for the purposes of valuation of transfer of tenancy rights. To sum up the findings are as follows: 1. There is no transfer or alienation of asset by the appellant and, therefore, the provision .....

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fully following the decision of the Hon'ble Mumbai Tribunal in the cases of Atul G Puranik and Munsons Textile, this ground of appeal is hereby allowed. 5. Against the above order of CIT(A), Revenue is in further appeal before us. 6. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the .....

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at landlord at all the times held exclusive use and possession of the impugned property and the tenant is only entitled for the commercial exploitation of the same, in lieu of the monthly rent paid by him. The CIT(A) also recorded a finding to the fact that as per terms of the tenancy agreement, the tenant is not entitled in any way to alienate the said property in any manner either by way of letting it out or by sub letting it out or by creating any kind of assignment or transfer. It was also o .....

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