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TMI Blog2024 (2) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... section 50C of the Act but enjoy all the benefits of ownership. 3. The Learned CIT (Appeals), NFAC has erred in law and on facts and circumstances of the case in misinterpreting the various clauses of the Tenancy Agreement that was entered into by the Appellant. 4. The Learned CIT(Appeals), NFAC has erred in law and on facts and circumstances of the case in upholding the service of order on 31-12-2016 being the last day of serve the order to the assessee, to security personnel of the building who was not authorised to receive the order." 2. The assessee is a registered partnership firm carrying on the business of medicines, drugs etc. The assessee filed a return of income for AY 2014-15 on 02.03.2015 declaring total income of Rs. 53,82,245/-. The case was selected for scrutiny and statutory notices were duly served on the assessee. During the year under consideration the assessee has declared Long Term Capital Gain (LTCG) of Rs. 54,00,000/-. The AO noticed that the market value of the property was Rs. 95,00,000/- and called on the assessee to explain why the difference of Rs. 41,00,000/- cannot be treated as income under section 50C of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tenant. For example, the decision in Fleurette Marine Novelle Hatam relates to surrender / assignment of tenancy rights, Kancast (P) Ltd relates to transfer of leasehold rights in MIDC land by the lessee not the owner, Tejender Singh relates to transfer of leasehold rights by lessee, Pradeep Steel Re-Rolling Mills Pvt. Ltd relates to transfer of leasehold rights by lessee, Atul G. Puranik relates to transfer of leasehold rights in land received on compensation from CIDCO for acquisition of agricultural land, etc. In short, the appellant being an owner of the property no. 105 in Drug House has transferred all the rights in the said property and the possession of the said property vide agreement for tenancy dated 27.12.2013. Also, contents not mere nomenclature of a document are relevant factors to decide the transfer of ownership or tenancy. Further, no owner of any property shall become a tenant and created tenancy rights in his/her own property. I am in the considered view that this agreement is nothing but a document of transferring the property, which is duly covered under the word "land or building or both used in section 50C of the Act. Keeping in view the above facts & c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 50C of the Act. The ld. AR in this regard relied on the decision of the co-ordinate bench of the Tribunal in the case of Ashwin Vardhichand Shah v/s. NFAC (ITA No. 2434/Mum/2023 dated 12.12.2023). 5. The ld. DR on the other hand submitted that the tenancy agreement does not have any end date and is a perpetual agreement. The ld. DR accordingly relied on the order of the CIT (A) where the CIT (A) has observed that the entire transaction is a colorable device entered into by the assessee in order to avoid the Capital Gain at the stamp duty value of the property. 6. We have heard the parties and perused the material on record. The assessee, being the owner of property situated at premises no. 105 on the 1st floor of building (Drug House), vide tenancy agreement dated 27.12.2013 has transferred the tenancy right therein for an one time consideration of Rs. 54,00,000/- and a monthly rental was agreed at Rs. 3,960/- per month as per the terms of the agreement. The said agreement was registered as per the Maharashtra Stamp Duty Act whereby the assessee paid the stamp duty on the market value of the property which was at Rs. 95,00,000/-. The AO during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred only the tenancy rights in the property owned by the assessee and the tenant has acquired only the right to use the property on payment of monthly rental subject to the conditions stated in the agreement. We further observed that though the agreement does not specify any end date it cannot be said to be a perpetual agreement since clause-8 as extracted above contains terms by which the assessee has reserved the right to evict the tenant if the terms and conditions are breached. Therefore we tend to agree with the submission that there is no transfer of property in the given case but only the tenancy rights therein. Now coming to the issue of whether section 50C of the Act is applicable, we will first look at the relevant provisions of section 50C which reads as under: Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee 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 State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee along with his brothers named collectively as the "landlords" had given on rent, second & third floor of the building (Property in question) at Kika Street, Mumbai; and as per agreement, Shri Chunilal have to pay Rs. 500/- and Shri Tejaram had to pay Rs. 700/- to the land-lords. This agreement (tenancy agreement) has been registered before Registrar. And as per the AIR information, the market value of the property registered by Registrar was at Rs. 31,60,080/- and Rs. 39,47,400/- on which stamp duty paid was to the tune of Rs. 360 + 360/-, registration fee of Rs. 30,000/- + Rs. 30,000/- and tax value of Rs. 1,97,500/- and Rs. 1,58,500/- was remitted in the Government Account. Taking note of the aforesaid transaction/AIR information, the AO was of the opinion that the assessee had surrendered his rights in the properties to Shri Chunilal Velaji Prajapati and Shri Tejaram Navaji Prajapati respectively and offered stamp duty value of Rs. 71,07,480/- as sale consideration for both floors and calculated the Long Term Capital Gain (LTCG) at Rs. 71,07,480/-. The Ld. CIT (A) confirmed the action of the AO by holding that "money pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not to register the tenancy would invite imprisonment up to 3 months as per section 55 of MRC Act, 1999. Drawing our attention to the tenancy agreement placed at page 32 to 49 PB with Shri Chunilal and page no. 52 to 69 of PB with Shri Tejaram, the Ld. AR submitted that as per the terms of the agreement it can be seen that ownership of the two floors/property in question has not been transferred to Shri Chunilal or Shri Tejaram. According to the Ld. AR, it can be seen that they were only tenants and didn't enjoy the power to sell or mortgage or sub-lease the property (without permission of landlords). And both the tenancy agreement has incorporated the provision of MRC Act, 1999 which permits the assessee to evict the tenant for failure to pay the rent as per section 15 of MRC Act, 1999. Moreover, according to Ld. AR, there was no consideration passed between land-lord and tenant. Apart from the aforesaid facts and despite assessee pointing out the aforesaid facts, there was no enquiry on the part of AO/Ld. CIT (A) to verify from the tenants (Shri Chunilal or Shri Tejaram) as to whether there was any transaction of the nature of transfer as contemplated u/s 2(47) of the Act. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm capital gains on the basis that the said sum was the consideration. The AO took the view that as the market value adopted the Sub-Registrar was Rs. 33,11,200/- the said market value had to be adopted as the consideration u/s 50C of the Act. This was confirmed by the Ld. CIT(A). On appeal by the Ld. Assessee, held allowing the appeal; (i) Section 50C of the Act is a deeming provision and incorporates a legal fiction that if the consideration received on transfer of land or building is less than the stamp duty value, the said stamp duty value shall be deemed to be the full value of consideration for purposes of computing capital gains; (ii) It is trite law that a legal fiction cannot extend beyond the purpose for which it is enacted. As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent is impermissible. The statute has to be interpreted on the basis of the language used. No words can be added and only the language used can be considered so to ascertain the proper meaning and intent of the legislation. (Las on interpretation discussed in detail); (iii) Section 50C of the Act does not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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