9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (11) TMI 905 - AT - Income TaxLong term capital gains on transfer of tenancy right - Addition u/s 50C OR 48 - difference of 9.43% between document price and market value - HELD THAT - From the perusal of Notes on clauses and Memorandum explaining the provisions in the Finance Bill 2002 it becomes explicitly clear that if the consideration declared to be received on sale of land or building or both is less than the value adopted or assessed by any authority of the State Government for the purposes of stamp duty in respect of such transfer the value so adopted or assessed shall be deemed to be the full value of consideration and capital gain shall be computed accordingly u/s 48. As noticed from plain reading of the section 50C that unless the property transferred has been covered by that section 50C that is a capital asset being land or building or both registered by sale deed and for that purpose the value has been assessed and stamp duty has been paid by the parties only then section 50C cannot come into operation. In the case under consideration there is transfer of tenancy right though that is capital asset but not a capital asset being land or building or both. Therefore section 50C is not applicable to the facts of the case under consideration. Accordingly the AO is not correct in taking the value adopted or assessed by the authority of a State Government/ the stamp valuation for the purpose calculation of capital gains on transfer of tenancy right. The orders of AO and CIT (A) are set aside and the claim of the assessee is allowed.
Issues Involved:
1. Assessment of long-term capital gains on transfer of tenancy rights. 2. Applicability of Section 50C to the transfer of tenancy rights. 3. Consideration of marginal difference between document price and market value. 4. Misinterpretation of the assessee's agreement on additional consideration. 5. Non-referral to a valuation officer for ascertaining the value of transfer of tenancy rights. Detailed Analysis: 1. Assessment of Long-Term Capital Gains on Transfer of Tenancy Rights: The primary issue is the assessment of long-term capital gains arising from the transfer of tenancy rights. The AO assessed the gains at Rs. 2,07,466, which was confirmed by the CIT(A). The assessee contended that the gains arose from the transfer of tenancy rights, not from the sale of the flat itself. 2. Applicability of Section 50C to the Transfer of Tenancy Rights: The assessee argued that Section 50C, which pertains to the transfer of capital assets being land or building or both, should not apply to the transfer of tenancy rights. The AO and CIT(A) applied Section 50C, taking the market value of the property as Rs. 33,11,200 instead of the document price of Rs. 30 lakhs. The Tribunal observed that Section 50C is specific to land or building and does not extend to tenancy rights. Therefore, the AO's application of Section 50C was incorrect. 3. Consideration of Marginal Difference Between Document Price and Market Value: The assessee highlighted a marginal difference of 9.43% between the document price (Rs. 30 lakhs) and the market value (Rs. 33,11,200). The Tribunal noted that this difference should not have been the basis for invoking Section 50C, especially since the property in question was a tenancy right, not land or building. 4. Misinterpretation of the Assessee's Agreement on Additional Consideration: The AO noted that the assessee had agreed to consider an additional amount for calculating capital gains. However, the assessee clarified that this was an alternate submission without prejudice to the primary argument that Section 50C was not applicable. The Tribunal found that the AO misinterpreted the assessee's agreement, leading to an incorrect assessment. 5. Non-Referral to a Valuation Officer for Ascertaining the Value of Transfer of Tenancy Rights: The assessee argued that the AO should have referred the matter to a valuation officer to ascertain the value of the transfer of tenancy rights. The CIT(A) rejected this contention. The Tribunal emphasized that the AO's failure to refer the matter to a valuation officer was a significant oversight, further invalidating the application of Section 50C. Conclusion: The Tribunal concluded that Section 50C does not apply to the transfer of tenancy rights, as it is specific to land or building. The AO's assessment based on the market value adopted by the stamp valuation authority was incorrect. The Tribunal set aside the orders of the AO and CIT(A), allowing the assessee's appeal. The appeal was pronounced in favor of the assessee on 27.11.2009.
|
