2013 (4) TMI 340 - AT - Income Tax

Transaction of transfer of tenancy rights - whether the impugned transfer of tenancy rights attracts the provisions of section 50C - whether u/s 2(47)(v) the giving of possession in part performance of a contract as per section 53A of the Transfer of Property Act is deemed to be a transfer - Held that - The Tribunal s decision in the case of Shri Atul G. Puranik vs. ITO (2011 (5) TMI 576 - ITAT, MUMBAI) which of course deals with the case of transfer of lease rights in principle shall apply to the impugned transfer of tenancy right , which is neither land nor building nor both. Like the lease rights , the tenancy rights are also the capital rights attached to the land or building or both and however, they are not covered by the definition of land or building or both specified in the provisions of section 50C, which is marked as deemed provisions. The deemed provisions are not to be extended to items of capital assets which are not mentioned in section 50C and it is the settled legal position. Therefore, considering the above settled nature of the issue the provisions of section 50C which is the deeming fiction of substituting the value adopted or assessed or assessable by the stamp valuation authority only in respect of land or building or both cannot be extended or extrapolated to the transaction of transfer of the tenancy rights. Accordingly, grounds raised by the Revenue are dismissed and decided in favour of the assessee.

Summary

Issues Involved:
- Applicability of section 50C of the IT Act to the transfer of tenancy rights for the assessment year 2007-2008.

Analysis:
1. The appeal filed by the Revenue challenged the order of CIT (A) regarding the application of section 50C of the IT Act to the transfer of tenancy rights. The Revenue contended that the CIT (A) erred in not applying section 50C to the transaction. The Revenue also argued that the decision of the Hon'ble ITAT Mumbai in certain cases supported their position that section 50C should be applied in such cases.

2. The Ld Counsel for the assessee argued that the provisions of section 50C only apply to "land or building or both," and since tenancy rights do not fall under these categories, section 50C should not be applicable. The Ld Counsel relied on the decision of the Division Bench of the Tribunal in specific cases to support this argument. The CIT (A) had granted relief to the assessee based on similar reasoning.

3. The Tribunal analyzed the contentions of both parties and reviewed the relevant orders and decisions. The Tribunal noted that the case law supported the position that section 50C applies only to "land or building or both." The Tribunal emphasized that tenancy rights, although capital assets, do not fall under the definition specified in section 50C. Therefore, the deeming provisions of section 50C cannot be extended to cover the transfer of tenancy rights. The Tribunal relied on settled legal principles to dismiss the grounds raised by the Revenue and ruled in favor of the assessee.

4. In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision of the CIT (A) that the provisions of section 50C of the IT Act do not apply to the transfer of tenancy rights. The Tribunal's decision was based on the interpretation of the statutory provisions and established legal principles regarding the scope of section 50C in relation to different types of capital assets.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning behind its decision regarding the applicability of section 50C to the transfer of tenancy rights.