2018 (5) TMI 1792 - HC - Income Tax

Applicability of section 50C - transfer of capital asset - change of tenor of transaction for sale of land - sale therein was through a registered sale deed for consideration but it was taken to be relinquishment of right - Held that - It is nothing but an order without elaborate finding on the issue, that too, after taking into consideration the requisite facts for its adjudication. The appellant has referred judgment of Bombay High Court in M/S. GREENFIELD HOTELS ESTATES PVT. LTD. 2016 (12) TMI 353 - BOMBAY HIGH COURT where it was held that Section 50C of the Act of 1961 would not be applicable on transfer of lease hold rights of the land. Bare perusal of Section 50C of the Act of 1961 does not show that transfer of capital asset for consideration should be other than of lease hold property or khatedari land. The court cannot re-write the provision. If analogy taken by the Bombay High Court in the case (supra) is applied in general then Section 50C would not be applicable in majority of the cases as not it is allowed as lease hold property. Section 50C is applicable on transfer of capital assets for consideration. The Bombay High Court has not referred as how the land was in the balance-sheet. It is as a capital asset or not thus we are unable to apply the judgment of Bombay High Court in the case of M/s. Greenfield Hotels Estates Pvt. Ltd. (supra). - No substantial question of law.

Summary

Issues:
1. Application of Section 50C of the Income Tax Act, 1961 to the sale of land.
2. Interpretation of possession and transfer of rights in land versus transfer of capital asset.
3. Comparison with previous judgments regarding the applicability of Section 50C.

Analysis:
1. The primary issue in this case revolves around the application of Section 50C of the Income Tax Act, 1961 to a land sale transaction. The appellant contested the addition of capital gains under Section 50C by the Assessing Authority, arguing that the land sale was not a transfer of a capital asset but only of rights due to the land being under acquisition for RIICO. The appellant referenced various orders and the Bombay High Court judgment to support the claim that Section 50C does not apply to the transfer of leasehold rights. However, the Tribunal and CIT (Appeals) upheld the addition, concluding that Section 50C was rightly applied due to the variance between the consideration received and the value assessed for stamp duty purposes.

2. The second issue concerns the interpretation of possession and transfer of rights in land versus the transfer of a capital asset. The appellant argued that possession lay with RIICO, not the assessee, and therefore, Section 50C should not apply. However, the court found that the material on record did not conclusively establish RIICO's possession, leading to the dismissal of the appeal. The court highlighted the necessity of factual evidence in determining possession and the applicability of Section 50C.

3. Lastly, the comparison with previous judgments regarding the applicability of Section 50C added depth to the analysis. The court examined judgments from the Bombay High Court and the ITAT, Ahmedabad, to assess the interpretation of Section 50C in different scenarios. While acknowledging the varying interpretations, the court emphasized the need for a comprehensive evaluation of facts and legal provisions to determine the applicability of Section 50C. The court critiqued the ITAT, Jaipur Bench, for not adequately considering the facts and balance sheet disclosures in its decision-making process, ultimately leading to the dismissal of the appeal.

In conclusion, the High Court dismissed the appeal, emphasizing the importance of factual evidence and a thorough analysis of legal provisions in determining the applicability of Section 50C to land sale transactions. The judgment underscored the need for a nuanced understanding of possession, transfer of rights, and capital assets to ensure accurate application of tax laws.