2012 (2) TMI 691 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of long-term capital gain.
2. Applicability of Section 50C on transfer of leasehold rights.
3. Consideration of alternative ground regarding Section 54F.

Summary:

Issue 1: Deletion of Addition on Account of Long-Term Capital Gain
The appellant Assessing Officer challenged the deletion of Rs. 46,24,350 on account of long-term capital gain by the CIT(A). The CIT(A) held that the assessee was a tenant in the property sold by the owner and the receipt was in the nature of surrendering tenancy rights. The CIT(A) concluded that the capital gains should be computed based on actual consideration and not the stamp duty value.

Issue 2: Applicability of Section 50C on Transfer of Leasehold Rights
The CIT(A) ruled that Section 50C of the Income Tax Act, 1961, does not apply to the transfer of leasehold rights in a building. The Tribunal upheld this view, stating that Section 50C applies only to the transfer of a capital asset, being land or building or both, and not to leasehold rights. The Tribunal noted that the assessee received payment for surrendering tenancy rights, not ownership rights, and thus Section 50C could not be invoked.

Issue 3: Consideration of Alternative Ground Regarding Section 54F
The assessee's cross objection argued that Section 50C is not applicable when the full value of consideration is invested u/s 54F. The CIT(A) did not address this alternative ground, deeming it academic since the primary ground was allowed. The Tribunal agreed, noting that the qualifying investment u/s 54F exceeded the consideration received for surrendering tenancy rights, resulting in no taxable capital gain.

Conclusion:
The Tribunal dismissed both the appeal by the Assessing Officer and the cross objection by the assessee. The Tribunal upheld the CIT(A)'s decision that Section 50C does not apply to the transfer of leasehold rights and that the capital gains should be computed based on actual consideration. The cross objection was deemed academic and not pressed.