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2017 (10) TMI 1600 - AT - Income TaxCapital gain computation on transfer of leasehold rights of land - Value determined by the Stamp Valuation Authority - application of Section 50C in respect of leasehold rights in the land in question which is owned by the Govt. i.e.Narela Industrial Complex New Delhi - HELD THAT - We find that this issue has already been examined by various Benches of the Tribunal wherein it has been consistently held that the provisions of Section 50C of the Act cannot be invoked in transaction involving transfer of leasehold rights of land or building. We do not find any justification in the orders of the authorities below in invoking the provisions of Section 50C of the Act and adopting the value of property as determined by the Stamp Valuation Authority for the purpose of computing the capital gain on transfer of assessee s leasehold rights in the said plot. We direct the AO to compute the capital gain on the transfer of leasehold rights of the aforesaid plot by adopting the value of the property at 55 lakhs as offered by the assessee. It is ordered accordingly the ground raised by the assessee is allowed.
Issues Involved:
1. Validity of the orders of the lower authorities. 2. Applicability of Section 50C of the Income Tax Act to the transfer of leasehold rights. Issue-wise Detailed Analysis: 1. Validity of the Orders of the Lower Authorities: The appellant challenged the orders of the lower authorities (Assessing Officer and CIT(A)) on the grounds that they were "bad in law and facts" and should be set aside or modified. However, the tribunal did not provide a detailed adjudication on this general ground, focusing instead on the specific issue of the applicability of Section 50C. 2. Applicability of Section 50C to the Transfer of Leasehold Rights: The primary issue in this appeal was whether Section 50C of the Income Tax Act, which deals with the valuation of capital assets for the purpose of calculating capital gains, applies to the transfer of leasehold rights. - Facts of the Case: - The Delhi State Industrial Development Corporation executed a perpetual lease deed for a plot of land in favor of an individual, who later assigned the leasehold rights to the assessee. - The assessee subsequently transferred these leasehold rights to two individuals for a total consideration of ?55,00,000. - The Assessing Officer adopted the value of ?96,00,000 as determined by the Stamp Valuation Authority, treating the leasehold rights as "land or building or both." - Assessee's Argument: - The assessee contended that Section 50C should not apply to the transfer of leasehold rights, citing the ITAT Mumbai Tribunal's decision in Atul G Puranik v. ITO, which held that leasehold rights do not fall within the scope of "land or building or both." - Tribunal's Analysis: - The tribunal reviewed various judgments from different benches of the ITAT, which consistently held that Section 50C does not apply to transactions involving the transfer of leasehold rights. - The tribunal cited several cases, including: - Shri Farid Gulmohamed vs. ITO, where it was held that leasehold rights are distinct from ownership and Section 50C does not apply. - Kumarpal Mohanlal Jain, where it was determined that leasehold rights are different from ownership of land or building, and Section 50C is not applicable. - Atul G. Puranik vs. ITO, which emphasized that Section 50C applies only to "land or building or both" and not to leasehold rights. - Kancast Pvt. Ltd. vs. ITO, where the tribunal concluded that Section 50C does not cover leasehold rights. - Tribunal's Decision: - The tribunal found no justification for the lower authorities to invoke Section 50C and adopt the stamp valuation for computing capital gains on the transfer of leasehold rights. - It directed the Assessing Officer to compute the capital gains based on the actual sale consideration of ?55,00,000 as offered by the assessee. Conclusion: The appeal was partly allowed, with the tribunal directing the computation of capital gains based on the actual sale consideration rather than the stamp valuation. The tribunal adhered to the principle that Section 50C does not apply to the transfer of leasehold rights, following consistent judicial precedents.
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