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2016 (4) TMI 1053 - AT - Income TaxInvocation of the provisions of section 50C - Held that - 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 the assessee s leasehold rights in the said foreshore land at Napean Sea Road, Mumbai. We direct the AO to compute the capital gains on the transfer of the leasehold rights of the aforesaid foreshore land at Napean Sea Road, Mumbai by adopting the value of the property at ₹ 1,35,00,000/- as offered by the assessee. It is accordingly ordered. The additional grounds raised by the assessee, by holding that the provisions of section 50C of the Act cannot be invoked to compute the capital gains arising on transfer of leasehold rights, the assessee s grievance in this appeal has been addressed. In this view of the matter, the ground raised at S. No. 2, seeking a direction to be issued to the AO for making a reference to the Departmental Valuation Officer (DVO) would not now require adjudication.
Issues Involved:
1. Applicability of Section 50C of the Income Tax Act, 1961 to leasehold rights in land. 2. Whether the Assessing Officer should have referred the valuation of the property to the Valuation Officer. 3. Determination of the correct sale consideration for computing long-term capital gains. Issue-wise Detailed Analysis: 1. Applicability of Section 50C of the Income Tax Act, 1961 to Leasehold Rights in Land: The primary issue was whether Section 50C of the Income Tax Act, 1961, which pertains to the adoption of the value determined by the Stamp Valuation Authority for computing capital gains, applies to the transfer of leasehold rights in land. The assessee argued that Section 50C is not applicable to leasehold rights as it specifically mentions "land or building or both" and not leasehold rights. The Tribunal reviewed various judicial pronouncements, including decisions from different Benches of the ITAT, which consistently held that Section 50C does not apply to leasehold rights. The Tribunal concluded that the provisions of Section 50C could not be invoked in the case of the transfer of leasehold rights in land, as these rights do not constitute ownership of land or building. 2. Whether the Assessing Officer Should Have Referred the Valuation of the Property to the Valuation Officer: The assessee contended that the Assessing Officer erred by not referring the valuation of the property to the Valuation Officer to determine its fair market value. The Tribunal noted that the assessee had raised objections to the value determined by the Stamp Valuation Authority during the assessment proceedings. However, since the Tribunal held that Section 50C does not apply to leasehold rights, the need to refer the matter to the Valuation Officer became redundant. Consequently, this issue did not require further adjudication. 3. Determination of the Correct Sale Consideration for Computing Long-Term Capital Gains: The assessee declared the sale consideration of the leasehold rights at Rs. 1,35,00,000/-, while the Assessing Officer adopted the value determined by the Stamp Valuation Authority at Rs. 3,41,59,500/-, invoking Section 50C. Given the Tribunal's decision that Section 50C does not apply to leasehold rights, it directed the Assessing Officer to compute the capital gains based on the declared sale consideration of Rs. 1,35,00,000/-. This directive was in line with the Tribunal's consistent stance in similar cases, where it was held that leasehold rights are distinct from ownership of land or building and thus not subject to the deeming provisions of Section 50C. Conclusion: The Tribunal allowed the appeal, holding that Section 50C does not apply to the transfer of leasehold rights in land. It directed the Assessing Officer to compute the capital gains based on the sale consideration declared by the assessee, thereby addressing the assessee's grievances comprehensively. The additional grounds raised by the assessee were also admitted and adjudicated in favor of the assessee. The Tribunal's decision was pronounced in the open court on 16th March 2016.
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