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2017 (4) TMI 759 - AT - Income TaxLong Term Capital Gain - sale consideration under section 50C applicability - whether the assessee has sold right to acquire a property or has actually sold the property itself? - Held that - What has been transferred is a right of allotment in the property which was under construction and possession thereof was not taken by the assessee and hence, there is no question of transfer of the possession of the said property. Further, other than these agreements and MOU, there is nothing in terms of any positive tangible evidence which has been brought on record by the Revenue to support its position that it is the flat which has been transferred by the assessee. After the assessee has submitted to the AO vide its letter dated 12.03.2014 that the property was under consideration at the time of the sale and no sale deed was executed, the AO has not carried out any further investigation with the developer to refute the contentions raised by the assessee. In result, on perusal of the documents available on record, the contention of the assessee remains uncontroverted. It is the right in the property by way of right of allotment which has been assigned by the assessee in favour of the buyer and not the property itself. On reading of sub section (1) of section 50C, it is clear that the value of land, building or both adopted or assessed or assessable by the Stamp Valuation Authority shall for the purpose of section 48, be deemed to be the full value of consideration received or accruing as a result of such transfer. It is a deeming provision and it extent only to land, building or both. It therefore follows that where a capital asset being land or building or both is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted or assessed or assessable by the Stamp Valuation Authority, the deeming provisions of sub section(1) of section 50C shall be applicable. In the instant case what has been transferred is a right of allotment in office flat and not the office flat itself. It is therefore clear that a deeming provision which is limited to land, building or both cannot be extended beyond the purpose for which it is enacted and is therefore not applicable in the instant case. Thus what has been transferred by the assessee is a right of allotment in the property and not the actual property itself and in respect of such rights, the deeming provisions of section 50C are not applicable. - Decided in favour of assessee.
Issues Involved:
1. Whether the assessee sold the right to acquire a property or the property itself. 2. Applicability of Section 50C of the Income Tax Act, 1961, to the right to acquire a property. Issue-Wise Detailed Analysis: 1. Whether the assessee sold the right to acquire a property or the property itself: During the assessment proceedings, the AO observed that the assessee showed a Long Term Capital loss of ?4,90,018/- from the sale of a flat for ?33,75,000/-. The AO requested the registered sale deed for the flat to adopt the value of sale consideration under Section 50C of the Act. The assessee responded that the flat was under construction at the time of purchase and sale, and thus, no registered sale deed was executed. The sale was executed through an agreement. The AO did not accept the assessee's contention and adopted the sale consideration based on the DLC rate provided by the Sub-Registrar, Gurgaon, taxing ?32,50,000/- in the hands of the assessee under Section 50C. Upon appeal, the CIT(A) upheld the AO's decision, stating that the agreements referred to a flat in the complex, indicating that a flat, not a right, was sold. The assessee argued that Section 50C applies only to land or building and not to rights in property, citing the case of Atul G. Puranik vs. ITO. The Tribunal examined the agreements and MOUs, noting that the assessee initially purchased and later sold the right of allotment in an under-construction flat. The balance consideration of ?3,75,000/- was still unpaid and to be paid by the purchaser directly to the developer. The Tribunal concluded that what was transferred was a right of allotment, not the property itself. 2. Applicability of Section 50C of the Income Tax Act, 1961, to the right to acquire a property: Section 50C(1) states that if the consideration received for transferring a capital asset, being land or building or both, is less than the value assessed by the Stamp Valuation Authority, the assessed value shall be deemed the full value of consideration. This provision is a deeming provision limited to land or building or both. The Tribunal held that since the assessee transferred a right of allotment and not the property itself, Section 50C does not apply. The Tribunal cited the case of Atul G. Puranik vs. ITO, where it was held that Section 50C applies only to land or building or both and not to lease rights or any other rights in land or building. The Tribunal concluded that the deeming provisions of Section 50C are not applicable to the right of allotment in the property. Hence, the addition made by the AO and confirmed by the CIT(A) was deleted. Conclusion: The Tribunal allowed the appeal, holding that the assessee transferred a right of allotment in the property, not the property itself, and thus, the provisions of Section 50C are not applicable. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 17/02/2017.
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