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2020 (10) TMI 563 - AT - Income TaxCapital gain computation - right in land or building - invoking of Section 50C - As per AO consideration received by the assessee as a result of the transfer of the six properties in question was lower than the value adopted by the Stamp Valuation Authority for the purposes of payment of stamp duty and Section 50C is to be not invoked - HELD THAT - The expression land or building in its coverage is quite distinct from the expression any right in land or building . The legislature, in its wisdom, has used the expression land or building or both in Section 50C(1) and not the expression any right in land or building . Express use of one expression would exclude the other, a legal premise which is supported by the judgment of GVK Industries Ltd. 2011 (3) TMI 1 - SUPREME COURT . In this view of the matter, in our considered opinion, the point sought to be raised by the assessee deserves to be upheld. As in MANISH TRADERS VERSUS ITO, WARD 1 (4) , GHAZIABAD. 2019 (7) TMI 1268 - ITAT DELHI observed that assessee s leasehold right for a period of 90 years in question is a capital asset to which provisions contained u/s 50C are not applicable. Even if for the sake of argument, it is understood to be a new plea, it does not change the complexion of the dispute, inasmuch as the subject matter of the dispute remains to be the efficacy or otherwise of the action of the Assessing Officer of invoking section 50C of the Act. More importantly, it has to be appreciated that the point of law raised by the assessee is competent to be adjudicated, based on the accepted factual position, which is available on record.Report of the DVO dated 21.6.2018 reveals that the nature of property being lease hold , has been specifically noted. Thus, in our considered opinion, there is no merit in the plea of the Ld. C.I.T. DR to prevent the assessee from pursuing the aforesaid argument before us. The defence by the C.I.T. DR, in our view, is misplaced and is hereby negated. We find that the present transaction of six properties in question does not warrant invoking of section 50C(1) of the Act as the property in question is not of the nature covered by section 50C(1) of the Act. Therefore, on this point itself, we set aside the order of the ld. Commissioner of Income Tax(A) and direct the Assessing Officer to delete the addition. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction and legality of the assessment order. 2. Applicability of Section 50C to leasehold properties. 3. Addition under Section 50C without DVO report. 4. Rejection of DVO report and approved valuer’s report. 5. Consideration of valuation and objections by the assessee. Detailed Analysis: 1. Jurisdiction and Legality of the Assessment Order: The assessee argued that the assessment order was arbitrary, illegal, and without jurisdiction, violating the provisions of the Income Tax Act, 1961, and principles of natural justice. However, the Tribunal did not explicitly address this issue in its final decision, focusing instead on the applicability of Section 50C. 2. Applicability of Section 50C to Leasehold Properties: The primary issue revolved around whether Section 50C of the Income Tax Act, which pertains to the valuation of capital assets for the purpose of computing capital gains, applies to leasehold properties. The Tribunal noted that Section 50C(1) covers "a capital asset, being land or building or both," but the assessee had transferred only leasehold rights in the property. The Tribunal emphasized that the expression "land or building or both" does not include leasehold rights in land or building. This interpretation was supported by various judicial precedents, including decisions from the Supreme Court and High Courts. Consequently, the Tribunal concluded that Section 50C does not apply to leasehold rights, and the addition made by the Assessing Officer under this section was unwarranted. 3. Addition Under Section 50C Without DVO Report: The assessee contended that the addition under Section 50C was made without waiting for the report from the Departmental Valuation Officer (DVO), which was in violation of the provisions of the Income Tax Act. The Tribunal noted that the Assessing Officer had indeed made the addition without the DVO report, which was received later during the appellate proceedings. Since the Tribunal found that Section 50C was not applicable to the leasehold rights, this issue became moot. 4. Rejection of DVO Report and Approved Valuer’s Report: The Tribunal observed that the Commissioner of Income Tax (Appeals) [CIT(A)] had dismissed the DVO report and the approved valuer’s report without proper justification. The CIT(A) had relied on the recommendations of the Assessing Officer, which the Tribunal found to be unmerited. However, since the Tribunal concluded that Section 50C was not applicable, the rejection of these reports did not affect the final decision. 5. Consideration of Valuation and Objections by the Assessee: The assessee argued that the CIT(A) had not properly considered the submissions and objections raised regarding the valuation of the property. The Tribunal noted that the assessee had consistently contested the applicability of Section 50C and provided necessary documentation, including sale deeds and valuation reports. The Tribunal emphasized that the legal interpretation of Section 50C was central to the dispute, and since the section did not apply to leasehold rights, the valuation and objections became secondary. Conclusion: The Tribunal concluded that Section 50C of the Income Tax Act does not apply to leasehold rights in land or building. Consequently, the addition made by the Assessing Officer under this section was deleted. The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the addition. All other aspects of the dispute were rendered academic and were not adjudicated. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced on 12th October 2020.
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