2022 (6) TMI 442 - AT - Income Tax

Addition u/s 69A OR 50C - difference between the sale consideration disclosed by the assessee and the value adopted by the Stamp Valuation Authority - HELD THAT - There is no dispute with regard to the fact that the property which was sold by the assessee, was a lease hold property. The lease hold right was granted by Nitishree Builders Pvt. Ltd. in favour of the mother of the assessee. The fact that the lease hold rights were transferred is not disputed by the Revenue. Revenue has not brought any contrary material on record to rebut the contention of the assessee. We find that there are series of decisions on this issue by the Division Bench of the Tribunal, confirmed by the Hon'ble Bombay High Court in the case of the CIT versus Greenfield Hotels Estate (P) Ltd. 2016 (12) TMI 353 - BOMBAY HIGH COURT . As the Division Bench of Tribunal in Dy. Commissioner of Income Tax Central Circle VI, Kolkata versus Tejinder Singh 2012 (2) TMI 720 - ITAT KOLKATA also ruled that where there is a transfer of lease hold rights, there would not be application of section 50C. Division Bench of the Tribunal in the case of Shri Atul G. Puranik 2011 (5) TMI 576 - ITAT, MUMBAI ruled that As section 50C applies only to a capital asst, being land or building or both, it cannot be made applicable to lease rights in a land. As the assessee transferred lease right for sixty years in the plot and not land itself, the provisions of section 50C cannot be invoked. We, therefore, hold that the full value of consideration in the instant case be taken as Rs. 2.50 crores. Further, the assessee has placed on record the report of the registered valuer who has valued the fair market value of the property of Rs. 20,21,000/-. Therefore, where the authorities below have taken contrary stands about the taxability of the difference between the value declared by the assessee and value adopted by the Stamp Valuation Authority. Moreover, in the light of the binding precedents, we hereby direct the AO to delete the addition - Appeal of assessee allowed.

Issues Involved:
1. Confirmation of total income at Rs. 28,23,540/- against the returned total income of Rs. 84,540/-.
2. Addition of Rs. 27,39,000/- by invoking section 50C of the Income Tax Act.
3. Determination of sale consideration at Rs. 46,39,000/- against the actual sale consideration of Rs. 19,00,000/-.
4. Consideration of detailed explanation submitted by the assessee.
5. Applicability of section 50C to the sale of rights in the property.
6. Requirement of valuation report from a valuation officer.

Detailed Analysis:

1. Confirmation of Total Income:
The appellant contested the confirmation of total income at Rs. 28,23,540/- as against the returned total income of Rs. 84,540/-. The Tribunal noted that the primary issue was the addition of Rs. 27,39,000/- due to the difference between the sale consideration disclosed by the assessee and the value adopted by the Stamp Valuation Authority.

2. Addition of Rs. 27,39,000/- by Invoking Section 50C:
The assessee argued that the addition of Rs. 27,39,000/- was incorrectly invoked under section 50C of the Income Tax Act. The Tribunal observed that the AO initially invoked section 69A, which was deemed inappropriate by the CIT(A), who instead confirmed the addition under section 50C. However, the Tribunal found that section 50C was not applicable as the assessee had only transferred leasehold rights, not the property itself.

3. Determination of Sale Consideration:
The Tribunal scrutinized the determination of the sale consideration at Rs. 46,39,000/- against the actual sale consideration of Rs. 19,00,000/-. It was noted that the property sold was a leasehold property, and the leasehold rights were transferred. The Tribunal referenced multiple case laws, including CIT versus Greenfield Hotels & Estate (P) Ltd., which established that section 50C does not apply to the transfer of leasehold rights.

4. Consideration of Detailed Explanation:
The appellant contended that the detailed explanation submitted was not adequately considered. The Tribunal acknowledged this and directed that the AO should have considered the actual sale consideration of Rs. 19,00,000/-, especially given the valuation report presented by the assessee.

5. Applicability of Section 50C:
The Tribunal emphasized that section 50C applies to the transfer of capital assets being land or building, not to leasehold rights. The Tribunal cited several decisions, including Atul G. Puranik vs. ITO, which held that section 50C cannot be invoked for lease rights in land.

6. Requirement of Valuation Report:
The appellant argued that the valuation report from a valuation officer was mandatory under the Act. The Tribunal noted that the authorities below did not obtain such a report, which further invalidated the addition made.

Conclusion:
The Tribunal concluded that the addition of Rs. 27,39,000/- was not sustainable under section 50C as it did not apply to the transfer of leasehold rights. The Tribunal directed the AO to delete the addition and allowed the appeal of the assessee. The order was pronounced on 27th May 2022.

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