2022 (9) TMI 919 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - Whether leasehold rights are covered under the statutory definition of any immovable property u/s. 56 (2)(vii)(b) as defined in Explanation (d)(i) as being land or building or both? - HELD THAT - We note that the legislature has used an identical expression in section 50C(1) of the Act wherein various judicial precedents in CIT Vs. Greenfield Hotels and Estates Pvt. Ltd. 2016 (12) TMI 353 - BOMBAY HIGH COURT , KancastPvt. Ltd. 2015 (4) TMI 588 - ITAT PUNE , GVK industries Ltd. 2011 (3) TMI 1 - SUPREME COURT hold that such a leasehold right does not come under either of the twin specified categories of land or building or both ; as the case may be. We adopt the very reasoning herein as well to conclude that the learned lower authorities have erred in law and on facts in invoking section 56(2)(vii)(b) addition qua assessee s acquisition of leasehold rights in issue. The impugned addition stands deleted in above terms. Appeal of assessee allowed.

Summary

Issues:
Challenge against section 56(2)(vii)(b) addition of Rs.67,61,000 for the acquisition of leasehold rights in an industrial plot.

Analysis:
The judgment deals with the appeal of the assessee for the assessment year 2014-15 against the order of the CIT(A) - 8, Pune. The primary issue revolves around the challenge to the addition of Rs.67,61,000 under section 56(2)(vii)(b) of the Income Tax Act, 1961, related to the alleged purchase/acquisition of leasehold rights in an industrial plot. The key contention was whether leasehold rights fall under the statutory definition of "any immovable property" as per the explanation provided in the Act. The tribunal examined the legislative intent and relevant judicial precedents to determine the scope of "land or building or both" under the said provision.

The tribunal observed that the vendor of the assessee had acquired leasehold rights in the industrial plot/factory and subsequently transferred them to the assessee. After analyzing the lease agreements and relevant documents, the tribunal concluded that leasehold rights do not fall within the ambit of "land or building or both" as specified in section 56(2)(vii)(b). Citing legal precedents such as CIT Vs. Greenfield Hotels and Estates Pvt. Ltd. and GVK Industries Ltd. V/s. ITO, the tribunal held that leasehold rights cannot be considered as immovable property for the purpose of the provision in question.

Based on the above analysis, the tribunal ruled in favor of the assessee, allowing the appeal and deleting the addition made under section 56(2)(vii)(b). The judgment emphasized the importance of interpreting statutory provisions in line with established legal principles and precedents. The decision highlights the significance of a thorough examination of factual and legal aspects to arrive at a just and reasoned conclusion in tax matters.