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2024 (4) TMI 740 - AT - Income TaxLTCG u/s. 50C - leasehold right on land acquired - CIT(A) deleted addition by holding that leasehold right on land are not within the purview of section 50C - Ld. Counsel submitted that section 50C applies only in case of a transfer of capital asset being land or building or both and this section does not make a specific reference to rights in lands or building which otherwise is included in other provisions in the Act Whether the transfer of leasehold rights in land falls within the purview of section 50C or not? - HELD THAT - Coming to the facts of present case where the transaction relates to transfer of a leasehold property whereby an industrial plot of land was allotted by MIDC under a lease agreement to the assessee and subsequently assessee transferred the said leasehold land to SMI for the remaining period of lease the important point we need to consider is whether the leasehold rights which are restricted in nature are covered within the meaning of capital assets being land or building or both contained in section 50C(1). We need to understand the nature of rights accruing on a property which is freehold and the one which is leasehold. In this respect we do find force in the submission made by the Ld. Counsel exhaustively dealing with several parameters to distinguish between the features of leasehold property and a freehold property already tabulated above. Accordingly the capital asset being land or building or both referred to in sec. 50C(1) do not include leasehold rights in land or building or both. Wherever legislature intended to include specific reference to rights in land or building or part thereof which is included in certain sections such as section 54D section 54G sec. 54GA sec. 27(iiib) sec. 5(1) of Wealth Tax Act 1957 and explanation to sec. 269UAD. Such a reference to rights in land or building or part thereof does not find place in sec. 50C(1) which sets it apart from the inference to be drawn that capital asset being land or building or both would also include rights in land or building or part thereof to cover leasehold rights which are limited in nature and cannot be equated with ownership of land or building or both. The Act has given separate treatment to land or building or both and the rights therein. Thus we are in agreement with the submissions made by assessee to hold that leasehold rights in land are not within the purview of section 50C of the Act. Accordingly we concur with the finding arrived at by CIT(A) in deleting the addition on account of long term capital gain for transfer of leasehold industrial plot u/s. 50C of the Act. Alternate plea made by the Ld. Counsel as to application of first and second proviso to section 50C we do find force in the same - assuming for a moment for the purpose dealing with this alternate plea that transfer of a leasehold right in land is covered by sec. 50C(1) then on this alternative plea also the assessee is adequately safeguarded by first and second proviso to sec. 50C whereby it had entered into agreement to sale with SMI to transfer the leasehold rights in land in the year 2011 itself for a consideration of Rs. 2 Cr. against which assessee had received Rs. 5 lacs in advance through banking channel fact of which are undisputed and uncontroverted. Assessee had also placed on record the stamp duty value at that relevant time on record which is lesser than the actual consideration of Rs. 2 Cr. and thus there cannot be any adverse bearing on the assessee by applying first and second proviso to sec. 50C in the instant case. Appeal of the revenue is dismissed.
Issues Involved:
1. Deletion of addition made by the AO on account of long-term capital gain u/s 50C of the Income Tax Act, 1961. 2. Applicability of section 50C to leasehold rights in land. 3. Application of first and second proviso to section 50C when the date of agreement and date of registration are different. Summary: Issue 1: Deletion of Addition Made by AO on Account of Long-Term Capital Gain u/s 50C The only ground raised by the revenue is in respect of deletion of addition made by the Ld. AO on account of long-term capital gain u/s 50C of the Act of Rs. 5,29,39,153/- by holding that leasehold rights on land are not within the purview of section 50C. The AO computed the long-term capital gain by taking the full value of consideration of Rs. 8,18,36,300/- to arrive at a figure of Rs. 5,29,39,153/-. Aggrieved, the assessee went in appeal before the Ld. CIT(A), who deleted the addition. Issue 2: Applicability of Section 50C to Leasehold Rights in Land The assessee contended that section 50C applies only to the capital asset being land or building or both and not to leasehold rights in land or building. The Ld. CIT(A) concluded that provisions of section 50C would not be applicable in the assessee's case as it has transferred only the leasehold rights in the industrial plot of land. The Tribunal agreed with the assessee, noting that section 50C(1) refers to the transfer of a capital asset, being land or building or both, and does not include leasehold rights in land or building or both. The Tribunal held that the deeming provision of section 50C cannot be extended beyond its legitimate field and thus, leasehold rights in land are not within the purview of section 50C. Issue 3: Application of First and Second Proviso to Section 50C The Ld. Counsel for the assessee submitted that the assessee had entered into an agreement to sell with SMI to transfer the leasehold rights in the year 2011 for a consideration of Rs. 2 Cr. and received an advance of Rs. 5 lakh through banking channel. The Tribunal agreed with the assessee, stating that in terms of the first and second proviso to section 50C, the stamp duty valuation at the time of registration of the said agreement cannot be taken for computing the capital gain. The Tribunal noted that the valuation report for valuing the property at the time of execution of the agreement to sell at Rs. 1,62,99,500/- was submitted before the AO, and thus, the AO is wrong both in law and on facts to adopt the stamp duty value relevant to the year under consideration. Conclusion: The Tribunal dismissed the appeal of the revenue, holding that leasehold rights in land are not within the purview of section 50C of the Act and that the assessee is adequately safeguarded by the first and second proviso to section 50C. The order was pronounced in the open court on 22nd March 2024.
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