2012 (4) TMI 380 - AT - Income Tax

Addition to income u/s 50C Assessee booked under-constructed flat - ₹ 50, 000/- payable at the time of booking and the balance payable in installments all before taking possession cancelation of the booking due to non delivery - tri party registered sales deed executed between the appellant, the builder and the new buyer Held that - triparty registered sale agreement for transfer of the said flat wherein the appellant as the vendor was to transfer all his rights, title and interest in the said flat to the buyer and the was to give the possession of the said flat which was originally agreed to be allotted to the appellant - provisions of section 50C of the I. T. Act are applicable in the case of an assessee when he transfers a capital asset upheld conclusion arrived at by CIT (A) against revenue.

Issues Involved:
1. Applicability of Section 50C of the Income Tax Act.
2. Nature of the asset transferred (whether it was a "flat" or "booking rights").
3. Legality of the addition of Rs. 41,45,255 as unexplained income.

Issue-wise Detailed Analysis:

1. Applicability of Section 50C of the Income Tax Act:
The primary issue was whether Section 50C, which pertains to the valuation of capital assets for the purpose of calculating capital gains, was applicable in this case. The Revenue argued that the difference between the stamp duty valuation and the actual sale consideration should be treated as unexplained income under Section 50C. However, the CIT (A) and the Tribunal both concluded that Section 50C was not applicable because the appellant did not transfer a capital asset being land or building. Instead, he transferred "booking rights" in the flat, which do not fall under the purview of Section 50C. The Tribunal upheld the CIT (A)'s decision, noting that the legal fiction created by Section 50C could not be extended beyond its explicit mandate.

2. Nature of the Asset Transferred:
The appellant contended that he had only transferred "booking rights" and not the flat itself, as he never took possession of the flat nor executed a registered sale deed in his name. The CIT (A) agreed, stating that the appellant had neither acquired legal ownership nor possession of the flat. The tripartite agreement indicated that the builder was the one transferring the flat to the new buyer, and the appellant was merely relinquishing his booking rights. The Tribunal confirmed this view, emphasizing that the appellant's role was limited to transferring his booking rights, not the flat.

3. Legality of the Addition of Rs. 41,45,255 as Unexplained Income:
The Assessing Officer (A.O.) had added Rs. 41,45,255 to the appellant's income, treating it as unexplained income based on the difference between the stamp duty valuation and the actual sale consideration. The CIT (A) deleted this addition, reasoning that Section 50C was not applicable as the appellant did not transfer a capital asset being land or building. The Tribunal upheld this decision, noting that the appellant had only transferred booking rights and received back the booking advance, which could not be equated with a capital asset. Therefore, the addition of Rs. 41,45,255 as unexplained income was not justified.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decision that Section 50C was not applicable in this case since the appellant transferred only booking rights and not a capital asset being land or building. Consequently, the addition of Rs. 41,45,255 as unexplained income was deleted. The Tribunal emphasized that legal fictions like Section 50C should not be extended beyond their explicit mandate.

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