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2012 (12) TMI 781 - AT - Income TaxApplicability of sec 50 C on transfer of Leasehold Rights Held that - From the plain reading of the language of Section 50C (1), it is clear that value of land or building or both adopted or assessed or assessable by the Stamp Valuation Authority shall, for the purpose of Section 48, deemed to be full value of consideration accruing as a result of such a transfer. Section 50C(1) is of a deeming provision and it extends only to land or building or both. Such a deeming provision has been incorporated to substitute the value adopted by the Stamp Valuation Authority in place of consideration received or accruing as a result of transfer. The deeming provisions as contemplated in Section 50C however does not extend to lease rights in a land - Thus, respectfully following the decisions Atul G. Puranik Versus ITO 2011 (5) TMI 576 - ITAT, MUMBAI & DCIT Vs. Tejinder Singh 2012 (3) TMI 47 - ITAT, KOLKATA provision of Section 50C would not be applicable on the transfer of lease hold rights on the land. Thus going through the material placed on record like copy of agreement dated 5-11-1974 between MIDC and the assessee and the agreement dated 16-10-2006 between the appellant and Karamtara Engineering (P) Ltd. and also the valuation adopted by the Stamp valuation authority, it can be fairly concluded that it is a transfer of leasehold rights therefore, the finding given by the CIT(A) for non applicability of Sec 50C are confirmed - appeal filed by the department dismissed.
Issues Involved:
1. Applicability of Section 50C of the I.T. Act, 1961 on the transfer of leasehold land and premises. 2. Admission of additional evidence by CIT(A) in violation of Rule 46A of I.T. Rules, 1962. 3. Request to set aside the order of CIT(A) and restore the order of the Assessing Officer. Issue-wise Detailed Analysis: 1. Applicability of Section 50C of the I.T. Act, 1961 on the transfer of leasehold land and premises: The core issue revolves around whether Section 50C, which pertains to the valuation of capital assets for the purpose of computing capital gains, applies to the transfer of leasehold rights in land. The Assessing Officer (AO) argued that the market value of the transferred leasehold rights should be considered under Section 50C, resulting in a short-term capital gain calculation. The AO's computation showed a substantial gain from the sale of the asset. The assessee contended that the transaction was an assignment of lease rights, not a sale of the land itself. The CIT(A) reviewed the agreements and concluded that the transfer involved leasehold rights, not the land, thus Section 50C was not applicable. The CIT(A) relied on the ITAT Mumbai Bench decision in the case of Kishore Gaitonde, which held that Section 50C does not apply to tenancy rights. The ITAT upheld the CIT(A)'s decision, referencing multiple case laws, including Atul Puranik Vs. ITO and DCIT Vs. Tejinder Singh, which clarified that Section 50C applies only to land or building, not to leasehold rights. The tribunal emphasized that deeming provisions like Section 50C cannot extend beyond their explicit mandate. 2. Admission of additional evidence by CIT(A) in violation of Rule 46A of I.T. Rules, 1962: The revenue claimed that CIT(A) admitted additional evidence in violation of Rule 46A, which governs the conditions under which additional evidence can be admitted during appellate proceedings. However, the judgment does not provide detailed discussion or separate findings on this issue. The focus remained on the primary issue of the applicability of Section 50C. 3. Request to set aside the order of CIT(A) and restore the order of the Assessing Officer: The revenue's appeal sought to overturn the CIT(A)'s order and reinstate the AO's assessment, which treated the transaction as attracting Section 50C, thereby computing a higher capital gain. However, the ITAT found no merit in the revenue's arguments. It confirmed the CIT(A)'s findings that the transfer was of leasehold rights and not the land itself, making Section 50C inapplicable. Conclusion: The ITAT dismissed the revenue's appeal, affirming that Section 50C does not apply to transfers involving leasehold rights in land. The tribunal's decision was grounded in established legal precedents and a clear interpretation of the statutory provisions, ensuring that the deeming fiction of Section 50C is confined to its explicit scope.
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