2015 (10) TMI 1889 - AT - Income Tax

Long Term Capital Gain on surrender of tenancy right - applicability of provisions of Sec. 50C - assessee is a non-resident individual - Held that - Undisputedly tenancy right is a capital asset but whether transfer of such capital asset has to be looked upon in the light of the provisions of Sec. 50C of the Act. A perusal of Sec. 50C suggests that it is only for the limited purpose of computing capital gain in respect of sale of land and building, only when such sale take place Stamp duty value has to be substituted for the sale consideration, if the sale consideration is less than the stamp duty value. In our considered opinion, in case of the surrender of tenancy right, provisions of Sec. 50C would not apply. Dismissing Revenue s appeal, we hold that provisions of Sec. 50C are not applicable on the transfer of tenancy right. As we have dismissed Revenue s appeal, we do not find any reason for referring the matter to the DVO and adopting DVO s valuation for the computation of Long Term Capital Gains - Decided in favour of assessee.

Summary

Issues Involved:
Cross appeals by Revenue and assessee against CIT(A) order related to assessment year 2009-10 - Applicability of Sec. 50C on transfer of tenancy right - Computation of long term capital gains based on DVO's report - Interpretation of Sec. 48 regarding full value of consideration - Dispute over stamp duty value vs. fair market value - Whether DVO's valuation necessary for capital gains computation - Admissibility of Co-ordinate Benches' decisions - Dismissal of Revenue's appeal and allowance of assessee's appeal.

Analysis:

1. Applicability of Sec. 50C on Transfer of Tenancy Right:
Both Revenue and assessee disputed the applicability of Sec. 50C on the transfer of tenancy right. The Revenue contended that the CIT(A) erred in not considering the applicability of Sec. 50C, citing a Mumbai ITAT judgment. However, the CIT(A) held that since the assessee transferred only the tenancy right, Sec. 50C did not apply. The ITAT concurred, emphasizing that Sec. 50C pertains to land or building transfers for capital gain computation, not tenancy rights. Co-ordinate Benches' decisions supported this view, leading to the dismissal of Revenue's appeal.

2. Computation of Long Term Capital Gains and DVO's Report:
The CIT(A) directed the AO to compute capital gains based on the DVO's report, despite concluding that Sec. 50C did not apply to tenancy right transfers. The assessee argued that Sec. 48 mandates consideration 'received' or 'accrued,' not DVO's fair market value. The ITAT upheld the assessee's appeal, ruling that since Sec. 50C was inapplicable, there was no need for DVO's valuation. Consequently, the first ground of the assessee's appeal was allowed, rendering the second ground redundant.

3. Dismissal of Revenue's Appeal and Allowance of Assessee's Appeal:
Ultimately, the ITAT dismissed the Revenue's appeal and allowed the assessee's appeal. The decision was based on the inapplicability of Sec. 50C to tenancy right transfers, rendering the DVO's report unnecessary for capital gains computation. The order was pronounced on 19th August 2015, settling the dispute over the interpretation and application of relevant provisions in the context of the specific case.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, the reasoning of the authorities, and the final decision rendered by the ITAT, providing a comprehensive understanding of the case and its implications.