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2016 (1) TMI 865 - AT - Income TaxCapital gain computation - Applicability of section 50C - Held that - Admittedly, the MIDC has originally given the lease of the land in the year 1964. The Assessee had purchased the leasehold rights in the property in 1991 for a sum of ₹ 9 lakhs and after carrying out his business for 15 years had sold the same for ₹ 25 lakhs vide deed of assessment dated 29.04.05. Hence, the assessee had sold the leasehold rights for the remaining period of 55 years. A perusal of the provisions of section 50C of the Act reveals that the same are applicable for the transfer of land or building or both, however, the leasehold rights or the tenancy rights are different from the ownership of land or building itself. In view of the settled position on this issue, the section 50C is not applicable to the case in hand. Hence, the capital gains offered by the assessee by adopting the sale consideration actually received by him are to be taxed as such. We, therefore, do not find any justification on the part of the Ld. CIT(A) in adopting the value of the DVO. We accordingly direct the AO to tax the capital gains on the assessee by adopting the sale value of the property at ₹ 25 lakhs as offered by the assessee.
Issues Involved:
1. Appeal against CIT(A) order regarding valuation of property for capital gains tax under section 50C of the Income Tax Act. Analysis: The appeal before the Appellate Tribunal ITAT Mumbai involved the assessment year 2006-07. Initially, the Tribunal had decided on the appeal, but due to an error in not deciding one of the grounds raised by the assessee, a miscellaneous application was filed and subsequently decided, leading to a recall of the original order for disposal of the missed ground. The specific issue in contention was the valuation of a property sold by the assessee, where the Stamp Duty Authorities had valued it at a higher amount than the sale consideration disclosed by the assessee. The Assessing Officer applied section 50C of the Act to adopt the higher value for taxing capital gains. Upon hearing the arguments, the Appellate Tribunal considered the nature of the transaction, where the assessee had sold leasehold rights in the property for a specific period. The Tribunal noted that section 50C applies to the transfer of land or building, not leasehold rights, citing relevant case laws to support this interpretation. Given the settled position on this issue, the Tribunal concluded that section 50C was not applicable to the case at hand. Therefore, the Tribunal directed the Assessing Officer to tax the capital gains based on the actual sale consideration of the property, which was lower than the value determined by the DVO. Ultimately, the Tribunal allowed the appeal of the assessee on the limited issue related to ground No.1, directing the AO to tax the capital gains based on the sale value of the property as offered by the assessee. The Tribunal clarified that the decision on the other ground of appeal had already been made in a previous order. The judgment was pronounced on 30.11.2015 by the Appellate Tribunal ITAT Mumbai, highlighting the correct application of section 50C in the context of the specific transaction involving the sale of leasehold rights in the property.
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