2016 (7) TMI 275 - AT - Income Tax

Deemed income u/s. 50C - Held that - From the reading of Section 50C, it is evident that Section 50C is a deeming provision and it extends only to land or building or both. Section 50C can come into play only in a situation where the consideration received or accruing as a result of the transfer by an appellant of a capital asset, being land or building or both is less than the value adopted or assessed or assessable for the purpose of payment of stamp duty in respect of such transfer. It is settled legal proposition that deeming provision can be applied only in respect of the situation specifically given and, hence, cannot go beyond the explicit mandate of the section. Clearly, therefore, it is essential for application of Section 50C that the transfer must be of a capital asset, being land or building or both. If the capital asset under transfer cannot be described as land or building or both , then Section 50C will cease to apply. From the facts of the case, it is seen that the assessee has transferred only rights in the impugned land which cannot be equated to land or building or both. Therefore, in our understanding of the fact qua the provisions of Section 50C, the action of the revenue authorities is erroneous. We, therefore, set aside the findings of the ld. CIT(A) and direct the A.O to delete the addition as deemed income u/s. 50C of the Act - Decided in favour of assessee.

Summary

Issues:
1. Application of Section 50C of the Income Tax Act in the case.
2. Interpretation of the term "transfer of capital asset" under Section 50C.
3. Consideration of rights transferred in the land transaction.
4. Validity of Circular No. 549 issued by CBDT regarding the total income of the assessee.

Analysis:

1. The appeal was filed against the order of the Ld. CIT(A) upholding the addition of deemed income under Section 50C of the Income Tax Act. The main contention was that Section 50C does not apply to the assessee's case.

2. The Assessing Officer (A.O) applied Section 50C, adopting the stamp duty value of the registered sale deed as the full value of consideration for computing capital gains. The assessee argued that only rights were transferred, not the land itself, thus Section 50C should not be applicable.

3. The Tribunal analyzed the transaction details and concluded that the assessee had only relinquished rights in the land, which did not qualify as a transfer of a capital asset like land or building. Therefore, Section 50C was deemed inapplicable, and the addition of deemed income was directed to be deleted.

4. Additionally, the Tribunal addressed the validity of Circular No. 549 issued by CBDT, stating that the Assessing Officer is not bound by such circulars as they cannot dictate specific assessments or interfere with the appellate functions of the Commissioner. The circular was deemed ultra vires based on legal precedents.

In conclusion, the Tribunal allowed the appeal, setting aside the findings of the Ld. CIT(A) and directing the A.O to delete the addition of deemed income under Section 50C. The judgment clarified the scope of Section 50C, emphasizing the necessity for a transfer of a capital asset like land or building for its application.