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2021 (6) TMI 340 - AT - Income TaxCapital gain computation - transfer transaction within the realm of Sec. 50C - tenancy rights determined - HELD THAT - Variance/difference between the value of the tenancy rights of the property in question that was disclosed by the assessee for the purpose of computing the LTCG on the transfer of the same, as against that determined by the District Valuation Officer-II, Mumbai worked out at a marginal figure of 2.81% thus, the CIT(A) was of the view that as the said variance was well within the tolerable limits the same could safely be ignored. CIT(A) backed by his aforesaid observation had directed the A.O to accept the value disclosed by the assessee for the purpose of computing the LTCG on the transfer of the property in question. We have deliberated at length on the observations of the CIT(A) and are of a strong conviction that no infirmity emerges there from. Observing that the variance in the value of the tenancy rights adopted by the assessee as the sale consideration (as per the deed for transfer of tenancy rights , dated 17.09.2013) and the fair market value of such tenancy rights determined by the District Valuation Officer-II, Mumbai vide his order passed u/s 55A Of the Act, dated 01.06.2017 worked out at a marginal figure of 2.81%, the CIT(A) had rightly directed the A.O to accept the sale consideration reflected by the assessee, as such. Accordingly, concurring with the well reasoned view taken by the CIT(A), we uphold the same. Appeal filed by the revenue is dismissed.
Issues Involved:
1. Whether the assessee transferred tenancy rights or ownership rights in the property. 2. Applicability of Section 50C of the Income Tax Act, 1961 to the transaction. 3. Determination of fair market value of the property for computing Long Term Capital Gain (LTCG). Detailed Analysis: 1. Whether the assessee transferred tenancy rights or ownership rights in the property: The revenue contended that the assessee transferred ownership rights disguised as tenancy rights. The assessee, a non-resident Indian, argued that he transferred tenancy rights of a rented house property, not ownership rights. The Assessing Officer (A.O) observed that the transaction was executed for ?5.05 crores, while the market value per the Stamp Valuation Authority was ?13,07,25,000/-. The A.O believed the assessee held the property in perpetuity, akin to ownership rights. However, the CIT(A) and the tribunal concluded that the assessee transferred tenancy rights, not ownership rights, based on the "deed for transfer of tenancy rights" and the valuation report. 2. Applicability of Section 50C of the Income Tax Act, 1961 to the transaction: Section 50C pertains to the valuation of capital assets for calculating LTCG, using the value adopted by the Stamp Valuation Authority. The A.O applied Section 50C, considering the higher stamp duty value of ?13,07,25,000/- as the deemed sale consideration. The assessee argued that Section 50C should not apply as it transferred tenancy rights, not ownership rights. The CIT(A) did not explicitly address whether tenancy rights fall under Section 50C but directed the A.O to consider the valuation report, which valued tenancy rights at ?5,19,20,500/-, close to the declared value of ?5,05,00,000/-. 3. Determination of fair market value of the property for computing Long Term Capital Gain (LTCG): The A.O referred the property for valuation to the District Valuation Officer (DVO), who valued the tenancy rights at ?5,19,20,500/-. The CIT(A) observed that the difference between the declared value and the DVO's valuation was 2.81%, within tolerable limits. Thus, the CIT(A) directed the A.O to accept the assessee's declared value of ?5,05,00,000/- for computing LTCG. The tribunal upheld this decision, agreeing that the marginal difference justified accepting the declared value. Conclusion: The tribunal dismissed the revenue's appeal, affirming that the assessee transferred tenancy rights, not ownership rights. It upheld the CIT(A)'s directive to accept the declared value for LTCG computation, given the minor valuation difference.
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