2023 (1) TMI 1072 - AT - Income Tax

Capital gain on lease hold properties - addition made u/s. 50C - whether the deeming provision of section 50C applies to leasehold rights in land or building? - HELD THAT - Phraseology in section 50C(1) of the Act only covers exclusively land or building or both and does not refer to any right in land or building. Thus, the expression land or building in its coverage is quite distinct from the expression any right in land or building. The legislature, in its wisdom, for the purpose of section 50C without referring to section 2(14) of the Act, has used the expression land or building or both in section 50C(1) of the Act itself, and without the expression of any right in therein i.e. land or building. Therefore, the precise use of one expression would exclude the other, a legal premise which is supported by the judgment of Hon ble Apex Court in the case of GVK Industries Ltd. Vs ITO 2011 (3) TMI 1 - SUPREME COURT In our considered opinion, the point sought to be raised by the Ld. AR deserves to be upheld. Such a distinction also has found approval of CIT Vs Greenfield Hotels Estates Pvt. Ltd. 2016 (12) TMI 353 - BOMBAY HIGH COURT We find that the present transaction of transfer of leasehold right in question does not warrant invoking of section 50C(1) of the Act, as the property in question is not of the explicitly covered by section 50C(1) of the Act, for the reason, we set aside the order of the Ld. FAA and direct the Ld. AO to delete the impugned addition. Appeal of assessee allowed.

Issues involved:
Whether the deeming provision of section 50C applies to leasehold rights in land or building?

Detailed Analysis:
1. The appeal challenged the order of the Commissioner of Income Tax (Appeals) upholding the assessment order passed by the Assistant Commissioner of Income Tax for the assessment year 2014-15.
2. The main issue was whether section 50C applies to leasehold rights in land or building.
3. The appellant contended that section 50C should not apply to leasehold properties and argued for the deletion of the addition made under this provision.
4. The assessee, a resident individual and partner in various businesses, declared a total income with a claim of long-term capital loss arising from the transfer of immovable property.
5. The Assessing Officer invoked section 50C due to the property being transferred at a value lower than the stamp duty valuation, resulting in an addition to the income.
6. The appellant's appeal before the First Appellate Authority was unsuccessful, leading to the appeal before the Tribunal.
7. During the hearing, the appellant's representative argued that section 50C only applies to land or building, excluding leasehold rights, while the departmental representative supported the application of section 50C to leasehold properties.
8. The Tribunal analyzed section 50C(1) of the Income Tax Act, which deems the stamp valuation authority's value as the full consideration for computing capital gains on the transfer of land or building.
9. The Tribunal acknowledged the distinction made by the appellant between land/building and leasehold rights, citing section 54D(1) of the Act.
10. The Tribunal noted that section 50C(1) specifically mentions land or building without including any right in land or building, as highlighted in a Supreme Court judgment.
11. Referring to a Bombay High Court case, the Tribunal upheld the appellant's argument that leasehold rights are not covered under section 50C(1).
12. Consequently, the Tribunal ruled that section 50C did not apply to the transfer of leasehold rights in this case, directing the deletion of the addition made by the Assessing Officer.
13. The appeal of the appellant was allowed based on the above observations.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the application of section 50C to leasehold rights in land or building.

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