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TMI Blog2013 (1) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts in land. 4. The learned CIT (A) has erred in law and on facts in upholding invocation of Section 50C of the Act to the transaction of transfer of capital asset made by the appellant. 5. Without prejudice to the above, even if Section 50C of the Act is held to be applicable, the Assessing Officer ought to have referred the valuation of the capital asset to the District Valuation Officer. Since the Assessing Officer has not followed this procedure, the learned CIT (A) ought to have held the order of the Assessing Officer to be illegal and invalid/unsustainable. 6. Without further prejudice to the above, even if section 50C of the Act is held to be applicable, the stamp duty rate applicable as on April, 2007, i.e. the date of the Memorandum of Understanding ought to have been considered instead of stamp duty rate as on February 2008. 7. The learned CIT (A) has erred in law and on facts in sustaining the computation of long-term capital gain without even giving the indexed cost of acquisition as deduction. The learned CIT (A) ought to have held that computation of capital gain made by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sehold right for a period of more than 12 years from the date of assignment registered. It is evident that the appellant company has got leasehold right over the land from MIDC for a term of 95 years to be computed from 1st January, 1967 and thus the said right over the specified land which was transferred as per the agreement deed dated 07.03.2008 in the case of the appellant company and M/s Unnati Technology Pvt. Ltd is for transfer of land along with factory building. Therefore, in my considered view AO was completely justified in his action while applying the deeming provisions of section 50C of the Act as the appellant company had transferred the plot to the transferee. This fact is clearly evident from Para 'd', 'g', 'h', 'I' and 'j' of the transfer deed wherein the area of transfer has been specified. In view of the afore stated facts of the appellant's case, I am of the considered view that AO was completely justified in his action in applying the deeming provision of section 50C in the case of the appellant company. Accordingly, the addition so made by AO is held to be justified and thereby confirmed. Thus, appellant's this ground of appeal is dismissed". Hence assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty rate should have been adopted as on 09.04.2007 i.e. date of Memorandum of Understanding (MoU). It was his submission that even though the agreement and the registration happened in the same financial year the rates were revised as per the calendar year and hence assessee having entered agreement as on 09.04.2007 the stamp duty valuation on that date could have been taken. He relied on the decision of the ITAT Visakhapatnam Bench in the case of Lahiri Promoters vs. ACIT in ITA No.12/Vizag/2009 dated 22.06.2010. 6. On the issue of value of transfer of building, it was submitted that the plot contained a building which was also transferred and AO was not correct in excluding the valuation of the building. Assessee, it was submitted, has adjusted the cost of acquisition in the block of assets whereas AO did not take cognizance of the above and denied the benefit of exclusion of value of the building in the computation. 7. With reference to the cost of acquisition, the learned Counsel submitted that at the time of acquisition and subsequently the registration, assessee had paid the premium for leasehold right and this value was shown in the fixed asset schedule of the company acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores by applying the provisions of section 50C for the purposes of computing capital gain. His view was based on the assessee's submission that the market rate prevailing for land during 1-4-2004 to 31-12-2004 was Rs. 3950 per sq. meter. The Commissioner (Appeals) upheld the action of the Assessing Officer on this score. Ongoing through the provision of section 50C(1), it transpires that where the full value of consideration shown to have been received or accruing on the transfer of an asset, being land or building or both, is less than the value adopted or assessed or assessable by stamp valuation authority, the value so adopted etc. shall, for the purposes of section 48, be deemed to be full value of consideration received or accruing as a result of such transfer. This section has been inserted by the Finance Act, 2002 with effect from 1-4-2003 with a view to substitute the declared full value of consideration in respect of land or building or both transferred by the assessee with the value adopted or assessed or assessable by stamp valuation authority. But for this provision, there is nothing in the Act, by which the full value of a consideration received or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot of land are neither 'land or building or both' as such nor can be included within the scope of 'land or building or both'. The distinction between a capital asset being 'land or building or both' and any 'right in land or building or both' is well-recognized under the I.T. Act. Section 54D deals with certain cases in which capital gain on compulsory acquisition of land and building is charged. Sub-section (1) of section 54D opens with : "Subject to the provisions of sub-section (2), where the capital gain arises from the transfer by way of compulsory acquisition under any law of a capital asset, being land or building or any right in land or building, forming part of an industrial undertaking.....". It is palpable from section 54D that 'land or building' is distinct from 'any right in land or building'. Similar position prevails under the Wealth-tax Act, 1957 also. Section 5(1) at the material time provided for exemption in respect of certain assets. Clause (xxxii) of section 5(1) provided that "the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in land or building or any asset referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains under section 45 and is limited to the computation of the income under the head "Income from house property", the conclusion of the CIT(A) that section 50C cannot be invoked where leasehold rights in land or building are transferred, seems to us, to be correct. We accordingly affirm the decision of the CIT(A) and dismiss the appeal filed by the revenue with no order as to costs". 13. Similar view was also held by the ITAT Kolkata Bench in the case of DCIT vs. Tejinder Singh in ITA No. 1459/Kol/2011 dated 29.02.2012 as under: "8. A plain look at the undisputed facts of this case clearly shows that the assessee was a lessee in the property which was sold by the KSCT; there is no dispute on this aspect of the matter. Yet, the Assessing Officer has treated the assessee a seller of property apparently because the assessee was a party to the sale deed, and because, according to the Assessing Officer, "consideration is paid on sale of the property for giving up right of the owner of the property" and that "in the case of leasehold property, the right of owner is divided between lessor and lessee". We are unable to share this line of reasoning. It is not ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeded to, inter alia, "grant, convey, transfer and assign their leasehold rights, title and interest in the said premises". There is nothing on the record to even remotely suggest that the assessee was owner of the property in question. The monies received by the assessee, under the said agreement, were thus clearly in the nature of receipts for transfer of tenancy rights, and, accordingly, as the learned CIT(A) rightly holds, Section 50 C could not have been invoked on the facts of this case. Revenue's contention that the provisions of Sect ion 50 C also apply to the transfer of leasehold rights is devoid of legally sustainable merits and is not supported by the plain words of the statute. Section 50 C can come into play only in a situation " where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, (emphasis supplied by us by underlining) is less than the value adopted or assessed or assessable by any authority of a State Government ...... for the purpose of payment of stamp duty in respect of such transfer". Clearly, therefore, it is sine qua non for application of Section 50 C that the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was specifically stated as under: "G. The Assignor has represented to the Assignee that: (i) The said indenture of lease is valid and subsisting and is in full force and is not in any way cancelled, terminated or withdrawn by the lessor; (ii) The Assignor has complied with all the terms of the said Indenture of Lease till date and the Lessor has not served any notice of any kind for contravention of any terms and condition of the said Indenture of Lease or otherwise to the Assignor; (iii) Leasehold title of the Assignor to the said Larger Property is clear and free from all encumbrances; (iv) There is no decree, order, attachment or restraint order passed by any court or authority or any statutory body having jurisdiction in India, which restrains the Assignor from dealing with or disposing off the said Larger Property or any part thereof including for any statutory dues or otherwise; (v) Neither the said Larger Property nor any part/s thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub divided as per the request of assessee do indicate that the MIDC has only limited powers whereas assessee has absolute powers over the property. Moreover as seen from the recitals from the MoU, assessee also has developmental rights which it had intended to utilize. This also indicate that the development rights which are attached to the property are with assessee. 18. Not only the above, as seen from deeds of assignment, assessee transferred the rights in the plots as well as rights in the building, since there is building involved in this assignment, we are of the opinion that the transfer of property in question do attract provisions of section 50C and therefore, assessee's contention on this cannot be accepted. As seen from the marking given in the 'scheduled property' in the deed of transfer substantial portion was covered by the building thereon and as seen from the MoU, assessee seems to be developing the property by utilizing the development rights. In view of this, since both land and building were assigned by these deeds, we are of the opinion that provisions of section 50C are attracted in this case. As seen from the report of the valuation placed on record from pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, it is necessary for AO to examine how much property was transferred and whether the same has to be adjusted under the provisions of section 50 or under section 43(6) in the block of assets. As pointed out by DR there seems to be construction after the agreement, the details of which are not on record. Since this aspect of valuation of building was not examined by AO, we in the interest of justice restore the matter to the file of AO to examine this and do accordingly. 21. As seen from the record, AO has not taken in to consideration the objections of assessee, while invoking the provisions of section 50C. Under section 50C(2), AO has to give an opportunity to assessee to make submissions. This exercise has not been done by AO. AO has to follow the provisions of 50C(2) when the provisions of section 50C are made applicable. In order to fulfill this legal requirement also, we have set aside the order of AO and the CIT (A) on this issue. 22. The contention of cost of acquisition is also restored to the file of AO. Just because assessee has not claimed at the time of filing the return, statutory obligation of deducting the cost of acquisition cannot be brushed aside. There is inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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