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TMI Blog2022 (4) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... ong-term capital gains in terms of the provisions of section 2(29A) of the Act. We find, in the case of CIT vs. Frick India Limited [ 2014 (9) TMI 394 - DELHI HIGH COURT] has held that the expression 'held by the Assessee' means the date from which the assessee acquired right to hold the asset In the present case, the assessee was allotted a plot of land under a reallocation scheme by the President of India on 02.01.2004 and the leasehold rights have been sold on 16.02.2016. The assessee has made complete payment for acquiring these rights before the end of F.Y. 2004-05. Therefore, the said decision, in our opinion is distinguishable and not applicable to the facts of the present case. In view of the above discussion, we are of the considered opinion that the order passed by the AO may be prejudicial to the interest of the Revenue, but cannot be held to be erroneous. It is the settled proposition of law that for invoking the provisions of section 263 of the IT Act, the twin conditions, namely, (a) the order must be erroneous and (b) it must be prejudicial to the interest of the Revenue must be satisfied as held by the Hon ble Supreme Court in the case of Malabar Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 50C of the Act. The Assessing Officer has not made any disallowance u/s 50C of the Act. She further noted that the assessee got possession of land on 26.11.2015, the lease deed was registered on 21.01.2016 and sold the same on 16.02.2016. The period of holding was less than 36 months and, therefore, the Capital Gain shall be treated as Short Term Capital Gain. However, in computation, the assessee has taken it as long term capital Asset. The above facts according to her clearly show that the AO has not made proper inquiry and verification. She, therefore, was of the opinion that the assessment order passed by the Assessing Officer in respect of A.Y. 2016-17 is erroneous in so far as it is prejudicial to the interests of revenue as the AO has passed the assessment order without making inquires or verification which should have been made during the assessment proceedings. Therefore, she initiated proceedings u/s 263 of the Income Tax Act and issued a notice u/s 263 of the IT Act asking the assessee to explain as to why the assessment should not be reframed u/s 263 of the IT Act. Rejecting the various explanations given by the assessee, the ld. PCIT passed her revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of indexation. 2.3 That the leasehold right in the land having been acquired by the Appellant upon the date of allotment in terms of section 2(47), the period of holding of such right should be considered from the date of allotment. 2.4 That the Appellant had paid the entire cost in Financial Year 2004-05 and the rights having been successfully allotted in Appellant's name, there was creation of a capital asset in form of leasehold right in terms of section 2(14) of the Act. 2.5 That the decision of Hon'ble Delhi High Court in the case of Gulshan Malik vs. CIT (2014) 223 Taxmann 243 is not relevant and has been applied on illegal and arbitrary basis. 3.1 That the provisions of section 50C of the Act is applicable only in case of sale or transfer of immovable property being land or building and the same is not applicable on transfer of leasehold rights. 3.2 In any case, this being a case of bonafide sale made in accordance with prevailing market rate, the Pr. CIT, New Delhi was not justified in disputing the sale consideration u/s 50C without appreciating the factual position or making any reference to the Valuation Officer in terms of provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of capital gains copy of which is placed in the paper book. Referring to pages 24 to 25 of the paper book, he submitted that the AO, vide questionnaire dated 08.11.2018 had asked the assessee to explain the reason for sale consideration of property in ITR which is less than the value as per stamp duty. He submitted that the assessee, in response to the said notice has filed various replies dated 21st May, 2018, 4th July, 2018, 27th August, 2018, 3rd September, 2018 and 09.11.2018 wherein the sale consideration of leasehold rights was duly explained by the assessee and the AO, after being fully satisfied by the explanation offered by the assessee, accepted the sale consideration of ₹ 24 lakhs. The ld. Counsel for the assessee drew the attention of the Bench to the various replies given by the assessee on various dates copies of which are placed in the paper book. He submitted that a perusal of the questionnaire issued by the AO and replies filed by assessee during the course of Assessment proceedings would clearly show that it is not a case where the Assessing officer has not conducted any enquiry/verification. He submitted that once the AO was satisfied by the explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HC); vii. CIT vs. International Travel House Ltd. [2012] 344 ITR 554 (Delhi HC); viii. M/s. Virtusa Consulting Services Pvt. Ltd vs. DCIT (March 30 , 2021) (T.C.A. No. 997 of 2018) (Delhi HC); ix. CIT vs. Smt. Padmavathi [2020] 120 taxmann.com 187 (Madras HC) [06- 10- 2020] x. M/s SUTURES INDIA PVT. LTD vs. PCIT (ITA No. 115 OF 2010) (Dt. 02/12/2020) (Karnataka HC); xi. CIT vs. VodafoneEssar South Ltd. (ITA No.119/2012) (Delhi High Court); xii. IT vs. Gabriel India Ltd [1993] 203 ITR 108 (Bombay HC); xiii. CIT vs. Anil Kumar Sharma [2011] 335 ITR 83 (Delhi HC); xiv. M/s Arun Kumar Garg HUF vs. Pr. CIT (ITA No. 3391/Del/2018) (Delhi Trib.) (Dt. 08/01/2019); xv. Narayan Tatu Rane vs. ITO [2016] 70 taxmann.com 227 (Mumbai) [06- 05-2016]; xvi. JRD Tata Trust vs. DCIT [2021] 85 ITR (T) 431 (Mumbai-Trib.) [28.12.2020]; xvii. Bhandari Hospital and Research Center vs. PCIT [2020] 116 taxmann.com 258 (Indore - Trib.); xviii. Hill Queen Investment (P.) Ltd. vs. PCIT [2021] 127 taxmann.com 682 (Kolkata - Trib.) xix. Maharashtra Engineering vs. PCIT (ITA No. 859/PUN/2018) (ITAT Pune) 10. The ld. Counsel for the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 50C of the Act. He submitted that as per clause 5(a) of the Lease Deed, the assessee cannot sell/sublet the land to any other person without the permission of the Lessor and further, it is stated that no such permission will be given by the Lessor before the period of ten years. Moreover, in point 5(b) of the Lease Deed it has been agreed upon by the assessee that in case of sale of such plot, the Lessor shall be entitled to claim and recover 50% of the unearthed increase in the value of the plot and as such the assessee is liable to pay 50% of the difference between purchase and sale price to the Lessor. He drew the attention of the Bench to the relevant portion of the Lease Deed which reads as under: 5(a) The Lease shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the industrial plot except with the previous consent in writing of the Lessor which he shall be entitled to refuse in his absolute discretion. Provided that such consent shall not be given for a period of ten years from the commencement of this lease unless, in the opinion of the lessor exceptional circumstances exist for the grant of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred. He submitted that an immovable property can be legally and lawfully transferred only by way of a registered deed of conveyance and as such no transfer can be made merely through an Agreement to Sell. However, in the present case, that assessee having acquired only leasehold rights in the plot situated at Bawana and there being stringent conditions specified in the Lease Deed in relation to transfer of such leasehold rights, the transaction of transfer of leasehold rights initiated by the assessee is impermissible and in breach of the terms of the Lease Deed. 16. He submitted that the assessee in the present case has not sold the leasehold rights by way of any sale deed and rights have only been transferred by way of unregistered Agreement to Sell and as such there is no transfer of leasehold rights as per the provisions of section 54 of the Transfer of property Act, 1882 read with section 2(47) of the Income Tax Act, 1961. For the above proposition, the ld. Counsel for the assessee referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that since the deeming provisions of section 50C for assessing the stamp duty value as sale consideration are only applicable in case of transfer of land or building and as this provision cannot be invoked in respect of transfer of leasehold rights and since this legal position has been duly examined and accepted by the Assessing officer while passing the Assessment order u/s 143(3) of the Act, therefore, there is no case for treating the Assessment order as erroneous or prejudicial to the interest of revenue. 21. The ld. Counsel for the assessee submitted that the action of Pr. CIT in holding that the period of lease-hold rights as short term capital asset is arbitrary and without appreciating the factual position that the assessee was allotted such rights by the President of India through agency of DSICDC and as such period of holding will be counted from the date of allotment of property as entire consideration was duly paid at the time of allotment of lease hold rights. 22. He submitted that a perusal of the date of application, dates of payment, date of allotment, etc., would show that the assessee had fully acquired the leasehold rights in the plot in the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same being in the nature of long term capital asset, the Pr. CIT has arbitrarily rejected the contentions of the assessee and totally failed to even prima facie show that the Assessment order passed u/s 143(3) of the Act is erroneous and prejudicial to the interest of the Revenue. 24. The ld. Counsel for the assessee, in his another plank of argument, submitted that the provisions of section 263 of the Income Tax Act, 1961 cannot be invoked if the assessment order is neither erroneous nor prejudicial to the interest of revenue. He submitted that the view adopted by the AO in the instant case in accepting the actual sale consideration received by the assessee for the purposes of computing long term capital gain is a legally permissible view formed by the A.O. after making detailed verification of terms of lease deed, cancellation notice and provisions of section 50C of the Act. Whereas in the present case, the Pr. CIT without even properly appreciating the inflexible terms of lease deed claim of the Lessor being 50% of the unearthed profit if the Lessee sells the said leasehold rights prior to limitation has held that the Assessment order is prejudicial to the interest of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Hon ble Delhi High Court in the case of CIT vs. Leisure Wear Exports Ltd. [2012] 341 ITR 166 (Delhi HC) [14-09-2010] as relied on by the PCIT is, in fact, in favour of the assessee and not in favour of the Revenue. He submitted that it has been held that if two views are possible on the same issue and the A.O. has taken one view with which the Pr. CIT does not agree, the Assessment order cannot be prejudicial to the interest of the Revenue. He accordingly submitted that the revisional proceedings initiated by the PCIT not being in accordance with law should be quashed. 27. The ld. DR, on the other hand, heavily relied on the order of the PCIT. Relying on various decisions, the ld. DR submitted that the PCIT was fully justified in invoking the jurisdiction u/s 263 of the IT Act since the AO, in the instant case, has not made any enquiry. Therefore, the order has become both erroneous as well as prejudicial to the interests of the Revenue and, therefore, the grounds raised by the assessee should be dismissed. For the above proposition, he relied on the following decisions:- i) Daniel Merchants Pvt. Ltd.; ii) Malabar Industrial Company Ltd. Vs. CIT, 243 ITR 83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee the following question:- 8. Please explain the reason for the sale consideration of property in ITR is less than the value as per Stamp Duty. 32. From the paper book filed on behalf of the assessee, we find, the assessee, vide reply dated 21.05.2018, 4th July, 2018, 27th August,2008, 3rd September, 2018 and 09.11.2018 had duly explained the sale consideration of the leasehold rights and the AO, after considering the various replies given by the assessee, has accepted the reply filed by the assessee. Therefore, we find merit in the argument of the ld. Counsel for the assessee that it is not a case where the AO has not conducted any enquiry/verification. The AO, after being satisfied by the explanation given by the assessee with regard to the sale that there was no case of substituting the stamp duty value or any reference to the DVO in terms of provisions of section 50C has accepted the reply. 33. So far as the reference to valuation cell as per the provisions of section 50C is concerned, the same shall arise only when the AO is not satisfied about the consideration declared and supported from legal documents. We find, the coordinate Bench of the Tribunal in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discretion of the Assessing Officer cannot be termed as being erroneous as has been held by the Ld. Pr. CIT. 34. Even otherwise also we find merit in the submission of the ld. Counsel for the assessee that the PCIT does not have unfettered powers to initiate revisionary proceedings u/s 263 in a case where the AO has conducted proper and reasonable enquiry on the issue involved. Since the AO, in the instant case, after deeply examining the issue involved has reached to the conclusion that there is no requirement to substitute the stamp duty value for computing capital gain on sale of asset, the action of the PCIT in treating the assessment order as erroneous or prejudicial for taking a plausible view is arbitrary and merely on the basis of presumption and surmises. 35. We find, the Hon ble Supreme Court in the case of PCIT vs. Shreeji Prints (P.) Ltd., 130 taxmann.com 294, has upheld the decision of the Hon ble High Court in quashing the 263 proceedings where the Hon ble High Court has held that since Assessing Officer has made inquires in detail and accepted genuineness of loans received by assessee, such view of Assessing Officer was a plausible view and same cannot to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not correct. A perusal of clause 5(a) of the Lease Deed shows that the assessee cannot sell/sublet the land to any other person without the permission of the Lessor. Further, no such permission will be given by the Lessor before the period of ten years. Similarly, in point 5(b) of the Lease Deed it has been agreed upon by the assessee that in case of sale of such plot, the Lessor shall be entitled to claim and recover 50% of the unearthed increase in the value of the plot and as such the assessee is liable to pay 50% of the difference between purchase and sale price to the Lessor. Therefore, we find merit in the argument of the ld. Counsel that leasehold rights acquired by the assessee are available with certain restrictions and the assessee is not free to exercise his complete authority over the land. Therefore, the Pr. CIT, without considering the strict restrictions imposed upon on the assessee has erred in imposing the provisions of section 50C by substituting the stamp duty value in place of sale consideration received by the assessee. The same, in our opinion, being not in accordance with the facts of the case, the jurisdiction u/s 263 could not have been invoked. We fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a conservative view computed the indexed cost of acquisition for F.Y. 2004-05, i.e., the year in which complete payments for acquiring the leasehold rights was made and the assessee having sold such rights after holding for more than 36 months, computed the long-term capital gains in terms of the provisions of section 2(29A) of the Act. We find, the Hon ble Delhi High Court in the case of CIT vs. Frick India Limited 369 ITR 328 has held that the expression 'held by the Assessee' means the date from which the assessee acquired right to hold the asset. The relevant observation of the Hon ble High Court read as under:- 10. We would like to elucidate and explain the expression, held by the assessee in some detail. General words should normally receive plain and ordinary construction but this principle is subject to the context in which the words are used as the words reflect the intention of the Legislature. The words have to be construed and interpreted to effectuate the object and purpose of the provision, when they are capable of multiple meanings or are ambiguous. Isolated reading of words can on occasions negate the very purpose. Lord Diplock had referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Punjab and Haryana High Court in CIT v. Ved Prakash Sons (HUF) [1994] 207 ITR 148/73 Taxman 70 in which it has been held as under:- As is clear from a bare reading of Section 2(42A) of the Act, the word owner has designedly not been used by the Legislature. The word hold , as per dictionary meaning, means to possess, be the owner, holder or tenant of (property, stock, land.). Thus, a person can be said to be holding the property as an owner, as a lessee, as a mortgagee or on account of part performance of an agreement, etc. Conversely, all such other persons who may be termed as lessees, mortgagees with possession or persons in possession as part performance of the contract would not in strict parlance come within the purview of owner . As per the Shorter Oxford Dictionary. Edition 1985, owner means one who owns or holds something; one who has the right to claim title to a thing (Emphasis supplied) 14. The said decision was followed by the Punjab and Haryana High Court subsequently in Ms. Madhu Kaul v. CIT [2014] 363 ITR 54/225 Taxman 86/43 taxmann.com 417. The Delhi High Court in CIT v. K. Ramakrishnan [2014] 225 Taxman 123/48 taxmann.com 55 has held th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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