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TMI Blog2024 (2) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... any end date it cannot be said to be a perpetual agreement since clause-8 contains terms by which the assessee has reserved the right to evict the tenant if the terms and conditions are breached. Therefore we tend to agree with the submission that there is no transfer of property in the given case but only the tenancy rights therein. Section 50C of the Act is invoked when there is a transfer of capital asset being land or building or both. In assessee's case, however, the transfer is not of a capital asset but the tenancy rights of the property. Therefore, we see merit in the contention of the ld. AR that the AO is not correct in invoking the provisions of section 50C of the Act. As relying on Ashwin Vardhichand Shah [ 2024 (2) TMI 688 - ITAT MUMBAI ] we hold that the AO is not correct in making the addition u/s 50C of the Act. Accordingly, the addition is hereby deleted. Appeal of the assessee is allowed. - Shri Aby T. Varkey, JM And Ms. Padmavathy S, AM For the Appellant : Shri Vimal Punmiya, CA. For the Revenue : Shri Ashok Kumar Ambastha. ORDER PER PADMAVATHY S, AM: This appeal is against the order of the Commissioner of Income Tax (Appeals) / NFAC [for short 'the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved the assessee filed appeal before the CIT(A). The assessee submitted the copy of tenancy agreement in support of its claim that the assessee has not sold the property but only transfer the tenancy rights. The CIT (A) however confirmed the addition made by the AO by holding that Now, coming to the fact emanated from the agreement of tenancy, it reveals is between Landlord and Tenant and not between two tenants for transfer of tenancy rights or for surrender of tenancy rights to owner or a leasehold rights by lessee. Tenancy rights means to become a tenant of the property for a specified period whereas the present agreement for tenancy doesn't specify any period of tenancy but it is perpetual in nature. Further, the tenancy rights created on certain period of being a tenant of any property and it can't be said that the owner of a property shall have a tenancy right in it's own property. Further, the agreement is irrevocable in nature because there is no clause of suo-motto revocation after a prior notice by the owner of the property for vacation. Also, the monthly rent is very nominal, which includes the property/municipal tax and doesn't have any increment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Drug House) is transferred. The ld. AR further drew our attention to the fact that the assessee received a one-time consideration of Rs. 54,00,000/- towards a transfer of tenancy rights besides the monthly rentals and that the assessee has offered to tax the entire consideration received as Capital Gains taking cost of acquisition as Nil. The ld AR submitted that the tenancy agreement was registered under the Maharashtra Stamp Duty Act as per which the stamp duty was payable either on agreement value or on market value whichever is higher and therefore the assessee paid the registration cost based on the market value of the property i.e. Rs.95,00,000. The ld. AR further submitted that the AO has misunderstood that the assessee has transferred the immovable property and according invoked section 50C of the Act to make an addition towards the difference between the stamp duty value and the agreement value. In order to substantiate that the assessee has not transferred the immovable property but the tenancy rights therein, the ld. AR drew our attention to the various clauses in the tenancy agreement and submitted that the assessee has the rights to terminate the tenancy rights and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein and therefore provisions of section 50C of the Act is not applicable. In this regard our attention was drawn the certain clauses in the agreement which is extracted below: 4. The New Tenants shall occupy the said Premises as tenant of the Landlords monthly tenancy basis and pay to on the Landlords a sum of Rs. 3.960/- (Rupees Three Thousand Nine Hundred Sixty Only) as and by way of monthly rent (being the standard rent inclusive of municipal taxes, rates, ceases and permitted increases, etc.) on or before the 10th day of each month in advance. 5. The tenancy of the New Tenants shall be monthly tenancy according to the British calendar month and shall be governed by the provisions of the Maharashtra Rent Control Act 1999, and any statutory notification/ modification thereof made from time to time. The New tenants shall not commit any breach of the said Act. 6. The Landlords or representatives shall their have authorized free and unobstructed access to the said Premises and every part thereof, as and when required at 8. In the event of the New Tenants committing breach of any of the terms and conditions herein contained and failing to remedy or make good such breach within 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed 7 , on or before the date of the agreement for transfer: Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. (2) **** (3) **** (emphasis supplied) 8. From the plain reading of the above section, it is clear that section 50C of the Act is invoked when there is a transfer of capital asset being land or building or both. In assessee's case, however, the transfer is not of a capital asset but the tenancy rights of the property. Therefore, we see merit in the contention of the ld. AR that the AO is not correct in invoking the provisions of section 50C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout the consent of land-lords); and vide agreement executed in the relevant year (AY. 2011-12), the assessee had entered into an agreement with Shri Chunnilal and Shri Tejaram for regularizing the tenancy and pursuant to that stamp-duty of two properties (Rs.71,07,480/-) had to be remitted for registration of the agreement. According to the Ld. CIT(A), the Estate of land-lord i.e. Late Jasumathi V Shah (mother of assessee) had given notice for vacating the said premises to the original tenants i.e. TilokChand D Shah and Dinesh Metal Industries who had illegally given away the said properties by way of subtenancy, to Shri Chunilal and Tejaram. According to the Ld. CIT(A), since both these sub-tenants were not paying rent to the land-lord, a settlement was finally arrived at in the month of Oct, 2010 and the tenancy of these two persons were recognized by entering into agreement of tenancy by the landlord [assessee being one among the four (4) co-owner brother]. Therefore, according to Ld. CIT(A), the AO rightly taxed the transfer of tenancy right and dismissed the appeal of assessee. 7. According to assessee, the registered documents in question was evidencing only tenancy agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or both, it cannot be made applicable to lease rights in a land. As the assessee transferred lease right for sixty years in the Plot and not land itself, the provisions of section 50C of the Act cannot be invoked. A distinction has been drawn between land or building on one hand and or any rights in land or building on the other. Considering the fact that we are dealing with special provision for full value of consideration in certain cases u/s 50C of the Act, which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. (2) ACIT v M/s. Munsons Textiles (ITAT Mumbai) Only for the limited purpose of computation of capital gain in respect of sale of land and building, stamp duty value has to be substituted for sale consideration in view of specific provisions of section 50C of the Act. Therefore, provisions of section 50C of the Act cannot be applied in case of transfer of tenancy rights in respect of land or building or both. (3) DCIT v Tejinder Singh (2012) 19 taxmann.com 4/50 SOT 391 The Tribunal held that the phrase land or buildings or both will not include rights in land or building or both suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee who was one of the four (4) owners of the facts in question, we find it is a tenancy agreement and the terms of the agreement shows that provisions of MRC Act, 1999 are incorporated and therefore applies to the agreement between parties. Moreover, there was no evidence of any consideration being passed between the assessee and Shri Chunnilal and Shri Tejaram. The agreement between parties was for giving the flats in question on rent. Thus, the Ld. CIT (A) erred to upholding the action of the AO who erroneously treated the transaction of tenancy/rental agreement to be that of transfer of property without any material to hold otherwise. Therefore, in the facts and circumstances of the case in hand, we are inclined to delete the addition made by AO, that also by applying section 50C of the Act, which deeming provision in no case is applicable to the facts of the case. 9. The facts of assessee's case being identical in our considered view the ratio of the above decision is applicable to assessee's case also. In view of the above discussion and respectfully following the decision of co-ordinate bench, we hold that the AO is not correct in making the addition under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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