ITO-9(1)-3, MUMBAI V. DOYEN GASES PVT.LTD., MUMBAI

ITA 4923/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62479 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Assessee Lawyers: MRS UMA MAHA DEOKAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Additional evidence; Cost of acquisition; Difference of opinion; Capital receipt; Change of opinion
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.4923 /MUM/2011 ASSESSMENT YEAR: 2007-2008 ITO-9(1)-3, MUMBAI-400020 DOYEN GASES PVT. LTD., M/S VMD & CO. CHATTERED ACCOUNTANTS, SHREENIEWAS HOUSE, 27 H.S.MARG, FORT, MUMBAI-400 001, PAN NO.AAACD5702D APPELLANT VS. RESPONDENT APPELLANT BY : RUPINDER BRAR RESPONDENT BY : MRS.UMA MAHADEOKAR DATE OF HEARING : 2 ND MAY 2012 DATE OF PRONOUNCEMENT : 8 TH JUNE, 2012 O R D E R PER AMIT SHUKLA (J.M.) : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 23-3-2011, PASSED BY THE CIT(A)-19, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2007-2008 ON THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT SECTION 50C OF THE I.T.ACT, 1961 IS NOT APPLICABLE IN THE CASE OF TRANSFER OF LEASEHOLD LAND AND PREMISES AC QUIRED FOR 95 YEARS AFTER A PAYMENT OF PREMIUM OF ` .2,09,900/- AND A YEARLY RENT OF ` .1. ITA NO : 4923/MUM/2011 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCES IN VIOLATION OF PROV ISIONS OF RULE 46A OF I.T. RULES, 1962. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE RELEVANT FACTS FOR ADJUDICATION OF THE ISSUES INVOLVED ARE THAT, DURING THE YEAR THE ASSESSEE HAS TRANSFERRED THE LEASEHOLD RIGHTS IN RESPECT OF THE LAND AT PALGHAR AL ONG WITH FACTORY PREMISES SITUATED THEREIN, TO M/S KARAMTARA ENGINEERIN G (P) LTD. FOR A CONSIDERATION OF ` .1,10,00,000/-. ON PERUSAL OF THE AGREEMENT FOR THE SAID TRANSACTION, THE ASSESSING OFFICER NOTICED THAT THE MARKET VALUE OF THE SAID PROPERTY IS MUCH HIGHER THAN THE CONS IDERATION AT WHICH THE ASSESSEE HAS TRANSFERRED THE SAID LEASEHOLD RIGHTS WHICH SHOULD BE AT ` .3,17,40,000/- IN TERMS OF PROVISIONS OF SECTION 50C (1). HE REQUIRED THE ASSESSEE AS TO WHY THE VAL UE AS PER SECTION 50C SHOULD NOT BE CONSIDERED AND PROFIT AS SHORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITAL GAIN SINCE THE SAID ASSET HAS BEEN SHOWN AS CAPITAL ASSET, IN BALANCE SHEET. 2.1 IN RESPONSE, THE ASSESSEE S UBMITTED THAT IT HAD PURCHASED MIDC LEASE PLOT AT TARAPUR IN 1974. THE SAID PLOT ADMEASURING 20989 SQ.MTRS. ALONG WITH FACTORY BUILDING ADMEASURING 732.268 SQ.MTRS. WAS SOLD FOR A TOTAL CONSIDERATION OF ` .1,10,000/-. IT WAS FURTHER EXPLAINED ITA NO : 4923/MUM/2011 3 THAT THE ACTIVITIES OF THE FACTORY WERE CLOSED IN THE YEAR 1992 AND SINCE THEN THE ASSESSEE COMPANY WAS PAY ING HEAVY SERVICES CHARGES PER MONTH TO MIDC FOR ALMOST 12 YEARS WITHOUT ANY INCOME. THEREFORE, THE COMPANY HAD DECIDED TO SELL THE PLOT ALONG WITH FACTORY BUILDING IN 2004. IT WAS ALSO SUBMITTED THAT T HE BUILDING WAS SOLD AT WDV AND, THEREFORE, THE QUESTION OF C APITAL GAIN DOES NOT ARISE. 3. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT IT HAS FAILED TO SU BSTANTIATE ALONG WITH THE EVIDENCE THAT THE FACTORY BUILDING WAS IN A DILAPIDATED CONDITION AND MARKET VALUE AS PER THE PAYMENT OF STAMP DUTY AND REGISTRATION FEES IS NOT THE ACTUAL VALUE. HE, THEREFORE, INVOKED THE PROVISION OF SECTION 50C (1) AND WORKED THE SHORT TERM CAPITA L GAIN IN THE FOLLOWING MANNER :- COST VALUE OF THE LAND - ` . 2,12,905/- WDV OF LAND AS ON 01/04/2006 - ` . 2,72,787/- SALE VALUE OF THE ASSET - ` 3,17,40,000/- GAIN FROM THE SALE OF ASSET - ` 3,12,54,308/- LESS: TRANSFER CHARGES PAID TO MIDC - ` . 29,17,500/- SHORT TERM CAPITAL GAIN - ` .2,83,36,808/- 4. BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT THE TRANSFER OF THE ASSET WAS A TRANSACTION OF ASSIGNMENT OF LEASE RIGHTS IN LAND AND NOT SALE OF THE LAND AND THIS WAS VERY EVIDENT FROM THE DEED OF ASSIGNMENT ENTERED INTO BY THE ASSESSEE AND THE KARAMTARA ITA NO : 4923/MUM/2011 4 ENGINEERING (P) LTD.. THE RELEVANT SUBMISSIONS OF THE ASSESSEE FOR APPRECIATION OF HIS CONTENTION AR E REPRODUCED HEREIN BELOW :- 1. THE TRANSFER DOCUMENT IS DESCRIBED AS DEED OF ASSIGNMENT AND NOT AS SALE DEED. 2. THE RIGHTS TRANSFERRED VIDE THE SAID DEED ARE THE RIGHT TITLE AND INTEREST IN THE LEASEHOLD LAND AND NOT THE LAND ITSELF (PAGE1, PAGE 5 OF THE SAID DEED) 3. EVEN THE ORIGINAL RIGHTS AC QUIRED BY YOUR APPELLANT WERE ONLY TENANCY RIGHTS IN THE SAID MIDC PROPERTY FOR A PERIOD OF 95 YEARS ONLY. HENCE, YOUR APPELLANT CANNOT TRANSFER LARGER RIGHTS THAN WHAT HE AC TUALLY OWNED AND THEREFORE, THE PRESENT TRANSFER IS ALSO TRANSFER OF TENANCY RIGHTS ONLY. 4. THE ORIGINAL EASE WAS FO R A PERIOD OF 95 YEARS W.E.F. 1.11.1974 OUT OF WHICH PERIOD OF 32 YEARS WAS ALREADY OVER WHEN LEASE HOLD RIGHTS IN THE LAND WAS ASSIGNED ON 16.10.2006 VIDE AN ASSIGNMENT DEED. THUS, THE PERIOD OF ONLY 63 YEARS WAS AVAILABLE TO THE ASSIGNEE WHICH IS A SHORT SPAN FOR AN INDUSTRIAL UN IT COMPARED TO OUGHT RIGHT SALE WHERE THE LAND COULD BE EN JOYED IN PERPETUITY BY THE PURCHASER. 5. THE NATURE OF THIS TRANSACTION IS ACCEPTED BY THE LEARNED AO TO BE THAT OF TRANSFER OF LEASEHOLD RIGHTS AS HE HAS DESCRIBED IT AS SUCH IN PARA 5 OF HIS ASSESSMENT ORDER ITSELF WHICH SAYS A. ASSESSEE HAD TRANSFERRED LEASEHOLD RIGHTS IN RESPECT OF LAND AT PALGHAR. B. WHY VALUE OF LEASEHOLD RIGHTS SHOULD NOT BE ADOPTED AT ` .3,17,40,000/- AS AGAINST VALUE OF ` .1,10,00,000/- AT WHICH IT HAS TRANSFERRED THE SAID RIGHTS IN TERMS OF PROVISIONS OF SEC.50C OF THE I.T. ACT, 1961. THE FINDING THAT IT WAS TRANSFER OF LEASEHOLD RIGHTS IN LAND BEING A PURE FINDING OF FACT CANNOT BE SUBSEQUENTLY ITA NO : 4923/MUM/2011 5 ENLARGED TO CONVERT IT INTO TRANS FER OF LAND ITSELF WITHOUT ANY CONCRETE PROOF OR FACTS JUSTIFYING THIS CHANGE OF OPINION. FURTHER THE CASE OF KISHORI GAITONDE ITA NO.1561/M/09 (BCAJ FEB 2010) DECIDED BY OUR JURISDICTIONAL TRIBUNAL I.E. ITAT, MUMBAI IS SQUARELY APPLICABLE TO YOUR APPELLANT AND HENCE, SECTION 50C OF THE I.T.ACT, 1961 CANNOT BE MADE APPLICABLE TO THE PRESENT CASE. 5. LEARNED CIT(A) AFTER GOING THROUGH THE MATERIAL PLACED ON RECORD LIKE COPY OF AGREEMENT DAT ED 5-11-1974 BETWEEN MIDC AND THE ASSESSEE AND THE AGREEMENT DATED 16- 10-2006 BETWEEN THE APPELLANT AND KARAMTARA ENGINEERING (P) LTD. AND ALSO THE VALUATION ADOPTED BY THE STAMP VALUATION AUTHORITY, HE CAME TO THE CONCLUSION THAT IT IS A TRANSFER OF LEASEHOLD RIGHTS AND, THER EFORE, THE PROVISION OF SECTION 50C WILL NOT BE APPLICABLE. WHILE ARRIVING TO THIS CONCLUSION, HE HAS RELIED UPON THE DECISION OF ITAT MUM BAI BENCH IN THE CASE OF KISHORE GAITONDE, PASSED IN ITA NO .1561/M/09, DATED 27-11-2009 . SO FAR AS THE FACTORY BUILDING IN THE SAID PLOT OF LAND, THE CIT(A) HELD THAT THE FACTORY BUILDING IS A DEPRECIABLE ASSET FORMING PART OF THE BLOCK OF ASSET, HENCE, SECTION 50C WILL NOT BE APPLICABLE AND THE CAPITAL GAIN ARISING OUT OF THE TRANSFER OF FACTORY BUILDING WILL BE HOWEVER TREATED AS SHORT TERM CAPITAL GAIN. FOR THE PURPOSE OF BIFURCATION ON LEASEHOLD RIGHTS ON THE LAND AND FACTORY BUILD ING, THE CIT(A) RELIED UPON THE BIFURCATION DONE BY THE REGISTRATIO N AUTHORITIES AND THEREAFTER HE APPLIED THE SAME PERCENTAGE ON THE TO TAL CONSIDERATION RECEIVED ON THE ITA NO : 4923/MUM/2011 6 LEASEHOLD RIGHTS IN LAND AND FACTORY BUILDING AT ` 1,10,00,000/-. THE WORKING AS ADOPTED BY THE CI T(A) IS GIVEN HEREUNDER :- LEASEHOLD RIGHTS IN LAND ` .2,93,84,600/- 92.58% FACTORY BUILDING ` .23,54,948/- 7.42% TOTAL ` .3,17,40,000/- 100.00% HENCE, THE TOTAL CONSIDERATION FO R THE LEASE HOLD RIGHTS IN LAND AND FACTORY BUILDING ` .1.10 CRORES MAY BE BIFURCATED FOR COMPUTING TAXABILITY OF INCOME ARIS ING OUT OF THE SAID TRANSACTION AS UNDER : LEASEHOLD RIGHTS IN LAND ` .1,01,83,800/- 92.58% FACTORY BUILDING ` .8,16,200/- 7.42% TOTAL ` .1,10,00,000/- 100.00% 5.1 ACCORDINGLY, THE INCOME ARISING OUT OF TWO ASSETS WAS COMPLETED BY HIM AS UNDER :- LEASEHOLD RIGHTS IN THE PLOT B-8/2 IN MIDC THE JURISDICTIONAL ITAT HAS VIDE IT S ORDER IN THE CASE OF KISHORE GAITONDE ITA NO.1561/M/09 DATED 27 NOVEMBER, 2009, HAS HELD THAT SECTION 50C OF THE I.T.ACT 1961 IS NOT ATTRACTED IN CASE OF THE TENANCY RIGHTS. IN THE CASE OF THE APPELLANT THE RIGHTS TRANSFERRED BY HIM ARE ALSO IN THE NATURE OF LEASEHOLD RIGHTS IN LAND AND NOT THE LAND ITSELF AND HENCE IT IS MY CONSIDERED VIEW THAT SEC. 50C OF THE I.T.ACT, 1961 IS NOT APPLICABLE TO THE APPELLANT AND HENCE, STAMP VALUATION IS NOT TO BE TAKEN INTO CONSIDERATION FOR COMPUTING THE CAPITAL GAINS U/S. 45 OF THE I.T.ACT 1961. THE CONSIDERATION AFTER BIFURCATION AS ABOVE WILL BE TAKEN AT ` .1,01,83,800/- AND THE CAPITAL GAINS WILL BE WORKED OUT AS LONG TERM CAPITAL GAINS AFTER REPLAC ING THE MARKET VALUE AS ON 1.4.1981 AND AFTER GIVING BENEFIT OF INDEXATION. FACTORY BUILDING AT THE SAID PLOT . IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE FACTORY BUILDING IS PART OF THE BLOCK OF ASSETS AND DEPRECIATION IS CLAIMED FOR THE ITA NO : 4923/MUM/2011 7 SAME UNDER THE INCOME TAX ACT 1961. THE WDV OF THE FACTORY BUILDING AS ON 1.4.2006 IS ` .2,72,787/- AS MENTIONED IN PAGE 4 OF THE ASSESSMENT ORDER. THUS THE FACTORY BUILDING BEING DEPRECIABLE ASSET FORMING PART OF BLOCK OF ASSETS, SEC. 50 OF THE I.T.ACT, 1961 IS APPLICABLE AND THE CAPITAL GAINS ARISING FROM THE SAME WILL BE TREATED AS SHORT TERM CAPITAL GAIN. THE CONSIDERATION AFTER BIFURCATION AS ABOVE WILL BE TAKEN AT ` .8,16,200/- AND THE DIFFERENCE BET WEEN THIS CONSIDERATION AND ITS WDV AS ON 1.4.2008 BEING ` .2,72,787/- WILL BE TAXED AS SHORT TERM CAPITAL GAIN. 6. LEARNED AR APPEARING ON BEHALF OF THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT WHETHER THE PROVISION OF SECTION 50C WOULD BE APPLICABLE ON TRANSFER OF LEASE HOLD RIGHTS IN THE LAND OR NOT, STANDS SQUARELY COVERED BY THE DECISION OF THE ITAT INCLUDING MUMBAI BENCH. LIST OF SUCH DECISIONS RELIED UPON BY THE LEARNED AR ARE AS UNDER :- I) ATUL PURANIK VS. ITO (2011) 132 ITD 499 (MUM); II) DCIT VS. TEJINDER SINGH, ITA NO.149/KOL/2011, ORDER DTD.29-2-12; AND III) SMT. KISHORI GAITONDE VS. ITO, ITANO. 1516/M/09, ORDER DATED 27-11-09. 7. ON THE OTHER HAND, LEARNED CI T DR RELIED UPON THE FINDINGS GIVEN BY THE ASSESSING OFFICER. 8. WE HAVE CAREFULLY CONSIDERED T HE FINDINGS GIVEN BY THE CIT(A) AS WELL AS THE ASSESSING OFFICER AND AL SO HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. SO FAR AS THE FINDI NGS OF THE CIT(A) WITH REGARD TO CHARGING OF SHORT TERM CAPITAL GAIN ON THE TRANSFER OF FACTORY BUILDING, IT ITA NO : 4923/MUM/2011 8 HAS NOT BEEN DISPUTED BY THE DEPARTM ENT. THE ONLY ISSUE IS WHETHER THE PROVISIONS OF SECTION 50C W OULD BE APPLICABLE ON THE TRANSFER OF LEASEHOLD RIGHTS IN THE LAND. FROM THE PLAIN READING OF THE LANGUAGE OF SECTION 50C (1), IT IS CLEAR THAT VALUE OF LAND OR BUILDING OR BOTH ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY SHALL, FOR THE PURPOSE OF SECTION 48, DEEMED TO BE FULL VALUE OF CONSIDERATION ACCRUING AS A RESULT OF SUCH A TRANSFER. SECTION 50C(1) IS OF A DEEMING PROVISION AND IT EXTENDS ONLY TO LAND OR BUILDING OR BOTH. SUCH A DEEMING PROVISION HAS BEEN INCORPORATED TO SUBSTITUTE THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY IN PLACE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER. THE DEEMING PROVISIONS AS CONTEMPLATED IN SE CTION 50C HOWEVER DOES NOT EXTEND TO LEASE RIGHTS IN A LAND. THIS ASPECT OF THE MATTER DOES NOT NEED ANY DETAIL OR FURTHER ELABORATION AS T HE SAME HAS BEEN SUBJECT MATTER OF SCRUTINY AND ANALYSIS BY VARIOUS COUNTS AS HAVE BEEN RELIED UPON BY THE LEARNED AR, WHICH ARE ELABORATED HEREIN BELOW. (I) ATUL G. PURANIK(SUPRA) : IN THIS CASE, THE HONBLE MEMBERS HAVE ANALYSED THE SIMILAR SITUATION AND THE APPLICABILITY OF SECTION 50C ON THE LEASE HOLD LANDS AND HELD THAT :- 11.4 IN VIEW OF THE AFORENOTED JUDGMENTS RENDERED BY THE HONBLE APEX COURT AND THAT OF THE HONBLE JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT A DEEMING PROVISION CAN BE APPLIED ONLY IN RESPECT OF THE SITUATION SPECIFICALLY GIVEN AND HENCE CANNOT GO BEYOND THE EXPLICIT MANDATE OF THE SECTION. TURNING TO SEC. 50C, ITA NO : 4923/MUM/2011 9 IT IS SEEN THAT THE DEEMING FICT ION OF SUBSTITUTING ADOPTED OR ASSESSED OR ASSESSABLE VALUE BY THE STAMP VALUATION AUTHORITY AS FULL VALUE OF CONSIDERATI ON IS ITA NO.3051/M/10 ATUL G. PURANIK APPLICABLE ONLY IN RESPECT OF LAND OR BUILDING OR BOTH. IF THE CAPITAL ASSET UNDER TRANSFER CANNOT BE DESCRIBED AS `LAND OR BUILDING OR BOTH, THEN SEC. 50C WILL CEASE TO APPLY. FROM THE FACTS OF THIS CASE NARRATED ABOVE, IT IS SEEN THAT THE ASSESSEE WAS ALLOTTED LEASE RIGHT IN THE PLOT FOR A PERIOD OF SIXTY YEARS, WHICH RIGHT WAS FURTHER ASSIGNED TO M/S. PATHIK CONSTRUCTION IN THE YEAR IN QUESTION. IT IS AXIOMATIC THAT THE LEASE RIGHT IN A PLOT 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. SEC. 54D DEALS WITH CERTAIN CASES IN WHICH CAPITAL GAIN ON COMPULSORY ACQUI SITION OF LAND AND BUILDING IS CHARGED. SUB-SEC.(1) OF SEC. 54D OPENS WITH : SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), W HERE THE CAPITAL GAIN ARISES FROM THE TRANSFER BY WAY OF COMPULSO RY 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 SEC. 54D T HAT `LAND OR BUILDING IS DISTINCT FROM `ANY RIGHT IN LAND OR BUILDING. SIMILAR POSITION PREVAILS UNDER THE W.T. ACT, 1957 ALSO. SECTION 5(1) AT T HE MATERIAL TIME PROVIDED FOR EXEMPTION IN RESPECT OF CERTAIN A SSETS. CLAUSE (XXXII) OF SEC. 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 TO IN ANY OTHER CLAUSES OF THIS SUB-SECTION) FORMING PART OF AN INDUSTRIAL UNDERTAKING SHALL BE EXEMPT FROM TAX. HERE ALSO IT IS WORTH NOTING THAT A DISTIN CTION 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, ITA NO : 4923/MUM/2011 10 WHICH IS A DEEMING PROVISION, THE FICTION CREATED IN THIS SECTION CANNOT BE EXTENDED TO ANY ASSET OTHER THAN THOSE SPECIFICALLY PROVIDED THEREIN. AS SEC. 50C APPLIES ONLY TO A ITA NO.3051/M/10 ATUL G. PURANIK CAPITAL ASST, BEING LAND OR BUILDING 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 SEC.50C CANNOT BE INVOKED. (II) DCIT VS. TEJINDER SINGH (SUPRA) : IN THIS CASE ALSO THE ITAT I NDEPENDENTLY ANALYSED THE PROVISION OF SECTION 50C VIS--VIS ITS APPLICABILI TY ON TRANSFER OF LEASE HOLDS RIGHTS AND HELD THAT :- 8. A PLAIN LOOK AT THE UNDISPUTED FACTS OF THIS CASE CLEARLY SHOWS THAT THE ASSESSEE WAS 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 TH IS LINE OF REASONING. IT IS NOT NECESSARY THAT CONSIDERATION PAID BY THE BUYER OF A PROPERTY, AT THE TIME OF BUYING THE PROPERTY, MUST ONLY RELATE TO OWNERSHIP RIGHTS. IN THE CASE OF TENANTED PR OPERTY, AS IS THE CASE BEFORE US, WHILE THE BUYER OF PROPERTY PAYS THE OWNER OF PROPERTY FOR OWNERSHIP RIGHTS, HE MAY ALSO HAVE TO PAY, WHEN HE WANTS TO HAVE POSSESSION OF THE PROPERTY AND TO REMOVE THE FETTERS OF TENANCY RIGHTS ON THE PROPERTY SO PURCHASED, THE TENANTS TOWARDS THEIR SURRENDERING THE TENANCY RIGHTS. MERELY BECAUSE HE PAYS THE TENANTS, FOR THEIR SURRENDERING THE TENANCY RIGHTS, AT THE TIME OF PURCHASE OF PROPERTY, WILL NOT ALTER THE CHARACTER OF RECEIPT IN ITA NO : 4923/MUM/2011 11 THE HANDS OF THE TENANT RECEIVING SUCH PAYMENT. WHAT IS PAID FOR THE TENANCY RIGHTS CANNOT, MERELY BECAUSE OF THE TIMING OF THE PAYMENT, CANNOT BE TREATED AS RECEIPT FOR OWNERSHIP RIGHTS IN THE HANDS OF THE ASSESSEE. THIS DISTINCTION BETWEEN THE RECEIPT FOR OWNERSHIP RIGHTS IN RESPECT OF A PROPERTY AND RECEIPT FOR TENANCY RIGHTS IN RESPECT OF A PROPERTY, EVEN THOUGH BOTH THESE RECEIPTS ARE CAPITAL RECEIPTS LEADING TO TAXABLE CAPITAL GAINS, IS VERY IMPORTANT FOR TWO REASONS FIRST, THAT THE COST OF ACQUISITION FOR TENANCY RIGHTS, UNDER SECTION 55(2)(A), IS, UNLESS PURCHASED FROM A PREVIOUS OWNER WHICH IS ADMI TTEDLY NOT THE CASE HERE, TREATED AS NIL; AND, - SECOND, SINCE THE PROVISIONS OF SECTION 50 C CAN ONLY BE APPLIED IN RESPECT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, THE PROVISIONS OF SECTION 50 C WILL APPLY ON RECEIPT OF CONSIDERATION ON TRANSFER OF A PROPERTY, BEING LAND OR BUILDING OR BOTH, THESE PROVISIONS WILL NOT COME INTO PLAY IN A CASE WHERE ONLY TENANCY RIGHTS ARE TRANSFERRED OR SURRENDERED. IT IS, T HEREFORE, IMPORTANT TO EXAMINE AS TO IN WHAT CAPACITY THE ASSESSEE RECEIVED THE PAYMENT. NO DOUBT THE ASSESSEE WAS A PARTY TO THE REGISTERED TRIPARTITE DEED DATED 20TH JULY 2007 WHEREBY THE PROPERTY WAS SOLD BY THE KSCT, BUT, AS A PERUSAL OF THE SALE DEED UNAMBIGUOUSLY SHOWS, THE ASSESSEE HAS GIVEN UP ALL THE RIGHTS AND INTERESTS IN THE SAID PROPERTY, WHICH HE HAD ACQUIRED BY THE VIRTUE OF LEASE AGREEMENTS WITH OWNER AND WHICH WERE, THEREFORE, IN THE NATURE OF LESSEES RIGHTS; THESE RIGHTS COULD NOT HAVE BEEN, BY ANY STRETCH OF LOGIC, COULD BE TREATED AS OWNERSHIP RIGHTS. IT HAS BEEN SPECIFICALLY STATED IN THE SALE DEED THAT THE LESSEE, WHICH INCLUDED THIS ASSESSEE BEFORE US, HAD PROCEEDED TO, INTER ALIA, GRANT, CONVEY, TRANSFER AND ASSI GN 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 ITA NO : 4923/MUM/2011 12 LEARNED CIT(A) RIGHTLY HOLDS, SECTION 50 C COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THIS CASE. REVENUES CONTENTION THAT THE PROVISIONS OF SECTION 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 AN Y 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 MUST BE OF A CAPITAL ASSET, BEING LAND OR BU ILDING OR BOTH, BUT THEN A LEASEHOLD RIGHT IN SUCH A CAPITAL ASSET CANNOT BE EQUATED WITH THE CAPITAL ASSET PER SE . WE ARE, THEREFORE, UNABLE TO SEE ANY MERITS IN REVENUES CONTENTION THAT EVEN WHEN A LEASEHOLD RIGHT IN LAND OR BUILDING OR BOTH IS TRANSFERRED, THE PROVISIONS OF SECTION 50C CAN BE INVOKED. 9. THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS, WE HOLD THAT THE PROVISION OF SECTION 50C WOUL D NOT BE APPLICABLE ON THE TRANSFER OF LEASE HOLD RIGHTS ON THE LAND AND, THEREFORE, THE FINDING GIVEN BY THE CIT(A) ARE CONFIRMED. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED.. ORDER PRONOUNCED ON THIS 8 TH DAY OF JUNE, 2012. SD/- SD/- (P.M.JAGTAP) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 8 TH JUNE, 2012 ITA NO : 4923/MUM/2011 13 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PKM