ITO, Ward-32(2), Neew Delhi V. Rajesh Gupta, HUF, New Delhi

ITA 5470/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4240 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: KRISHAN NARANG
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO. 54 70 /DEL/201 7 [A.Y. 20 09 - 1 0 ] THE ITO, VS. SHRI RAJESH GUPTA, HUF WARD - 3 2 ( 2 ) E 22, GEETANJALI ENCLAVE NEW D ELHI NEW DELHI PAN : AAKHR 0872 D [ ASSESSEE ] [RESPONDENT] DATE OF HEARING : 2 7 . 1 2 .2017 DATE OF PRONOUNCEMENT : 03 .01 .201 8 ASSESSEE BY : SHRI KRISHAN N ARANG, ADV. REVENUE BY : MS. ASHIMA NEB, SR. DR ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE LD. CIT(A) - 11 , NEW DELHI VIDE ORDER DATED 06 .0 6 .201 7 FOR A.Y. 20 0 9 - 1 0 . 2. BRIEF FACTS OF THE CASE ARE THAT THE AO MADE AN ADDITION OF RS. 40,40,000/ - U/S 50C OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. THE ASSESSEE IS AN HUF AND FOR THE RELEVANT AY FILED THE RETURN OF INCOME DECLARING AN INCOME OF RS. 9,35,010 INCLUDING L ONG TERM CAPITAL GAIN OF RS. 7,57,435/ - . THEREAFTER, A NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE 2 ITA NO. 5470 /DEL/201 7 DATED 21.03.2016. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PROVISIONS CONTAINED IN SECTION 50C O F THE ACT BE NOT INVOKED AND CONSIDERATION RECEIVED ON SALE OF AGRICULTURAL LAND BE NOT TAKEN, AS ASSESSED BY THE AUTHORITIES FOR THE PURPOSE OF STAMP DUTY. THE ASSESSEE SOLD ITS RIGHTS IN THE AGRICULTURAL LAND ADMEASURING 0.64 HECTARES IN VILLAGE - TULERA, TEHSIL & DISTT. ALWAR, RAJASTHAN ON 31.03.2009 FOR A CONSIDERATION OF RS. 30 LAKHS. ACCORDING TO THE AO, THE VALUE OF LAND FOR THE PURPOSE OF STAMP DUTY WAS RS. 70,40,000/ - . THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT WAS IN POSSESSION OF LAND ONLY AS A TILLER/KASHTKAR AND NOT AS AN OWNER AND THEREFORE, THE PROVISION OF SECTION 50C IS NOT APPLICABLE. THE OWNER, ACCORDING TO ASSESSEE, WAS THE STATE OF RAJASTHAN. THE AO REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE ON THE GROUND THAT THE CONSIDERATION AFT ER SALE WAS RECEIVED BY THE ASSESSEE AND NOT THE STATE OF RAJASTHAN. IT FURTHER OBSERVED THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE STATE OF RAJASTHAN WAS THE OWNER OF THE LAND. 3 ITA NO. 5470 /DEL/201 7 3. THE CIT(A) , VIDE IMPUGNED ORDER DELETED THE ADDITION OF RS. 40,40,00 0/ - , ON ACCOUNT OF DIFFERENCE IN LTCG. IT WAS HELD THAT SECTION 50C CANNOT BE EXTENDED TO RIGHTS IN THE PROPERTY AND SINCE THE ASSESSEE WAS NOT THE ABSOLUTE OWNER OF THE PROPERTY TRANSFERRED, THE SAID SECTION HAS NO APPLICATION. 4. AGGRIEVED BY THE O RDER PASSED BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ' 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS. 40,40,000/ - MADE BY AO AS PER PROVISIONS OF SECTION 50C OF THE I.T. ACT BY HOLDING THAT THE ASSESSEE HAS TRANSFERRED ONLY THE LEASEHOLD RIGHTS IN THE PROPERTY IGNORING THE FACT THAT THERE ARE NO DOCUMENTARY EVIDENCES TO SUGGEST LESSOR - LESSEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE GOVT, OF RAJASTHAN AS BROUGHT OUT BY TH E AO DURING THE ASSESSMENT PROCEEDINGS. 2 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS. 40,40,000/ - MADE BY AO IGNORING THE DECISION IN THE CASE OF ITO - 2(2), KANPUR VS. SHRI HARI OM GUPTA [ITA NO. 222/LKW/2013] WHEREIN IT HA S BEEN HELD THAT LEASEHOLD RIGHTS OVER LAND IS ALSO A CAPITAL ASSET TO WHICH THE PROVISIONS OF SECTION 50C ARE APPLICABLE. 4 ITA NO. 5470 /DEL/201 7 3 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS. 40,40,000/ - MADE BY AO DESPITE THE FACT THAT THE PURCH ASE DEED DATED 220.02.2006 OF THE LAND IN QUESTION CLEARLY SUGGESTED THAT THE CONTROL AND POSSESSION OVER LAND WAS TRANSFERRED TO THE ASSESSEE FOR A CONSIDERATION AND ASSESSEE HAS ADOPTED THE SAME CONSIDERATION TO BE THE COST PRICE OF THE PROPERTY WHILE SE LLING IT FURTHER , WHICH CLEARLY REFLECT THAT THE ASSE S SEE HAS TRANSFERRED THE AGRICULTURAL LAND IN QUESTION AND NOT JUST THE TILLING RIGHTS. 4 . THE APPELLANT CRAVES LEAVE TO ADD , TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING.' 5 . IN THE AFORESAID GROUNDS OF APPEAL, THE REVENUE HAS CHALLENGED THE DELETION OF THE ADDITION OF RS. 40,40,000/ - . THE LD. DR WHILE RELYING UPON THE O RDER PASSED BY THE AO REFERRED TO THE ORDER PASSED BY ITAT LUCKNOW BENCH IN THE CASE OF SH RI HARI OM GUPT A VS. DEPARTMENT OF INCOME TAX ITA NO. 222/LKW/2013 DATED 11.04.2014 WHEREIN IT WAS HELD THAT LEASE HOLD RIGHTS FOR A PERIOD OF 99 YEARS WILL BE A CAPITAL ASSET AND THEREFORE, PROVISIONS OF SECTION 50C ARE APPLICABLE. 5 ITA NO. 5470 /DEL/201 7 6. THE L D. AR ON THE OTHER HAND REL IED UPON THE O RDER PASSED BY THE CIT (A). IT WAS SUBMITTED THAT THE AO FAILED TO APPRECIATE THAT THE REVENUE RECORDS/KHAUTONI/JAMABANDI SHOW THE STATUS OF THE ASSESSEE AS A TILLER ONLY AND NOT AS AN OWNER. IT WAS FURTHER SUBMITTED THAT SECTION 50C CANNOT B E EXTENDED TO RIGHTS IN THE LAND OR BUILDING AND THEREFORE, THE SAID SECTION HAD NO APPLICATION IN THE FACTS OF THE PRESENT CASE. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. I HAVE ALSO GONE THROUGH THE ORDERS RELIED UPON BY BOTH THE PARTIES. IT IS PERTINENT TO NOTE THAT THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WAS UNDER PERPETUAL LEASE IN FAVOR OF THE ASSESSEE. THE ARGUMENT OF THE LD. AR THAT IT WAS ONLY A LEASE HOLDER IN THE AG RICULTURAL LAND AND THEREFORE, S ECTIO N 50C IS NOT APPLICABLE DOES NOT IMPRESS US. OWNERSHIP IS A BUNDLE OF RIGHTS. THE LEASE, AS STATED BY THE ASSESSEE, IS A PERPETUAL LEASE DEED AND CAN BE EQUATED WITH OWNERSHIP OF THE PROPERTY. T HE LESSOR, STATE OF RAJASTHAN , HAS NO RIGHTS OVER THE PROPERTY LEASED TO THE ASSESSEE. 6 ITA NO. 5470 /DEL/201 7 8. THERE IS A DIFFERENCE BETWEEN A LEASE WHERE THE PERIOD IS SPECIFIED FOR EG. 40 YEARS, 60 YEARS ETC. AND A PERPETUAL LEASE WHERE NO PERIOD IS SPECIFIED. IN THE FIRST CASE, RIGHTS OVER THE PROPERTY FOR A CERTAIN PERIOD ARE TRANS FERRED AND THE PROPERTY GOES BACK TO THE OWNER AFTER THE EXPIRY OF THE LEASE TERM. HOWEVER, IN THE LATTER CASE, THE PROPERTY IS PERPETUALLY WITH THE LESSEE AND DOES NOT GO BACK TO THE OWNER. THE LESSEE IN A PERPETUAL LEASE IS VIRTUALLY THE OWNER OF THE PRO PERTY. 9. THE CIT (A) IN THE IMPUGNED ORDER FAILED TO APPRECIATE THAT THE LEASE DEED WAS A PERPETUAL LEASE DEED. IT IS RELEVANT TO REFER TO THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE CIT (A) ON 29.05.2017 WHEREIN IT WAS STATED AS UNDER: 'AGRICULTURAL LAND IN RAJASTHAN IS OWNED BY THE GOVERNMENT AND IS UNDER THE CULTIVATION OF DIFFERENT SUBJECTS OF THE STATE. SUBJECTS OCCUPY THE LAND AS TILLERS , CULTIVATORS , KASHTKARS, DAKHAIKARS, KHATEDARS AND KABZADARS. OCCUPANTS ARE THE PERPETUAL LESSEES. SUBJECTS SE LL THEIR LIMITED RIGHTS IN THE LAND AND THE OWNERSHIP ALWAYS REMAINS WITH THE STATE GOVT. CIRCLE RATES DECLARE BY THE GOVT, FOR THE PURPOSE OF LEVY OF STAMP DUTY ARE APPLICABLE TO TRANSFER OF SUCH RIGHTS IN LAND. 7 ITA NO. 5470 /DEL/201 7 STAMP DUTY RATES AS APPLICABLE IN RAJASTH AN ARE ENVISAGED IN SCHEDULE TO THE STAMP DUTY ACT. RATES OF STAMP DUTY APPLICABLE TO CONVEYANCE OF MOVABLE AND IMMOVABLE PROPERTY ARE GIVEN IN ARTICLE 21 OF THE SCHEDULE. IN CASE OF IMMOVABLE PROPERTY, THE RATES OF STAMP DUTY IS 11% OF MARKET VALUE. EXPLA NATION - 1 TO ARTICLE 21 READS 'FOR THE PURPOSE OF THIS ARTICLE AN AGREEMENT TO SELL AN IMMOVABLE PROPERTY OR AN IRREVOCABLE POWER OF ATTORNEY O R ANY OTHER INSTRUMENT EXECUTED IN THE COURSE OF CONVEYANCE OR LEASE E.G. ALLOTMENT LETTERS, PATTA, LICENSE ETC. S HALL, IN THE CASE OF TRANSFER OF THE POSSESSION OF SUCH PROPERTY BEFORE, AT THE TIME OF OR AFTER THE EXECUTION OF ANY SUCH INSTRUMENT, BE DEEMED TO BE A CONVEYANCE AND THE STAMP DUTY THEREON SHALL BE CHARGEABLE ACCORDINGLY:' RATES OF STAMP DUTY APPLICABLE TO LEASE OF IMMOVABLE PROPERTY ARE GIVEN IN ARTICLE 33 OF THE SCHEDULE TO STAMP DUTY ACT. WHERE THE LEASE PURPORTS TO BE A TERM IN EXCESS OF 20 YEARS OR IN PERPETUITY OR WHERE THE TERM IS NOT MENTIONED THE SAME DUTY AS ON CONVEYANCE (NO. 21) ON THE MARKET VALUE OF THE PROPERTY, WHICH IS THE SUBJECT MATTER OF LEASE. BY PERUSAL OF THE ABOVE, IT IS ABUNDANTLY DEAR THAT THE TRANSFER OF LEASEHOLD PROPERTY, WHICH IS IN PERPETUITY OR TERM IS NOT MENTIONED, THEN THE APPLICABLE RATES OF STAMP DUTY ARE SAME AS ON CONVEYANCE DEED/SALE DEED.' 8 ITA NO. 5470 /DEL/201 7 10. THE ASSESSEE DESCRIBING THE LEASE AS A PERPETUAL LEASE FURTHER REFERS TO THE STAMP DUTY APPLICABLE ON THE TRANSFER OF PROPERTY UNDER SUCH LEASE AS THE RATE APPLICABLE TO THE CONVEYANCE DEED/SALE DEED. THIS ALSO SHOWS THA T THE ASSESSEE IS TRANSFERRING THE LAND AS AN OWNER. 11. THE JUDGMENT OF THIS TRIBUNAL IN THE CASE OF SHRI KRISHAN DASS VS. DEPARTMENT OF INCOME TAX ITA NO. 915/DEL/2012 DEALT WITH A CASE WHERE LEASE WAS FOR A PERIOD OF 90 YEARS AND THE RIGHTS WERE TRANSF ERRED FOR THE REMAINING PERIOD OF 54 YEARS. SIMILARLY, IN THE CASE OF ATUL G. PURANIK VS. ITO ITA NO. 3051/MUM/2010 DATED 13.05.2011, THE LEASE PERIOD WAS FOR 60 YEARS. IN THE PRESENT CASE, THE FACTS ARE DIFFERENT IN AS MUCH AS THE LESSOR HAS ENTERED INTO A PERPETUAL LEASE WITH THE LESSEE/ASSESSEE. THOUGH THE REVENUE RECORDS SHOW THE STATE OF RAJASTHAN AS THE OWNER BUT SINCE THE LEASE IS PERPETUAL, THE SAME WOULD HAVE NO EFFECT ON TAXABILITY. THE ARGUMENT OF THE ASSESSEE THAT THE STATE OF RAJASTHAN HAS BEE N SHOWN AS THE OWNER IN THE REVENUE RECORDS IS OF NO SIGNIFICANCE FOR ADJUDICATION OF APPLICABILITY OF SECTION 50C AS THE PRESENT CASE IS OF A PERPETUAL LEASE DEED. WE , THEREFORE, HOLD THAT SECTION 50C IS APPLICABLE TO 9 ITA NO. 5470 /DEL/201 7 THE FACTS OF THE ASSESSEE AND UPHOLD THE ORDER PASSED BY THE AO. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 5470/DEL/2017 IS ALLOWED . THE ORDER IS PRO NOUNCED IN THE OPEN COURT ON 03 . 0 1 .201 8 . SD/ - [B.P. JAIN] ACCOUNTANT MEMBER DATED: 03 RD JANUARY , 201 8 VL/ COPY FORWARDED TO: 1 . ASSESSEE 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI