INDOGLASS P. LTD, MUMBAI V. ITO 5(2)(1), MUMBAI

ITA 5995/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7767 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 15-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Valuation report; Onus to prove
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI R.K. PANDA (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) ITA NO. 5995/MUM/2009 ASSESSMENT YEAR- 2006-07 M/S. INDOGLASS PVT. LTD., 202, ARUN CHAMBERS, TARDEO, MUMBAI-400 034 PAN-AAACI 0345K VS. THE ITO 5(2)(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI J.P. BAIRAGRA RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 15.9.2009 PASSED BY THE LD. CIT(A)--9 FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUND RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) CONFIRMING THAT PROVISIONS OF SEC 50C(2) ARE APPLIC ABLE TO THE APPELLANT COMPANY IN RESPECT OF THE TRANSFER OF THEIR LEASEHO LD RIGHT IN THE LAND AT DOMBIVILI OWNED BY THE MAHARASHTRA INDUSTRIAL DEVE LOPMENT CORPORATION (MIDC) AND FURTHER CONFIRMING THE ACTIO N OF THE AO IN NOT REFERRING THE VALUATION OF LEASE HOLD RIGHT OF THE APPELLANT COMPANY ON THE LAND TO THE VALUATION CELL OF THE DEPARTMENT A S PER THE PROVISIONS OF SUB SECTION (2) OF SECTION 50C OF THE I.T. ACT. ITA NO. 5995/M/09 2 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD TAKEN ON LEASE INDUSTRIAL LAND AT DOMBIVALI BEING PLOT NO. 5 IN IN DUSTRIAL AREA FROM MIDC DOMBIVALI VIDE AGREEMENT DATED 10.10.1968 FOR A PERIOD OF TEN YEARS. THE PERIOD OF LEASE WAS EXTENDED TO EIGHTY F IVE YEARS WITH EFFECT FROM 10.10.1978. DURING THE YEAR UNDER CONSIDERATIO N THE ASSESSEE COMPANY, WITH THE CONSENT AND APPROVAL OF MIDC, TRA NSFERRED THEIR LEASE RIGHTS TO M/S COSMO CHEMICALS PVT. LTD ON 12.4.2005 FOR A CONSIDERATION OF RS 8,72,900/- IN THE RETURN OF INCOME FILED ON 2 8.11.2006, THE ASSESSEE DECLARED CAPITAL LOSS OF RS 14,70,041/- FR OM THE TRANSFER OF LEASE RIGHTS WHICH WAS COMPUTED AS UNDER: SALE PROCEEDS 9,90, 109/- INDEXED COST OF ACQUISITION 24,60,150/- ---------------- CAPITAL LOSS 14 ,70,041/- ----------------- 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER FOUND THAT THE FAIR MARKET VALUE OF THIS LA ND AS ON THE DATE OF TRANSFER, AS PER RECORD OF STAMP VALUATION AUTHORIT IES IS RS. 1,10,70,500/- WHEREAS THE APPELLANT SHOWN THE CONSI DERATION FOR TRANSFER OF LEASE RIGHTS AT RS 8,72,900/- ONLY. THE ASSESSING OFFICER ASKED THE APPELLANT TO EXPLAIN WHY THE PROVISIONS OF SECT ION 50C OF THE INCOME TAX ACT SHOULD NOT BE APPLIED IN ITS CASE. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED TO THE ASSESSIN G OFFICER THAT IT HAS TAKEN THE LAND ON LEASE FROM MIDC AND IS NOT THE OW NER OF THE LAND. IT HAS TRANSFERRED ONLY LEASE RIGHT TO M/S COSMO CHEMI CALS PVT. LIMITED. THE APPELLANT CLAIMED THAT SINCE IT TRANSFERRED ONL Y LEASE RIGHTS AND THE LAND IS OWNED BY M/S MIDC THE PROVISION OF SECTION 50C OF THE INCOME TAX ACT ARE NOT APPLICABLE. HOWEVER THE ASSESSING O FFICER RELIED ON THE PROVISIONS OF SECTION 269UA(F) AND ALSO ON PROVISIO N OF SECTION 27(IIIB) OF ITA NO. 5995/M/09 3 THE INCOME TAX ACT TO HOLD THAT PROVISIONS OF SECT ION 50C WILL BE APPLICABLE EVEN WHERE THE APPELLANT HAS TRANSFERRED THE LEASE RIGHTS. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT AND COMPUTED THE CAPITAL GAIN OF THE APPELLANT AT RS 80,56,821/- BY TAKING THE SALE VALUE AT RS. 1,10,70,500/- . 5. AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE TH E LD. CIT(A). IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT SECTION 50C IS ONLY APPLICABLE ON THE TRANSFER OF A CAPITAL ASSET BEING LAND OR BUILD ING OR BOTH, WHEREAS PROVISIONS OF SECTION 269UA(1) ARE APPLICABLE TO AL L IMMOVABLE PROPERTIES WHETHER HELD AS CAPITAL ASSET OR AS STOCK IN TRADE AND ALSO TO ALL RIGHTS INCLUDED THEREIN. THE ASSESSEE THUS CONTENDED THAT PROVISIONS OF SECTION 50C ARE NOT APPLICABLE WHERE THERE IS TRANSFER OF L EASE RIGHTS. SIMILARLY THE ASSESSEE SUBMITTED THAT PROVISIONS OF SECTION 2 7(IIIB) ARE ALSO NOT APPLICABLE AS PROVISIONS OF THIS SECTION ARE APPLIC ABLE FOR COMPUTING INCOME FROM HOUSE PROPERTY. 6. THE ASSESSEE ALSO SUBMITTED THAT IN THE PRESENT CASE THE ASSESSING OFFICER SHOULD HAVE REFERRED THE MATTER TO THE VALU ATION OFFICER. ACCORDINGLY THE ASSESSEE SUBMITTED THAT DIRECTION M AY BE ISSUED TO THE ASSESSING OFFICER TO REFER THE MATTER TO THE VALUAT ION CELL FOR THE DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPE RTY AS ON THE DATE OF TRANSFER. 7. THE LD. CIT(A) VIDE LETTER DATED 7.7.2009 ASK ED THE ASSESSING OFFICER TO OBTAIN THE REPORT OF THE VALUATION OFFIC ER AND SUBMIT THE SAME BY 31.10.2009. HOWEVER IN ITS REMAND REPORT DATED 6 .8.2009 THE ASSESSING OFFICER SUBMITTED THAT CASE CAN BE REFERR ED TO THE VALUATION OFFICER ONLY WHERE THE APPELLANT CLAIMED BEFORE THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDING THAT THE FAIR MARKET VALU E OF THE PROPERTY IS LESS THAN FAIR MARKET VALUE ADOPTED BY STAMP VALUAT ION AUTHORITIES FOR THE PURPOSE OF LEVY OF STAMP DUTY. THE ASSESSING OF FICER SUBMITTED THAT ITA NO. 5995/M/09 4 THE ASSESSEE HAS NOT PRODUCED ANY VALUATION REPORT FROM THE REGISTERED VALUER IN SUPPORT OF ITS CLAIM THAT FAIR MARKET VAL UE OF THE LAND IS LESS THAN THE VALUES ADOPTED BY THE STAMP VALUATION AUTH ORITIES. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS MADE OUT CASE FOR REFERRING THE ISSUE TO THE VALUATION OFFICER. THE ASSESSING OFFIC ER FURTHER SUBMITTED THAT FRESH EVIDENCE CANNOT BE TAKEN ON THIS ISSUE. IT WAS FURTHER SUBMITTED BY THE ASSESSING OFFICER THAT PROVISIONS OF SECTION 50C(1) ARE APPLICABLE TO THE CASE OF THE ASSESSEE EVEN IF THER E IS SALE OF LEASE RIGHTS. 8. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE FACTS OF THE CASE AND LEGAL P OSITION IN THIS REGARD. I HAVE ALSO GONE THROUGH THE REPLY FIL ED BY THE ASSESSEE ON THIS ISSUE IN THE ASSESSMENT PROCEEDINGS. TOW IS SUES ARE ARISING IN THESE GROUNDS OF APPEAL (I) WHETHER THE PROVISIO NS OF SECTION 50C ARE APPLICABLE WHERE THERE IS TRANSFER OF LEASEHOLD RIGHTS AND (II) WHETHER THE APPELLANT HAS CLAIMED BEFORE THE ASSESS ING OFFICER THAT FAIR MARKET VALUE OF THE PROPERTY IS LESS THAN FAIR MARKET VALUE ADOPTED BY STAMP VALUATION AUTHORITIES FOR THE PURP OSE OF LEVY OF STAMP DUTY. THE LAND IN QUESTION WAS TAKEN ON LEASE BY M/S. IND O INDUSTRIAL ENTERPRISES ON 10.10.1968 FOR A PERIOD O F TEN YEARS. THESE LEASE RIGHTS WAS LATER ON TRANSFERRED TO THE APPELL ANT COMPANY VIDE AGREEMENT DATED 05.06.1973. THE PERIOD OF LEASE AGR EEMENT BETWEEN MIDC AND THE APPELLANT COMPANY WAS EXTENDED FOR A PERIOD OF 85 YEARS FROM 10.10.1978, WHICH WAS THE D ATE O EXPIRY OF OLD LEASE AGREEMENT. THE UNEXPIRED LEASE PERIOD WAS TRANSFERRED BY THE APPELLANT TO M/S. COSMO CHEMICALS PVT. LIMITED ON 16.12.72. IN THIS CASE THE LEASE PERIOD IS 85 YEARS AND WHEN LEA SE PERIOD IS 85 YEARS, IT CAN BE SAID THAT THE APPELLANT IS OWNER O F THE LAND. IT HAS THE RIGHT TO TRANSFER THE LEASE RIGHTS. THUS THE AP PELLANT IS ENJOYING ALL RIGHTS IN THE LAND EXCEPT THE LEGAL OWNERSHIP O F THE LAND STILL CONTINUES TO BE WITH MIDC. SINCE THE APPELLANT IS T HE OWNER OF THE LEASEHOLD RIGHTS AND NOT MERELY THE RIGHT TO USE TH E LAND, WHEN THE LEASEHOLD RIGHTS ARE TRANSFERRED IT CAN BE SAID THA T THE APPELLANT HAS TRANSFERRED LAND. IN VIEW OF THESE FACTS, IT IS HEL D THAT SINCE THE LEASE PERIOD IS A LONG PERIOD, THEREFORE, THE APPELLANT I S THE OWNER OF THE LAND AND ACCORDINGLY, PROVISIONS OF SECTIONS 50C AR E APPLICABLE TO THE CASE IN HAND. ITA NO. 5995/M/09 5 . NOW THE QUESTION COMES WHETHER THE APPELLANT HAS CLAIMED BEFORE THE ASSESSING OFFICER THAT THE VALUE ADOPTED BY STAMP VALUATION AUTHORITY FOR THE PURPOSE OF LEVY OF STAM P DUTY IS MORE THAN THE MARKET PRICE OF THE LAND. THE APPELLANT HA S FILED REPLY ON THIS ISSUE BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 28.11.2008. THE RELEVANT PARA OF THIS LETTER IS PARA 6.1. THIS PARA READS AS UNDER LONG TERM CAPITAL GAIN ON SALE OF LAND THE ASSESSEE COMPANY HAS GOT THE LEASE OF PLOT NO.5 IN DOMBIVLI INDUSTRIAL AREAS FROM MIDC VIDE INDENTURE OF LAND DT. 10.10.968. THE SAID LEASE HAS BEEN TRANSFERRED BY T HE ASSESSEE COMPANY VIDE TRIPARTITE AGREEMENT DATED 12.04.2005 TO M/S. COSMO CHEMICALS PVT. LTD. WE ARE ENCLOSING HEREWITH COPY OF THE SAID TRIPARTITE AGREEMENT, WHICH IS STAMPED AND REGISTER ED, ACCORDING TO WHICH IT IS VERY CLEAR THAT MIDC HAS AGREE TO TRANS FER THE DEED IN RESPECT OF THE SAID PLOT NO.5 IN DOMBIVLI INDUSTRIA L AREA IN FAVOUR OF COSMO CHEMICALS PVT. LTD. THE SAID LEASE IS TRANSFE RRED BY THE ASSESSEE COMPANY FOR A CONSIDERATION OF ` .8,72,900/- WHICH IS MENTIONED IN CLAUSE I OF THE AGREEMENT. WE ARE ENCLOSING HEREWITH PHOTOCOPY OF THE LEASE AG REEMENT WITH MIDC DATED 10.10.1968 UNDER WHICH LEASE WAS GR ANTED TO A PARTNERSHIP FIRM M/S. INDO INDUSTRIAL ENTERPRISES W HICH WAS TRANSFERRED IN THE NAME OF THE ASSESSEE COMPANY ON 16.12.1972. THESE FACTS ARE ALSO MENTIONED IN THE TRANSFER OF L EASE AGREEMENT ENTERED INTO BY THE ASSESSEE COMPANY WITH M/S. COSM O CHEMICALS PVT. LTD. WHICH IS REGISTERED ON 12.04.2005. FURTHER, IN THE SAID TRANSFER OF LEASE AGREEMENT, T HE REGISTARS OFFICE HAS TAKEN THE MARKET VALUE AT ` .1,10,70,500/- AND ACCORDINGLY, THE TRANSFEREE OF THE LEASE HAS PAID THE STAMP DUTY OF ` .5,53,529/-. SINCE THE STAMP OFFICE HAS TAKEN THE TOTAL VALUE OF THE LAND, THEY HAVE TAKEN THE HIGHER PRICE FOR LEVYING THE STAMP D UTY. HOWEVER, THE ASSESSEE COMPANY IS ONLY A LESSEE OF THE LAND OWNED BY M.I.D.C., WHICH IS, WITH THE PERMISSION OF M.I.D.C., TRANSFER RED TO M/S. COSMO CHEMICALS PVT. LIMITED AND THEREFORE, THE ASSESSEE HAS RECEIVED A SUM OF RS. .8,72,900/- ONLY FOR TRANSFER OF THE LEASE RIGHT OF THE LAND OWNED BY M.I.D.C. IN FAVOUR OF M/S. COSMO CHEMICALS PVT. LIMITED. IN VIEW OF THE ABOVE, THE PROVISIONS OF SEC.50C ARE NOT APPLICABLE IN THIS CASE. .ON GOING THROUGH THIS PARA, IT IS FOUND THAT THE A PPELLANT NEVER CLAIMED BEFORE THE ASSESSING OFFICER THAT THE FAIR MARKET ITA NO. 5995/M/09 6 VALUE OF THE LAND IS LESS THAN THE FAIR MARKET VALU E ADOPTED BY THE STAMP VALUATION AUTHORITIES FOR THE PURPOSE OF LEVY OF STAMP DUTY. THEREFORE, THE CLAIM OF THE APPELLANT M ADE IN THE WRITTEN SUBMISSION DATED 10.04.2009 THAT IT HAD CLA IMED BEFORE THE ASSESSING OFFICER THAT, EVEN IF THE PROV ISIONS OF SECTION 50 C ARE APPLICABLE, THE VALUE ADOPTED BY T HE STAMP OFFICE IS HIGHER THAN THE FAIR MARKET VALUE OF THE LAND ON THE DATE OF TRANSFER, IS NOT CORRECT. IT WAS ONLY ON TH E BASIS OF INCORRECT SUBMISSIONS MADE BY THE AUTHORIZED REPRES ENTATIVE OF THE APPELLANT IN THE APPELLANT IN THE APPELLATE PROCEEDING THAT THE ASSESSING OFFICER WAS DIRECTED TO OBTAIN R EMAND REPORT AND SUBMIT THE SAME TO THIS OFFICE VIDE LETT ER DATED 07.07.2009. SINCE ASSERTION MADE BY THE APPELLANT, THAT IT CLAIMED BEFORE THE ASSESSING OFFICER THAT FAIR MARK ET VALUE OF THE PROPERTY IS LESS THAN THE FAIR MARKET VALUE ADO PTED BY THE STAMP VALUATION AUTHORITIES, IS NOT CORRECT, THE AS SESSING OFFICER WAS JUSTIFIED IN NOT REFERRING THE MATTER T O THE VALUATION OFFICER FOR DETERMINATION OF FAIR MARKET VALUE OF T HE LAND AS ON THE DATE OF TRANSFER TO THE VALUATION OFFICER. . IT IS FURTHER HELD THAT THE APPELLANT CAN NOT CLA IM BEFORE THE ASSESSING OFFICER THAT FAIR MARKET VALUE OF THE LAN D IS LESS THAN THE FAIR MARKET VALUE ADOPTED BY THE STAMP VALUATIO N AUTHORITIES WITHOUT FILLING ANY EVIDENCE IN THIS RE GARD. IN THIS CASE NOT ONLY THE APPELLANT HAS NOT MADE ANY CLAIM BEFORE THE ASSESSING OFFICER BUT IT IS ALSO FOUND THAT NO EVID ENCE IN THIS REGARD WAS FURNISHED. IN THIS REGARD IT IS USEFUL T O REFER TO THE DECISION OF ITAT DELHI BENCH IN THE CASE OF RAVIKAN T VS. ITO IN ITA NO.3671 OF 2006. IN THIS CASE WHILE INTERPRETIN G THE PROVISIONS OF SECTION 50C, IT WAS HELD THAT THE NO RMAL RULE IS THAT WHERE THE STAMP DUTY VALUE IS STATED TO BE HIG HER THAN THE STATED CONSIDERATION IN THE TRANSFER DEED, THE SAME IS TO BE ADOPTED FOR THE PURPOSE OF CAPITAL GAIN. THE E XCEPTION IS THAT IN CASE ASSESSEE CAN DEMONSTRATE THAT THE FAIR MARKET VALUE IS LESS THAN THE STAMP DUTY VALUATION THEN FA IR MARKET VALUE IS TO BE ADOPTED. IN THE SAID CASE IT WAS HEL D THAT WHERE THE STAMP DUTY VALUATION IS MORE THAN THE STATED CONSIDERATION, THEN THE ONUS TO PROVE THAT THE FAIR MARKET VALUE IS LESS THAN THE STAMP DUTY VALUATION THEN FA IR MARKET VALUE IS TO BE ADOPTED. IN THE SAID CASE IT WAS HEL D THAT WHERE THE STAMP DUTY VALUATION IS MORE THAN THE STATED CONSIDERATION, THEN THE ONUS TO PROVE THAT THE FAIR MARKET VALUE IS LESS THAN THE VALUATION ADOPTED BY THE STA MP VALUATION AUTHORITIES SHIFTS TO THE ASSESSEE. AS LO NG AS ASSESSEE CAN DISCHARGE THIS ONUS, EVEN UNDER THE SC HEME OF SECTION 50C OF THE INCOME TAX ACT STATED CONSIDERAT ION CANNOT ITA NO. 5995/M/09 7 BE DISTURBED. THUS AS PER DECISION OF THE ITAT DELH I BENCH ONUS IS ON THE APPELLANT TO DEMONSTRATE THAT VALUE ADOPTED BY THE STAMP VALUATION AUTHORITIES EXCEEDS THE FAIR MA RKET VALUE OF THE ASSET ON THE DATE OF TRANSFER. IN THIS PRESE NT CASE THE APPELLANT FILED ON EVIDENCE TO SHIFT THIS ONUS ON T HE ASSESSING OFFICER. . IN VIEW OF THE ABOVE FACTS, IT IS HELD THAT ASSES SING OFFICER WAS JUSTIFIED IN NOT REFERRING THE CASE TO THE VALUATIO N OFFICER AS THE APPELLANT HAS NOT MADE ANY CLAIM BEFORE THE ASSESSI NG OFFICER UNDER SECTION 50C(2) OF THE INCOME TAX ACT. ACCORDI NGLY, THE ASSESSING OFFICER HAS RIGHTLY ADOPTED THE FAIR MARK ET VALUE TAKEN BY THE STAMP VALUATION AUTHORITIES FOR THE PU RPOSE OF LEVY OF STAMP DUTY. THE ACTION OF THE ASSESSING OFF ICER IS UPHELD. THESE GROUNDS OF APPEAL ARE NOT ALLOWED. 9. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US 10. THE LD. COUNSEL FOR THE ASSESSEE SHRI J.P. BAIR AGRA SUBMITTED AS FOLLOWS: FROM THE PLAIN READING OF SEC.50C(1), IT IS CRYSTAL CLEAR THAT THE SAID SECTION REFERS TO CAPITAL ASSET BEING LAND OR BUILDING OR BOTH. IN THE CASE UNDER CONSIDERATION, THERE IS TRANSFER OF LEASE RIGHTS THOUGH THAT IS A CAPITAL ASSET BUT NOT A CAPITAL AS SET, BEING LAND OR BUILDING OR BOTH. THEREFORE, IT IS SUBMITTED THAT S EC.50C IS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERA TION. IN SUPPORT OF OUR THESE ARGUMENTS, WE RELY UPON THE DECISION OF T HE MUMBAI ITAT IN THE CASE OF SMT. KISHORE SHARAD GAITONDE DATED 2 7-11- 2009 (COPY ENCLOSED AT PARA NOS. 34-38 OF THE PAPER BOOK) WHEREIN IT WAS HELD SEC.50C IS APPLICABLE TO A CAPITAL ASSET B EING LAND OR BUILDING OR BOTH AND IT DOES NOT APPLY TO A CASE OF TRANSFER OF TENANCY RIGHTS. 11. HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS H ELD, SINCE THE LEASE PERIOD IS FOR A LONG PERIOD, IT CAN BE SAID THAT TH E ASSESSEE IS THE OWNER OF THE LAND AT PLOT NO.5. IT IS SUBMITTED THAT THIS ST AND OF LD.CIT(A) IS FALLACIOUS BECAUSE OF THE FOLLOWING REASONS :- ITA NO. 5995/M/09 8 (A) AS HAS BEEN NOTED BY THE AO IN PARA 3.2 OF HIS ORDE R, THE LEASE RIGHTS IN THE SAID PLOT OF LAND WERE TRANSFER RED BY A TRIPARTITE AGREEMENT DATED 12-04-2005 (COPY AVAILAB LE AT PAGE NOS. 13-33 OF THE PAPER BOOK) BETWEEN MIDC, M/ S. COSMO CHEMICALS PVT. LTD. AND THE ASSESSEE. IN THIS AGREEMENT, MIDC WAS CALLED THE LESSOR AND M/S. CO SMO CHEMICALS PVT. LTD. WAS CALLED THE LESSEE. THE AS SESSEE WAS CALLED ONLY A CONFIRMING PARTY IN THE SAID AGRE EMENT. IF THE ASSESSEE HAD BEEN THE OWNER OF THE SAID PLOT OF LAND, (AS HAS BEEN HELD BY THE CIT(A), IT WOULD HAVE STRAIGHT AWAY TRANSFERRED THE LEASE RIGHTS TO M/S.COSMO CHEMICALS PVT. LTD. BY A BILATERAL AGREEMENT AND THERE WAS NO NEED TO INVOLVE THE MIDC AND MAKING THE TRIPARTITE AGREEMEN T TO TRANSFER THE LEASE RIGHTS. (B) THE VERY FACT THAT THE TRANSFEREE HAD TO PAY A SUM OF RS. .8,72,900/- TO MIDC TOWARDS DIFFERENTIAL PREMIUM FO R THE SAID LEASE TRANSFER OF THE PLOT OF LAND AS AGAINST RS. 9,90,109/- PAID TO THE ASSESSEE, SHOWS THAT THE ASS ESSEE CANNOT BE SAID TO BE THE FULL FLEDGED OWNER OF THE PLOT OF LAND. THE OWNER WAS ONLY MIDC AND IN THE SAID TRIPARTITE AGREEMENT, MIDC WAS THE LESSOR AND M/S. COSMO CHEMI CAL PVT. LTD. WAS THE LESSEE. THIS AGREEMENT ESTABLISHE S THAT IT WAS ONLY A CASE OF TRANSFER OF LEASE RIGHTS FROM TH E ASSESSEE TO M/S. COSMO CHEMICALS PVT. LTD. AND THAT IS WHY I N THE SAID TRIPARTITE AGREEMENT, THE ASSESSEE WAS MADE ON LY A CONFIRMING PARTY. 12. (I) THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMI TTED AS FOLLOWS: ITA NO. 5995/M/09 9 THE REVENUE AUTHORITIES HAVE REFERRED TO THE DEFINI TION OF TRANSFER IN RELATION TO IMMOVABLE PROPERTIES AS LAID DOWN IN SEC.269UA(F) TO HOLD THAT THE ASSESSEE COULD BE CALLED THE OWNER OR THE DEEMED OWNER OF THE SAID PLOT OF LAND, THE LEASE PERIOD BE ING MORE THAN 12 YEARS. IN THIS RESPECT, WE SUBMIT THAT THE DEFINITI ON OF TRANSFER AS PER SEC.269U/A(7) IS NOT APPLICABLE IN THIS CASE AS SEC.50C IS MUCH NARROWER THAN THE PROVISIONS OF CHAPTER XX-C. IT MAY BE NOTED THAT CHAPTER XX-C DEALS WITH ALL IMMOVABLE PR OPERTIES WHETHER HELD AS STOCK-IN-TRADE OR AS CAPITAL ASSETS AND ALSO INCLUDES ALL RIGHTS IN OR WITH RESPECT TO THE LAND OR BUILDING WHEREAS SEC.50C IS APPLICABLE ONLY TO TRANSFER TO C APITAL ASSET BEING LAND OR BUILDING OR BOTH AND ACCORDINGLY, SC. 50C DOES NOT COVER DEVELOPMENT RIGHTS, LEASE OR TENANCY RIGHTS A TTACHED TO THE LAND OR BUILDING. (II) THE AO HAD ALSO RELIED UPON SEC.27(IIIB). IN THIS R EGARD, WE SUBMIT THAT SEC.27(IIIB) IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE AS THIS SECTION IS APPLICABLE FOR THE LIMITED PURPOSE OF COMPUTING THE INCOME FROM HOUSE PROPERTY AS PER THE PROVISIONS OF SECTIONS 22 TO 26 OF THE I.T. ACT. (III) CAPITAL ASSET HAS BEEN DEFINED IN SEC.2(14) OF TH E I.T. ACT, ACCORDING TO WHICH RIGHT OF LEASE IS NOT INCLUDED I N THAT. SEC.50C IS, THEREFORE, NOT APPLICABLE ON THE TRANSFER OF LE ASE RIGHT PARTICULARLY WHEN SEC.50C REFERS TO CAPITAL ASSET B EING LAND OR BUILDING OR BOTH. 13. IN VIEW OF THE ABOVE ARGUMENTS, WE SUBMIT THAT THE PROVISIONS OF SEC. 50C ARE NOT APPLICABLE ON THE TRANSFER OF LEAS E HOLD RIGHTS AS THE ITA NO. 5995/M/09 10 SAME IS APPLICABLE ON THE TRANSFER OF CAPITAL ASSET S BEING LAND OR BUILDING OR BOTH. 14. THE LD. COUNSEL CHALLENGED IN GROUND NO. 3, THE LD. CIT(A)S ORDER IN CONFIRMING THE ACTION OF THE AO IN NOT REFERRING THE VALUATION OF LEASE HOLD RIGHT OF THE ASSESSEE COMPANY ON THE PLOT OF L AND TO THE VALUATION CELL OF THE DEPARTMENT AS PER THE PROVISIONS OF SEC .50C OF THE I.T. ACT. 15. IT WAS SUBMITTED BY THE LD. COUNSEL THAT THOUGH IN LETTER DATED 28.11.2008 THE ASSESSEE HAD NOT CLAIMED THAT THE FA IR MARKET VALUE OF THE PROPERTY WAS LESS THAN ITS STAMP DUTY VALUATION BUT THE ASSESSEE DID MAKE SUCH CLAIM BEFORE THE AO ORALLY AS IS EVIDENCE D BY THE FOLLOWING OBSERVATION MADE BY THE AO ON PAGE 4 OF HIS ORDER - THEREFORE, THE ASSESSEES CONTENTION IS NOT ACCEPT ABLE FOR ADOPTING THE SALE CONSIDERATION AT A LOWER RATE THA N THE STAMP DUTY VALUATION FOR THE PURPOSE OF CAPITAL GAIN WORKING. 16. IT WAS FURTHER SUBMITTED THAT TWO CONDITIONS LA ID DOWN IN S.50C(2) HAVING BEEN SATISFIED BY ASSESSEE, AO WAS BOUND TO REFER THE PROPERTY FOR VALUATION TO THE VALUATION CELL OF THE DEPARTMENT. IT IS SUBMITTED THAT SUB-SEC. (2) OF S.50 ONLY LAYS DOWN THAT ASSESSEE I S REQUIRED TO CLAIM BEFORE AO THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROP ERTY ON THE DATE OF TRANSFER AND THIS SUB-SECTION NOWHERE STATES THAT T HE ASSESSEE IS REQUIRED TO FILE ANY EVIDENCE IN THIS REGARD OR, IN OTHER WORDS, IT HAS TO DEMONSTRATE BEFORE THE AO THAT FAIR MARKET VALUE OF THE PROPERTY IS LESS THAN ITS STAMP DUTY VALUATION. ITA NO. 5995/M/09 11 17. WE HEARD BOTH THE PARTIES. IN THE CASE OF MEGHR AJ BAID VS ITO (114 TTJ 841) THE JODHPUR BENCH OF ITAT HAS HELD THAT TH E WORD `MAY IN SUBSECTION (2)(A) SHOULD BE READ AS `SHALL. THE AO DOES NOT HAVE THE OPTION NOT TO REFER TO THE VALUATION OFFICER. 18. SUB SECTION (2)(A) TO SEC 50C, ONLY REQUIRES TH AT THE ASSESSEE SHOULD CLAIM THAT THE VALUE ADOPTED BY THE STAMPING AUTHORITY IS MORE THAN THE FAIR MARKET VALUE. THE SECTION DOES NOT RE QUIRE THE ASSESSEE TO PROVE OR SUBSTANTIATE THIS CLAIM .THEREFORE ONCE TH E ASSESSEE CLAIMS THAT THE VALUE ADOPTED BY THE STAMPING AUTHORITY IS HIGH ER THAN THE FAIR MARKET VALUE, THE AO SHOULD REFER TO THE VALUATION OFFICER TO VERIFY WHAT IN HIS OPINION THE FAIR MARKET VALUE OF THE PROPERT Y TRANSFERRED IS. THE ISSUE BEFORE US IS WHAT MANNER THE ASSESSEE SHOULD CLAIM, BEFORE THE ASSESSING OFFICER, THAT THE VALUE ADOPTED BY THE ST AMP VALUE AUTHORITIES IS MORE THAN THE FAIR MARKET VALUE. SHOULD HE SAY S O IN SO MANY WORDS OR CAN IT BE INFERRED FROM HIS ACTION. IN OUR OPINI ON IF THE SAME CAN BE INFERRED BY THE OTHER SUBMISSIONS OF THE ASSESSEE, THE AO SHOULD REFER TO THE VALUATION OFFICER. 19. IN THE CASE OF B.N. PROPERTIES HOLDINGS PVT. LT D. VS ACIT ITAT CHENNAI BENCH 6 ITR 01 (CHENNAI, IT WAS HELD THAT THE FAILURE OF THE AO TO REFER VALUATION TO THE DEPARTMENTAL VALUATION OF FICER DEFINITELY PREJUDICED THE ASSESSEE TO ITS DETRIMENT AND ALSO T OOK AWAY A VALUATION RIGHT VESTED IN THE ASSESSEE UNDER THE STATUTE. TH E ORDERS OF THE LOWER AUTHORITIES WERE SET ASIDE AND THE MATTER WAS REMIT TED TO THE AO WITH A DIRECTION TO REFER THE VALUATION OF THE PROPERTY TO THE VALUATION OFFICER IN ACCORDANCE WITH SEC. 50C(2) OF THE ACT . 20. FURTHER WHEN THE LD.CIT(A) HAS, IN HIS REMAND R EPORT, ASKED THE AO TO REFER THE MATTER TO THE VALUATION OFFICER, TH E AO SHOULD HAVE DONE ITA NO. 5995/M/09 12 SO AND NOT RAISED TECHNICAL OBJECTIONS. WE ARE THER EFORE OF THE OPINION THAT THE AO SHOULD HAVE REFERRED TO THE VALUATION O FFICER TO DETERMINE THE FAIR MARKET VALUE OF THE RIGHTS TRANSFERRED. IN THE CIRCUMSTANCES, WE DEEM IT FIT TO SET ASIDE THE ENTIRE MATTER TO THE F ILE OF THE ASSESSING OFFICER TO REDO THE MATTER DENOVO AFTER REFERRING THE MATTE R TO THE DISTRICT VALUATION OFFICER FOR DETERMINING THE FAIR MARKET V ALUE OF CONSIDERATION FOR ASSIGNMENT OF LEASE HOLD RIGHTS. WE ARE NOT DEC IDING ANY ISSUE AND IT IS OPEN TO THE ASSESSEE TO RAISE ALL ISSUES INCLUDI NG THE LEGAL ONE THAT PROVISIONS OF SEC 50C IS NOT APPLICABLE, BEFORE THE ASSESSING OFFICER. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2011 SD/- SD/- (R.K. PANDA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 31 ST MARCH, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 5995/M/09 13 DATE INITIALS 1 DRAFT DICTATED ON: 2 4 .0 3 .2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 9 .0 3 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______