2020 (12) TMI 114 - AT - Income Tax

Tribunal rules in favor of appellant, section 50C not applicable to leasehold transfer

The tribunal partly allowed the appeal, ruling that section 50C of the Income Tax Act does not apply to the transfer of leasehold rights, based on legal ... Short tern capital gain - leasehold right transferred by the assessee as per registered agreement to sale to one Smt. Deepika Kapoor - applicability of provisions of section 50C - According to the assessee leasehold rights are neither land or building or both - HELD THAT:- On careful perusal of the fact it is apparent that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Bombay High Court CIT Vs. Greenfield Hotels and Estates Pvt. Ltd [2016 (12) TMI 353 - BOMBAY HIGH COURT] wherein held that provisions of section 50C will not be applicable while computing the capital gain on transfer of leasehold rights in land and plot. The issue is also covered in favour of the assessee by the decision of the coordinate bench in case of Ritz Suppliers Pvt. Ltd [2020 (1) TMI 726 - ITAT KOLKATA], Pyaribai K Jain [2019 (2) TMI 1055 - ITAT MUMBAI] and Kencast Pvt. Ltd [2015 (4) TMI 588 - ITAT PUNE]. In view of the above binding precedents we allow ground No. 2 of the appeal which challenges that provision of section 50C of the Act do not apply on transfer of leasehold right in plot of land and direct the ld AO to delete the addition - Decided in favour of assessee. Issues:1. Application of section 50C of the Income Tax Act on transfer of leasehold land.2. Validity of the assessment order passed under section 143(3) of the Act.3. Determination of short term capital gain and addition made by the assessing officer.Issue 1: Application of Section 50C on Transfer of Leasehold LandThe appellant contended that section 50C does not apply to the transfer of leasehold rights, arguing that leasehold rights are distinct from land or building. Citing the decision of the Hon'ble Bombay High Court in CIT Vs. Greenfield Hotels and Estates Pvt. Ltd, it was established that section 50C does not apply to the transfer of leasehold rights. The appellant further supported their argument with precedents from other cases. The tribunal upheld the appellant's contention, directing the assessing officer to delete the addition made under section 50C of the Act, thereby allowing ground No. 2 of the appeal.Issue 2: Validity of Assessment OrderThe appellant challenged the assessment order passed under section 143(3) of the Act, contending that it was bad in law. However, the tribunal dismissed this ground as being general in nature, without delving into the specifics of the challenge.Issue 3: Determination of Short Term Capital GainThe assessing officer substituted the sale consideration with the stamp duty valuation under section 50C, resulting in a higher short term capital gain assessment than declared by the appellant. The tribunal's decision on Issue 1 rendered the discussion on this issue moot, as the addition made under section 50C was directed to be deleted. Consequently, the tribunal did not adjudicate on the merit of the addition to the short term capital gain.In conclusion, the tribunal partly allowed the appeal of the assessee, primarily on the grounds related to the non-applicability of section 50C on the transfer of leasehold rights. The assessment order was not challenged on specific legal grounds and the determination of short term capital gain was impacted by the decision on Issue 1. The tribunal's detailed analysis and reliance on legal precedents ensured a fair and just decision in favor of the appellant.