2025 (10) TMI 842 - AT - Income Tax

Section 50C's deeming rule covers only transfer of land or buildings, not leasehold rights as capital asset

ITAT MUMBAI - AT held that section 50C's deeming provision applies only to transfer of 'land or building or both' and does not extend to leasehold rights, ... Addition u/s 50C - what is transacted is leasehold rights in land and building, which is a distinct 'Capital Asset' - HELD THAT:- Deeming provision has been incorporated to substitute the value adopted or assessed or assessable by stamp valuation authority in place of consideration received or accruing as a result of transfer of land or building or both and in case the latter is lower than the former. From the language used in sub-section (1) of section 50C of the Act, it is clear that the value of land or building or both adopted or assessed or assessable by the stamp valuation authority shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such a transfer. Hon'ble Supreme Court in CIT v. Amarchand N. Shroff [1962 (10) TMI 51 - SUPREME COURT] considered the scope of a deeming provision and came to hold that it cannot be extended beyond the object for which it is enacted. In section 54D(1) of the Act, the 'capital asset' has been understood to be 'land or building or any right in land or building', thereby supporting the distinction sought to be canvassed before us. In contrast, section 50C(1) of the Act is worded only cover 'land or building or both' and does not refer to 'any right in land or building'. Thus, the expression 'land or building' in its coverage is quite distinct from the expression 'any right in land or building'. In our view, the legislature, in its wisdom, used the expression 'land or building or both' in section 50C(1) of the Act, as against the expression 'any right in land or building'. It is thus noted that, Parliament was aware of the distinction and has used differently between 'land or building' on one hand and 'or any rights in land or building' on the other. At this juncture it is apt to apply the legal maxim Expressio Unius Est Exclusio Alterius, meaning thereby, express mention of one implies the exclusion of another. This legal premise is supported by the decision of Hon'ble Supreme Court in the case of GVK Industries Ltd [2011 (3) TMI 1 - SUPREME COURT] It is clear that the mandate of section 50C of the Act extends only to a capital asset which is 'land or building or both'. Identical issue has been decided against the assessee in case of Vidarbha Veneer Industries Ltd. [2025 (4) TMI 545 - BOMBAY HIGH COURT] wherein the previous decisions in case of Green Field Hotel & Estates (P) Ltd [2016 (12) TMI 353 - BOMBAY HIGH COURT] has been considered. Following the ‘doctrine of Stare Decisis’ the decision of Hon’ble Bombay High Court [2016 (12) TMI 353 - BOMBAY HIGH COURT] being the latest decision on the issue, needs to be followed. Respectfully following the decision (supra) the view taken by Ld.CIT(A) is not found fault with - Decided against assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether failure of the Appellate Tribunal to consider the assessee's contention on non-applicability of Section 50C vitiates the tribunal's consideration of the appeal to that extent. 2. Whether Section 50C(1) of the Income-tax Act applies to a transfer of leasehold rights (i.e., 'any right in land or building') or is confined only to transfer of 'land or building or both'. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Procedural consideration: effect of non-consideration of specific submissions Legal framework: Principles governing appellate adjudication require that material contentions raised by a party be considered before disposal; recall and rehearing may cure earlier non-appearance-based dismissal. Precedent treatment: The Tribunal noted that the appeal earlier dismissed for non-appearance was recalled on affidavit and posted for hearing on merits; both sides were heard before adjudication. Interpretation and reasoning: The Tribunal examined the affidavit and the miscellaneous application, recalled the earlier dismissal, and proceeded to decide the appeal on its merits after hearing both sides; therefore the contention of non-consideration was remedied by the recall and fresh hearing. Ratio vs. Obiter: Ratio - where an earlier dismissal is recalled and the matter re-heard, any earlier non-consideration is cured; the Tribunal's subsequent merits adjudication is not vitiated by the prior procedural defect. Conclusions: The Tribunal proceeded on merits after recall; the ground asserting vitiation by earlier non-consideration does not sustain the appeal. Issue 2 - Applicability of Section 50C(1) to transfer of leasehold rights Legal framework: Section 50C(1) is a deeming provision that substitutes for the 'full value of the consideration' (for purposes of section 48) the value adopted/assessed/assessable by the stamp valuation authority where consideration on transfer of a capital asset 'being land or building or both' is less than such stamp value. Deeming provisions must be interpreted with regard to their object and limited to their legitimate field. Distinct statutory expressions (e.g., 'land or building' versus 'any right in land or building') indicate legislative intent. Precedent treatment (followed/distinguished): The Tribunal followed a later decision of the High Court which held that the word 'transfer' in Section 50C(1) must be given wide amplitude and that mode of holding (e.g., leasehold) does not necessarily exclude operation of Section 50C; accordingly that High Court decision was followed as the latest binding view of the High Court. The Tribunal distinguished a coordinate bench decision which had held Section 50C inapplicable to leasehold transfers, concluding that that decision did not address Section 2(14) in conjunction with Section 50C and was not good law in light of the High Court ruling. The Tribunal also relied on Supreme Court dicta restricting the reach of deeming provisions and on the maxim expressio unius est exclusio alterius to interpret differing statutory phrases. Interpretation and reasoning: The Tribunal analysed the language of Section 50C(1) and observed two features: (i) it is a deeming provision; (ii) it expressly mentions only 'land or building or both'. The Tribunal contrasted Section 50C(1) with other provisions (e.g., a provision addressing compulsory acquisition) which expressly refer to 'any right in land or building', thereby concluding that Parliament knew how to include 'rights' when intended. Applying the maxim expressio unius est exclusio alterius and authorities limiting the expansion of legal fictions beyond their object, the Tribunal concluded that Section 50C(1) in its terms extends only to capital assets that are 'land or building or both' and does not, by its plain language, extend to mere rights in land/building such as leasehold rights. However, the Tribunal further observed that a later decision of the High Court construed Section 50C broadly to include transfers where the land/building is held in leasehold and treated the mode of holding as not excluding the operation of Section 50C; following the doctrine of stare decisis, the Tribunal respectfully followed the later High Court decision and accepted its binding effect, thereby upholding the application of Section 50C in the present fact pattern. Ratio vs. Obiter: Ratio - Section 50C(1) is a deeming provision whose express language refers to 'land or building or both'; ordinarily that wording excludes transfer of mere rights unless Parliament so specifies. Obiter - observations on the comparative statutory expressions and on the application of expressio unius; application of High Court authority to override the plain-text distinction (treated as binding precedent rather than as obiter). Conclusions: On textual grounds, Section 50C(1) naturally applies to transfers of 'land or building or both' and does not explicitly cover transfers of 'any right in land or building' (such as leasehold rights). Notwithstanding that textual distinction, the Tribunal followed a later High Court decision which construed Section 50C to include transfers of land/building notwithstanding the mode of holding (including leasehold), and therefore upheld the application of Section 50C to substitute the stamp valuation authority's value for the consideration in computing capital gains in the present appeal. The grounds challenging the invocation of Section 50C were dismissed and the appeal was dismissed accordingly.