TaxTMI 
TaxTMI 
2016 (1) TMI 486
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....cts by holding that the lease right had been enjoyed by the assessee till 27.10.2006 (Date of Transfer) and after that the lease right were transferred to M/s Med Sassomeccanica (I) Pvt. Ltd. for remaining period of lease. 4. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts by holding that section 50C of the I.T. Act, 1961 is related only to transfer of capital assets and not to the transfer of lease hold right in capital assets. 5. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts by holding that the property so transferred is not capital asset as per the provision of the I.T. Act, 1961. 6. That the order of the Ld. CIT (A)-II, Kanpur dated 21.12.2012 needs to be quashed and the order passed by the Assessing Officer dated 23.12.2010 be restored. 7. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so. 2. The assessee has also filed cross objection assailing the validity of reopening of the assessment. The cross objection is filed late by 203 days, for which app....
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....he property in question because the assessee had no absolute right to sell the impugned property. He further placed reliance upon the judgment of the Hon'ble jurisdictional High Court in the case of Narendra Dhar vs. State of UP & Others, in which it is held that the market value cannot be determined for the purposes of stamp duty in case of transfer of lease by way of assignment. He has further placed reliance upon the order of the Kolkata Bench of the Tribunal, in which it is held that the transfer of leasehold rights, denoted as sale agreement, cannot qualify for sale of property. Hence provisions of section 50C of the Act are not applicable to the instant case involving transfer of leasehold rights. The ld. CIT(A) re-examined the claim of the assessee and being convinced with the explanations furnished by the assessee, held that on transfer of leasehold rights, the provisions of section 50C of the Act cannot be invoked. The relevant observations of the ld. CIT(A) are extracted hereunder for the sake of reference:- "6.3- I have considered the submissions made, perused the material on record and I have gone through the deed dated 27- 10-2006 which is referred to in t....
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....erty hereby assigned for the remainder terms of the lease or as may be extended from time to time and transferor has delivered actual physical vacant possession over the said property to the transferee and who are now entitled to use, possess and enjoy and occupier the same as own property in any way wise or manner." 6.6- Likewise condition No. 2 and 3 of the aforesaid deed dated 27-10-2006 covenant transfer of lease hold rights. In condition No. 7 the transferee M/s. Ved Sassomeccanica (I) Pvt. Ltd. declares and covenants that the transferee shall abide by all terms and conditions of the original lease deed dated 27-9-1984 duly registered on 28-9-1984 executed by K.D.A.. Kanpur. in favour of appellant (Transferor). 6.7- It is abundantly clear from the undisputed documents, namely- the deed dated 27-10-2006 (supra) read with lease deed dated 27-9-1984 executed by Kanpur Development Authroity, Kanpur, in favour of Sri Hari Om Supta (the appellant) that the appellant was a lessee in the properties in question and the appellant transferred lease hold rights in favour of M/s. Ved Sassomeccanica (I) Pvt. Ltd. There is no dispute of this aspect of the matter, yet the A.....
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....tal assets (properties in question), hence the lease hold rights in such capital asset cannot be equated with a capital asset. On perusal of case laws (supra), I, find justification in the appellant's contention and accordingly addition made by the Assessing Officer u/s.50C is hereby deleted." 7. Aggrieved, the Revenue is in appeal before the Tribunal and placed heavy reliance upon the order of the Assessing Officer; whereas the ld. counsel for the assessee has invited our attention to the fact that the assessee had agreed to sell the property initially to Shri. Monu Dua under distress, as he was not in a position to repay the loan obtained from the SBI, IFB, Kanpur against equitable Mortgage on the property in question. In order to pay the bank dues, the assessee approached one Shri. Monu Dua, who offered the assessee a sum of Rs. 45 lakhks and thereafter agreement to sell was executed in respect of the property in question. In sale agreement, there was a specific clause that the property would either be sold to Shri. Monu Dua or to any other person at his instance. Thereafter, a sale deed was executed in favour of M/s. Ved Sassomeccanica (I) Pvt. Ltd. at the instance of Sh....
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....ined the other aspects of invocation of provisions of section 50C of the Act relating to leasehold rights. The issue was examined by different Benches of the Tribunal in a number of cases referred to by the assessee, in which the Tribunal has held that the provisions of section 50C of the Act cannot be invoked in transfer of leasehold rights. 10. In the case of Kancast Pvt. Ltd. vs. Income Tax Officer, Pune (supra), the Pune Bench of the Tribunal has elaborately discussed the issue in the light of various judicial pronouncements and has categorically held that section 50C of the Act does not come into operation in transfer of leasehold rights. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:- 9. We have carefully considered the rival submissions. Section 50C of the Act provides that if the consideration received or accruing is less than the value adopted or assessed or assessable by the stamp valuation authority of the State Government for such transfer then the value so adopted or assessed or assessable shall be deemed to be the full value of consideration and the capital gains will be computed accordingly. The phraseology of....
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....e of the aforesaid provisions, it was "not necessary to mention 'rights in land or building' specifically u/s 50C of the Act also". 11. In our considered opinion, the point made by the CIT(A) is quite fallacious. Firstly, it has to be understood that the meaning of the expression "immovable property" contained in section 269UA(d) of the Act has been referred to in section 2(47) of the Act only in relation to sub-clause (v) and (vi) thereof. Secondly, from the meaning of expression "immovable property" contained in section 269UA(d) of the Act, the only thing that can be inferred is that even leasehold rights in land is a capital asset. However, the said inference does not justify the inclusion of a transaction involving transfer of leasehold rights in land within the purview of section 50C of the Act. Quite clearly, section 50C of the Act applies only to capital asset being land or building or both. It does not apply to leasehold rights in the land or building. The stand of the CIT(A) that it was not necessary to mention 'rights in land or building' specifically in section 50C of the Act, in our view, is quite misconceived. 12. Apart from the aforesaid discussion, ....