TaxTMI 
TaxTMI 
2026 (1) TMI 39
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....ee, an individual, filed his return of income for A.Y. 2011-12 on 30.06.2011 declaring total income of Rs. 4,70,660/-, which was processed under section 143(1) of the Act. Subsequently, based on information received from the Income Tax Officer (International Taxation)-4(1), Mumbai, the Assessing Officer recorded reasons to believe that income chargeable to tax had escaped assessment. The basis of such belief was that the assessee had sold his rights in immovable property for a consideration of Rs. 28,00,000/- vide registered deed dated 09.01.2010, whereas the stamp duty valuation of the said property was Rs. 1,11,07,000/- as on the date of registration i.e. on 03,08.2010.Accordingly, notice under section 148 of the Act was issued on 07.02.2014. 3. Before the Assessing Officer, it was submitted that the assessee was holding 20 percent undivided share along with his four brothers in an ancestral family trust property situated at Colaba, Mumbai, since 10.02.1977.Out of his 20 percent share, the assessee assigned 10 percent undivided share in the said property to his nephew, Shri Nikhil J. Merchant, for a consideration of Rs. 28,00,000/-, vide registered deed dated 09.01.2010.The As....
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....e assignment of 10 percent undivided share amounted to transfer of property itself and not merely transfer of rights. The Assessing Officer held that the decision relied upon by the assessee in the case of Anil G. Puranik was distinguishable on facts and that section 50C was squarely applicable. Accordingly, the Assessing Officer computed long-term capital gains at Rs. 51,37,000/- after allowing exemption under section 54F of Rs. 31,70,000/-, and completed the assessment under section 143(3) read with section 147 of the Act. Penalty proceedings under section 271(1)(c) were also initiated. 8. The assessee preferred an appeal before the CIT(A). Before the Ld. CIT(A), the assessee reiterated his submissions regarding non-applicability of section 50C and also raised objections to the reopening of assessment. 9. The Ld. CIT(A) observed that although section 50C refers to transfer of a capital asset being land or building or both, the scope of the provision has been expansively interpreted by the jurisdictional Bombay High Court. Placing reliance on the decision of the Hon'ble Bombay High Court in Vidharbha Veneer Industries Ltd. (In Liquidation) v. ITO (ITA No. 34 of 2022), the Ld....
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.... not giving deduction of indexed cost of acquisition as determined by the DVO from the of the capital gains working. 4. The appellant craves to leave, add, amend or alter the grounds of appeal. 13. During the course of hearing, the learned Authorised Representative (AR) of the assessee invited our attention to the notice issued under section 148 of the Act and submitted that the same was issued in a casual manner, without even mentioning the jurisdiction of the concerned Commissioner and merely on the basis of borrowed satisfaction. However, the learned Authorised Representative fairly submitted that she does not wish to press the first legal ground challenging the validity of reopening under section 147 of the Act. 14. On the merits, the learned AR submitted that the assessee had not transferred land or building or both. What was transferred under the registered assignment deed was only the life interest of the assessee in the trust properties. The deed repeatedly uses the expressions "life interest", "to have and to hold the same" and "during his lifetime", which clearly establishes that the ownership of the land and building continued to vest in the trust and was ....
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....the above, the learned AR submitted that the addition sustained under section 50C is unsustainable in law and on facts and deserves to be deleted in entirety. 20. The learned Departmental Representative, on the other hand, relied upon the orders of the lower authorities. 21. We have carefully considered the rival submissions, examined the orders of the lower authorities and perused the material placed on record, including the registered assignment deeds placed at page nos. 40, 91 and 92 of the paper book, the report of the Departmental Valuation Officer placed at page no. 34 of the paper book, and the judicial precedents relied upon by both the parties. 22. At the outset, it is noted that during the course of hearing, the learned Authorized Representative of the assessee fairly submitted that he does not wish to press the first legal ground challenging the validity of reopening under section 147 of the Income-tax Act, 1961. In view of the said submission, the ground relating to reopening is dismissed as not pressed. 23. The substantive issue which survives for our adjudication is whether, having regard to the true legal nature of the interest transferred by the assessee....
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....imposed on the trustee for the benefit of all beneficiaries, including remainder men. The beneficiary holding a life interest acquires only a beneficial interest and not ownership of the trust property. Further, any alienation by a life tenant, even if contractually permissible, cannot extend beyond the lifetime of the life tenant nor can it prejudice the vested or contingent rights of the remainder men, a principle flowing from sections 6(a) and 8 of the Transfer of Property Act, read with sections 56 and 58 of the Indian Trusts Act, 1882, which protect the interests of persons beneficially entitled to the trust property in succession. 26. This legal character of the assessee's interest is also reflected in the valuation record itself. The Departmental Valuation Officer has proceeded on the footing that the assessee was holding only an undivided share in a family property and has specifically recorded that such interest could not be freely sold or transferred to outsiders, applying a discount on account of such restriction. The DVO's report thus corroborates the conclusion that the assessee did not hold an independently marketable or freely transferable estate in land or buildi....
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.... has relied upon the judgment of the Hon'ble Karnataka High Court in V.S. Chandrashekar v. ACIT [2021] 129 taxmann.com 273 / 432 ITR 330.The Hon'ble High Court, after examining the scope of section 50C, held as under: 11. Thus, from perusal of the aforesaid provisions, it is axiomatic that Explanation 1 to section 2(47) uses the term 'immovable property' whereas, Section 50C uses the expression 'land' instead of immovable property. It is also pertinent to mention that wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(l)(a), Section 54G(1), Section54GA(1) and Section 269UA(d) and Explanation to Section 155(5A). Thus, Section 50C applies only in case of a transferor of land which in the instant case is M/s Namaste Exports and not the assessee who was only a consenting party and not a transferor/co-owner of the property. Undoubtedly, the assessee had certain rights under the agreement, however, from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land. It is equally well settl....
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.... or acquired, by a person. That cannot be in any manner equated with land or building, but rather, would be a species of the right to hold it, which as indicated above, are of multiple nature. 7. We, therefore, find that merely because the land was originally allotted by the MIDC by way of a lease to the predecessor of the appellant, who in turn has received the same by way of an assignment, that being one of the modes of transfer, of land or building, the mere use of a particular mode of transfer, cannot create any exception vis-a-vis the holding of the land or building by the Assessee. The word 'transfer' as used in Section 50C(1) of the IT Act, also cannot be used in a restricted sense and will have to be given widest amplitude, considering the nature and purpose of the section and thus would include all modes and methods of transfer as are permissible and recognizable in law. 33. Even assuming that the ratio of Vidarbha Veneer Industries Ltd. permits application of section 50C on bare hold rights, the factual matrix of the present case stands on a materially different footing. The assessee herein did not hold a leasehold estate or any time-certain, commercia....