Income Tax Appellate Tribunal - Jaipur
Savitra Singh, Jaipur vs Ito, Alwar on 29 June, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No.142/JP/17
fu/kZkj.k o"kZ@Assessment Year : 2007-08
Smt. Savitra Singh, cuke The ITO Ward-1(4), Alwar.
W/o Rao Sajjan Singh, Vs.
C/o Rao Education Academy,
Village- Kothi Narayanpur,
Rajgarh, Alwar.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: BMBPS8569J
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrhdh vksj ls@Assessee by : Shri P.C. Parwal (C.A.)
jktLo dh vksj ls@Revenue by : Shri Ajay Malik (Addl.CIT)
lquokbZ dh rkjh[k@Date of Hearing : 02/05/2017
?kks"k.kk dh r kjh[k@Date of Pronouncement: 29/06/2017.
vkns'k@ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of Ld. CIT(A), Alwar dated 05.01.2017 for A.Y. 2007-08. The grounds of appeal taken by the assessee are as under:-
"1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of the notice issued u/s 148 by the AO on an erroneous assumption that on execution of lease deed there is a transfer of property and thus the value assessed by stamp authorities for registration of the lease deed is full value consideration liable for capital gains tax which has escaped assessment and consequently upholding the order passed by AO u/s 147 of the Act.ITA No. 142/JP/17
Smt. Savitra Singh Vs. ITO, Alwar 1.1 The Ld. CIT(A) has further erred on facts and in law in upholding the validity of the order passed by AO u/s 147 of the Act by holding that AO is empowered to reopen the assessment u/s 147 even when there is a specific provisions u/s 155(15) of the IT Act which specifically empowers the AO to amend the assessment order where the value adopted by the stamp authority is subsequently revised in any appeal or revision or reference.
2. The Ld. CIT(A) has erred on facts and in law in upholding the order of the AO in assessing the long term capital gain on lease of land and building at Gram Kothi, Narayanpur, Tehsil Rajgarh to Rao Education Academy vide lease deed dated 22.02.2007 for 30 years as transfer and thereby confirming the assessment of long term capital gain at Rs. 91,71,313/- by:
a) incorrectly holding that on lease of land and building for 30 years, there is transfer u/s 2(47)(v),
b) holding that the subsequent gift of this property vide registered gift deed dated 03.04.2008 to Rao Education Academy is a colourable device to avoid payment of tax.
c) drawing incorrect inferences from the facts available on record and
d) not considering that the land under consideration is an agricultural land beyond the municipal area of Rajgarh and thus not a capital asset u/s 2(14) of the Act.
2. Briefly the facts of the case are that the assessee vide lease deed dated 22.02.2007 leased out 2,950 sq. mtrs of land along with the construction thereon on 1500 sq. mtrs to Rao Shiksha Samiti for 30 years at rent of Rs. 1 lakh per annum w.e.f. 01.03.2007. This deed was registered with the Sub- Registrar, Rajgarh. Thereafter, vide 2 separate deeds dated 03.04.2008, the assessee donated the said land to Rao Shiksha Samiti.The Accountant General (Audit), Rajasthan raised an objection that at the time of executing the lease deed, value of this property should have been considered at Rs. 1,43,91,000/-
and accordingly there is a short levy of Rs. 9,52,914/-. The assessee raised the objection and thereafter the Collector (Stamps), Alwar vide order dated 15.02.2013 determined the valued of the 2 ITA No. 142/JP/17 Smt. Savitra Singh Vs. ITO, Alwar property at Rs. 92,80,860/- and directed the assessee to pay stamp duty of Rs.6,21,846/-. The AO on the basis of the order of Collector (Stamps) issued notice u/s 148 on 11.03.2014 and the reasons for reopening were communicated to the assessee on 05.09.2014 wherein it wasstated that the lease was made for more than 20 years and the stamp duty was charged on market value treating it as conveyance deed and not lease deed. Later, this property was gifted to Rao Shiksha Samiti. Therefore, the conduct of the assessee was to transfer the property. As per Section 2(47)(v), it should be treated as conveyance deed and not as lease deed. The assessee has, therefore, failed to compute the capital gain as per Section 50C of the Act and income chargeable to tax has escaped assessment for AY 2007-08.The assessee raised objection against the initiation of reassessment proceedings u/s 147. The AO however, rejected the objection of the assessee vide his order dated 06.02.2015 for the reason that as the lease was made for more than 20 years, there is a transfer u/s 2(47)(v) and therefore, capital gains is liable to be taxed in terms of Section 50C of the Act.
3. During the course of hearing, the ld. AR has submitted that the transaction of lease of property to Rao Shiksha Samiti is not a transfer u/s 2(47)(v) of the Act and therefore, no capital gain tax is leviable on execution of lease deed. It is also a settled proposition of law that Section 50C is a deeming fiction for determination of the sale consideration on transfer of land or building or both and this section does not apply on transfer of right in land or building or both. For this, reliance is placed on the following cases:-
A) Smt. Devindraben I. Barot Vs. ITO (2016) 159 ITD 162 (Ahd.) (Trib.) The assessee entered into Banakhat for land with 'P' for certain consideration.
Said Banakhat was registered without possession of land. Thereafter assessee entered into another Banakhat of the aforementioned land with 'V' and 'I' for 3 ITA No. 142/JP/17 Smt. Savitra Singh Vs. ITO, Alwar higher price. Said Banakhat was also registered without possession of land. Thereafter 'P' entered into sales transaction for said land with 'V' and 'I' vide registered sale deed. The AO was of the firm belief that it was the assessee who had sold the property and therefore computed capital gain as per section 50C. It was held that section 50C is a deeming provision and it extends only to land or building or both. If the capital asset under transfer cannot be described as 'land or building or both', then section 50C will cease to apply. In the present case, assessee had transferred only rights in impugned land which could not be equated to land or building or both and therefore, provision of section 50C could not be applied.
B) ITO Vs. Tara Chand Jain (2015) 155 ITD 956 (Jaipur) (Trib.): Where assessee held mere 'Kashtkar' right in a land allotted by State Government, it could not be equated with ownership of land and thus, in case of sale of said piece of land, long term capital gain could not be calculated by invoking deeming provisions of section 50C.
3.1 It was further submitted that the Ld. CIT(A) has observed that the intention of the assessee right from the beginning was to transfer the land as is evident from the fact that the assessee gifted the property to the Samiti within 1 year of the lease. This intention supports the case of the assessee in as much as her intention always was to gift the property. Gift of property is not a transfer u/s 47(iii) and therefore, no question of avoidance of tax or the applicability of the decision of Apex Court in case of McDowell & Co. Ltd. arise for consideration. In view of above, the long term capital gain assessed by AO and confirmed by Ld. CIT(A) is not as per law and the same be directed to be deleted.
4 ITA No. 142/JP/17Smt. Savitra Singh Vs. ITO, Alwar
4. We have heard the rival contentions and perused the material available on record. The limited question for consideration before us is whether the provisions of section 50C can be invoked in respect of lease of land and building for a period of 30 years or not. In this regard, we refer to the provisions of section 50C(1) of the Act which reads as under:
"Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed, or assessable by any authority of a State Government (hereafter in this section referred to as the 'stamp valuation authority') for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer."
5. On reading of above provisions, it is clear that where a capital asset being land or building or both is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted or assessed or assessable by the Stamp Valuation Authority, the deeming provisions of sub section(1) of section 50C shall be applicable. In the instant case what has been transferred is leasehold rights in land and building for a period of 30 years. It is a deeming provision which is limited to land, building or both which cannot be extended beyond the purpose for which it is enacted and is therefore not applicable in the instant case.
6. The ld AR has relied on Coordinate Bench decision in case of Tara Chand Jain (supra) where assessee was having mere 'Kashtkar' right in a land allotted by State Government, it was held that it could not be equated with ownership of land and thus, in case of sale of said piece of land, long term 5 ITA No. 142/JP/17 Smt. Savitra Singh Vs. ITO, Alwar capital gain could not be calculated by invoking deeming provisions of section 50C.
7. It is noted that Coordinate Bench in case of Tara Chand Jain (supra) has in turn relied on another Coordinate Bench's decision in the case of Atul G. Puranik (132 ITD 399) which has recently been affirmed by the Bombay High Court in case of Commissioner of Income-tax, Central-II, Mumbaiv.Greenfield Hotels & Estates (P.) Ltd389 ITR 68 (Bombay) on the basis that the Revenue has not gone in further appeal against the said decision and it has thus been accepted, therefore, it has to be held that any subsequent decision following the said decision cannot be challenged. In case of Atul G. Puranikcase, the assessee transferred lease rights for sixty years in the plot and not land itself and it was held that the provisions of section 50C are not applicable. In our view, the said decision of the Coordinate Bench also supports the case of the assessee. The relevant findings of the Coordinate Bench are contained at para 11.2 to 11.4 of its order which are reproduced as under:
"11.2 On going through the above provision, it transpires that where the full value of consideration shown to have been received or accruing on the transfer of an asset, being land or building of both, is less than the value adopted or assessed or assessable by stamp valuation authority, the value so adopted etc. shall, for the purposes of sec. 48, be deemed to be full value of consideration received or accruing as a result of such transfer. This section has been inserted by the Finance Act 2002 w.e.f. 01-04-2003 with a view to substitute the declared full value of consideration in respect of land or building or both transferred by the assessee with the value adopted or assessed or assessable by stamp valuation authority. But for this provision, there is nothing in the Act, by which the full value of a consideration received or accruing as a result of transfer of land or building or both is 6 ITA No. 142/JP/17 Smt. Savitra Singh Vs. ITO, Alwar deemed to be any amount other than that actually received. From the language of sub-sec. (1), 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. Two things are noticeable from this provision. Firstly, it is a deeming provision and secondly, it extends only to land or building or both. It is manifest that a 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, in case the latter is lower than the former. It is further relevant to note that the mandate of sec. 50C extends only to a capital asset which is "land or building or both".
It, therefore, follows that only if a capital asset being land or building or both is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted or assessed or assessable by the stamp valuation authority, the deeming fiction under sub-sec. (1) shall be activated to substitute such adopted or assessed or assessable value as full value of consideration received or accruing as a result of such transfer in the given situation.
11.3 It is a settled legal proposition that a deeming provision cannot be extended beyond the purpose for which it is enacted. The Hon'ble Apex Court in CIT v. Amarchand N. Shroff [1963] 48 ITR 59 has considered the scope of a deeming provision and came to hold that it cannot be extended beyond the object for which it is enacted. Similar view has been reiterated by the Hon'ble Supreme Court in CIT v. Mother India Refrigeration Industries (P.) Ltd. [1985] 155 ITR 711/ 23 Taxman 8 by laying down that "legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond their legitimate field". In CIT v. ACE Builders (P.) Ltd. [2006] 281 ITR 210 /[2005] 144 7 ITA No. 142/JP/17 Smt. Savitra Singh Vs. ITO, Alwar Taxman 855 (Bom), the Hon'ble jurisdictional High Court considered the facts of a case in which the assessee was a partner in a firm which was dissolved in the year 1984 and the assessee was allotted a flat towards the credit in the capital asset with the firm. The assessee showed the flat as capital asset in its books of account and depreciation was claimed and allowed from year to year. In the previous year relevant to asst. year 1992- 93, the assessee sold the flat and invested the net sale proceeds in a scheme eligible u/s.54E of the Act and accordingly declared Nil income under the head 'Capital gains'. The AO formed the view that since the block of building ceased to exist on account of sale of flat during the year, the written down value of the flat was liable to be taken as cost of acquisition u/s.54E of the Act. He further held that since the assessee had availed depreciation on such asset, which was otherwise a long-term capital asset, the deeming provision u/s.50 would apply and it would be treated as capital gain on the sale of short-term capital asset and hence no benefit u/s.54E could be allowed. When the matter came up before the Hon'ble Bombay High Court, it was noticed that sub-sections (1) and (2) of sec. 50 contained a deeming provision and such fiction was restricted only to the mode of computation of capital gain contained in sections 48 and 49 and hence it did not apply to other provisions. The assessee was held to be eligible for exemption u/s.54E in respect of capital gain arising out of the capital asset on which depreciation was allowed.
11.4 In view of the aforenoted judgments rendered by the Hon'ble Apex Court and that of the Hon'ble jurisdictional High Court, it is clear that a deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of the section. Turning to sec. 50C, it is seen that the deeming fiction of substituting adopted or assessed or assessable value by the stamp valuation authority as full value of consideration is applicable only in respect of "land or building or 8 ITA No. 142/JP/17 Smt. Savitra Singh Vs. ITO, Alwar both. If the capital asset under transfer cannot be described as 'land or building or both', then sec. 50C will cease to apply. From the facts of this case narrated above, it is seen that the assessee was allotted lease right in the Plot for a period of sixty years, which right was further assigned to M/s. Pathik Construction in the year in question. It is axiomatic that the lease right in a plot of land are neither 'land or building or both' as such nor can be included within the scope of 'land or building or both'. The distinction between a capital asset being 'land or building or both' and any 'right in land or building or both' is well recognized under the I.T. Act. Sec. 54D deals with certain cases in which capital gain on compulsory acquisition of land and building is charged. Sub-sec.(1) of sec. 54D opens with : "Subject to the provisions of sub-section (2), where the capital gain arises from the transfer by way of compulsory acquisition under any law of a capital asset, being land or building or any right in land or building, forming part of an industrial undertaking.....". It is palpable from sec. 54D that 'land or building' is distinct from 'any right in land or building'. Similar position prevails under the W.T. Act, 1957 also. Section 5(1) at the material time provided for exemption in respect of certain assets. Clause (xxxii) of sec. 5(1) provided that "the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in land or building or any asset referred to in any other clauses of this sub-section) forming part of an industrial undertaking" shall be exempt from tax. Here also it is worth noting that a distinction has been drawn between 'land or building' on one hand and 'or any rights in land or building' on the other. Considering the fact that we are dealing with special provision for full value of consideration in certain cases u/s.50C, which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. As sec. 50C applies only to a capital asst, being land or building or both, it cannot be made applicable to 9 ITA No. 142/JP/17 Smt. Savitra Singh Vs. ITO, Alwar lease rights in a land. As the assessee transferred lease right for sixty years in the Plot and not land itself, the provisions of sec.50C cannot be invoked. We, therefore, hold that the full value of consideration in the instant case be taken as Rs.2.50 crores."
8. In light of above discussions and in the entirety of facts and circumstances of the case, the provisions of section 50C are not attracted in the instant case. Hence, the addition made by the Assessing officer is hereby deleted.
9. Having decided the issue on merit regarding applicability of section 50C, we are not inclined to refer to other contentions raised by the ld AR as well as the other ground challenging the legality of the reassessment proceedings. In the result, the other grounds have become infructous and are dismissed.
10. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 29/06/2017.
Sd/- Sd/-
¼dqy Hkkjr ½ ¼foØe flag ;kno½
(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Jaipur
Dated:- 29/06/2017
vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant-Smt. Savitra Singh, W/o Rao Sajjan Singh, C/o Rao Education Academy, Village- Kothi Narayanpur, Rajgarh, Alwar.
2. izR;FkhZ@The Respondent-The ITO Ward-1(4), Alwar.10 ITA No. 142/JP/17
Smt. Savitra Singh Vs. ITO, Alwar
3. vk;dj vk;qDr@CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT,
6. xkMZ QkbZy@Guard File (ITA No.142/JP/2017) vkns'kkuqlkj@By order, lgk;d iathdkj@Assistant Registrar.
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