Income Tax Appellate Tribunal - Mumbai
Vandana D Shetty, Mumbai vs Ito 26(3)4, Mumbai on 5 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " SMC" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM
ITA No.6668/Mum/2016
(A.Y:2009-10)
Vandana D Shetty Income Tax Officer
Gala No.5, Sai Kutir, Gol 26(3)(4)
Building Bus Stop, 161 -A LBS 5 t h Floor, C-11, Pratyaksha
Vs.
Road, Kurla (W ), Kar Bhavan, BKC
Mumbai-400 080 Bandra(E), Mumbai-400 051
P AN No. AQEPS7796K
Appellant .. Respondent
Assessee by .. Shri Hari S. Raheja, AR
Revenue by .. Shri T.A. Khan, DR
Date of hearing .. 15-06-2017
Date of pronouncement .. 05-07-2017
ORDER
PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT(A)-38, Mumbai, in appeal No. CIT(A)-38/ITO 26(3)(4)/IT-287/2015-16 dated 29- 07-2016. The Assessment was framed by ITO Ward-21(3)(2), Mumbai for the A.Y. 2009-10 vide order dated 26-12-2011 under section 143(3) read of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The only issue in this appeal of assessee is against the order of CIT(A) in holding that the transfer of capital assets and not transfer of lease holding rights attracting the provisions of section 50C of the Act. For this assessee as raised following two grounds: -
"1. On the facts & circumstances of the case and Commissioner of Income Tax (A)-38. Mumbai holding that the leasehold rights, Tax Act, 1961. in law, the learned was not justified in re is a transfer of capital asset and not transfer of attracting the provisions of section 50C of the Income.ITA No.6668/ Mum/2016
Vandana D Shetty A.Y:09-10
2. On the facts & circumstances of the case and in law, the learned Commissioner of Income Tax (A)-38, Mumbai erred in not deleting the addition made to the capital gains by invoking Section 50C of Income Tax Act, 1961."
3. Briefly stated facts are that the assessee has disclosed transfer of leasehold rights in the plot of land at Turbhe, in her return of income, for a total consideration of Rs. 15.50 lakhs and after setting of cost of leasehold rights including expenses on transfer at Rs. 8,50,640/-, assessee disclosed short term capital gain at Rs. 6,99,360/-. The AO referred the matter to stamp valuation authorities, who adopted the value of lease hold rights at Rs. 26.54 lakhs and therefore AO applying the provision of section 50C of the Act re-computed the short term capital gain at Rs. 18,03,860/-. The assessee carried the matter before CIT(A) and Tribunal in first round and Tribunal in first round set aside the matter to the file of the AO to consider whether 50C of the Act would be applicable in the hands of the assessee whether the land is of lease hold rights and transfer was only of lease hold rights or transfer of land as such. Again the AO vide his order under section 143(3) of the Act read with section 254 of the Act reiterated the earlier action by observing in Para 6 as under: -
"6. Since the appeal in the case of M/s Heatex Products Pvt. Ltd. is pending before the High Court, in the instant case the addition of Rs. 18,03,860/- made by the AO in his order under section 143(3) dated 26-12-2011 is unaltered. This order is subject to rectification in view of the decision of the High Court in the case of M/s Heatex Products Pvt. Ltd for the assessment year 2007-08. Penatly under Page 2 of 7 ITA No.6668/ Mum/2016 Vandana D Shetty A.Y:09-10 section 271(1)(c) is separately initiated for filing inaccurate particulars of income."
4. Aggrieved, assessee preferred the appeal before CIT(A), who after going through the terms of lease agreement and deed of assignment dated 16-04-2008 reproduced the clause of the assignments deed given at page 2 last paragraph wherein assigner agree to transfer to assignee and assigner agree to acquire from the assignee of the leasehold rights and interest in all and singular in the said plot No.PAP-D-29 admeasuring 100 square meters along with building and other structures constructed thereon as whereas basis for consideration of Rs. 15.50 lakhs. According to the CIT(A) this was confirmed by Maharashtra Industrial Development Corporation giving consent for transfer of this plot by observing in Para 4.1.4 as under: -
"4.1.4 Further on perusal of the letter of Maharashtra Industrial Development Corporation (MJDC) addressed to the appellant giving consent for transfer of Lease of Plot NoPAP-D-29 in the Trans Thane Creek Industrial Area admeasuring 100 square meters or thereabouts together with the built up area admeasuring about 95 square meters or thereabouts, it is clear that there has been a transfer of Lease of the aforesaid Plot and not the transfer of any leasehold rights. In fact the Lease deed dated 17th May, 2006 between MIDC and the appellant has been transferred to Mr. Arnjad. LaIq Shekh on the behest of the appellant to the NIDC. Vide the above letter, it is specifically mentioned that "the Corporation has after due consideration of the said request of the Lessee decided to grant its consent to the Page 3 of 7 ITA No.6668/ Mum/2016 Vandana D Shetty A.Y:09-10 transfer and assignment of his interest under the said lease in favour of Shri Anjad Laiq Shekh for manufacturing activity of 'Engineering Workshop'. Further, on perusal of the above letter, it is observed that the consent has been restricted in respect of the transferee alone and it has been mentioned that in case the transferee proceeds to make any further transfer of the assignment party wholly or partially with the possession of the part of and or any part thereof the transferee will have to make a fresh application for consent of and that application will be examined as per guidelines prevailing at that time. Thus it is crystal clear that all the rights of the appellant in the aforesaid property ceased to exist after the said property was transferred to the buyer which in my opinion is a clear cut case of transfer of property wherein the title of the property has been assigned to the buyer."
5. Aggrieved, against this finding, assessee is now in the appeal before the Tribunal. We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee stated that the facts are undisputed and he drew our attention to lease deed dated 17-05-2006 by virtue of which the assessee acquire lease hold rights in this property for 95 years on the basis of lease rent. He drew our attention to lease deed page 3, the first clause which reads as under: -
"......and together with all rights, ....... and ........ thereto belonging except and reserving unto the lesson all mines and minerals in and Page 4 of 7 ITA No.6668/ Mum/2016 Vandana D Shetty A.Y:09-10 under the said land or any part thereof to hold the land and premises hereinbefore expressed to be hereby demised (hereinafter referred to as "the demised premises") unto the Lessee for the term of Ninety Five years computed from the First day of June, 1995 subject nevertheless to the provisions of the Maharashtra Land Revenue Code, 1966 and the rules thereunder paying therefor yearly during the said term unto the Lessor at the Office of the Chief Executive officer of the Lessor (hereinafter referred to as "the Chief Executive Officer" which expression shall include any other officer to whom the duties or functions of the Chief Executive Officer, Maharashtra Industrial Development Corporation may be assigned) or as otherwise required the yearly rent of rule one, the said rent to be paid in advance without any deductions whatsoever on or before the first day of January in each and every year.."
6. The learned Counsel for the assessee stated that this is only a lease rights transfer in the property and it cannot be said the ownership who transfer the land. The learned Counsel for the assessee stated that the Hon'ble Bombay High Court in the case of CIT vs. Heatex Products Pvt. Ltd. Income tax appeal No. 270 of 2014 vide order dated 26th July 2016 has considered this issue and the following question of law was for Hon'ble High Court's consideration.
"(i) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law, in setting aside the issue of applicability of section 50C of the Act are Page 5 of 7 ITA No.6668/ Mum/2016 Vandana D Shetty A.Y:09-10 applicable to transfer of capital asset being land or building or both and that in the assessee's case transfer of leasehold rights amounted to transfer of capital asset as envisaged in section 50C of the Act?"
And finally Hon'ble High Court decided the issue in favour of assessee vide paras 3, 4 and 5 as under: -
"3. The only grievance of the revenue in this appeal is that the provisions of Section 50C of the Act mandates that where a transfer of capital asset being land or building or both is for consideration less than its value as adopted/assessed by the State Government for the purpose of stamp duty then the stamp duty value would be adopted as being the full value of consideration for computing capital gains arising out of transfer of the asset. It is the case of the revenue that Section 50C of the Act would apply also to transfer of leasehold interest in land and is not limited to only to transfer of land and building or both.
4. The impugned order of the Tribunal allowed the respondent - assessee's appeal by following its own decision in Atul G. Puranik V. ITO reported in 58 DTR 208 on identical issue. The Tribunal in Atul G. Puranik (supra) held that Section 50C of the Act would apply only to a capital asset being land or building or both and it cannot apply to transfer of lease rights in a land.Page 6 of 7 ITA No.6668/ Mum/2016
Vandana D Shetty A.Y:09-10
5. It appears the Revenue has accepted the decision of the Tribunal in Atul G. Puranik (supra). This inference is drawn as no evidence of filing an appeal from the order of the Tribunal in Atul G. Puranik (supra) is produced. The fact situation in both Atul G. Puranik (supra) and this case is identical as no distinction in facts of the present case from those arising in Atul Puranik (supra) has been pointed out."
7. When it was pointed to the learned Sr. DR, where there is any change in facts and circumstances, he could not answer. In view of the above facts and circumstances and the decision of the Hon'ble Bombay High Court, respectfully following the same I allow the appeal of assessee.
8. In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 05-07-2017.
Sd/-
(MAHAVIR SINGH) JUDICIAL MEMBER Mumbai, Dated: 05-07-2017 Sudip Sarkar /Sr.PS Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Page 7 of 7