Income Tax Appellate Tribunal - Panji
Sangeeta Ramuka, Bhagalpur vs Actit, Circle - 1, Bhagalpur on 6 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
PATNA BENCH, PATNA
BEFORE SHRI J.SUDHAKAR REDDY (AM) &
SHRI SANDEEP GOSAIN (JM)
ITA No.03/Pat/2013
Assessment years: 2009-10
Sangeeta Ramuka, vs. ACIT,
C/o Shyam Sunder Ramuka Sultanganj, Circle-1,
Bhagalpur. Bhagalpur.
(Appellant) (Respondent)
PAN-ADOPR5235P
Department by : Shri Ram Babu , DR.
Assessee by :Shri A.K.Rastogi, Adv .
Date of hearing:-03/10/2017
Date of Pronouncement:-06/10/2017
ORDER
PER SANDEEP GOSAIN, JUDICIAL MEMBER:
This is an appeal by the assessee directed against the order of the CIT (A)-1 dated-09.11.2012 and pertains to assessment year 2009-10.
2. The effective issues raised in grounds of appeal read as under:
"1. For that the order of the Ld. Lower Authorities are bad in law and fcts and liable to be set aside/ modified.
2. Delhi State Industrial Development Corporation has executed a Perpetual lease Deed in respect of the property in question in favour of one Subhash Chandra Ahuja by registered document no.7652 on 22.04.2002 with the office of the Sub-Registrar to District no. VI, Delhi and the said Subhash Chandra Ahuja handed over the said document and assigned the leasehold rights to the assessee who has transferred the aforesaid leasehold right vide 2 agreements dated 12.09.2008 to Shri nSita Ram Gupta and Smt. 2 ITA No.-03/Pat/2013 Ruchika Gupta for a consideration of Rs.27,50,000/- each i.e.e Rs.55,00,000/- in aggregate. The Ld. Lower Authorities have adopted the value as of the Stamp Valuation Authority at Rs.96 lakhs treating the leasehold rights as "Land or building or both". Since, the assessee ws having only lease4hold right and transferred the same, the provisions of Section 50C is not applicable in view of Atul G Puranik v. ITO 12(1) (1) reported in [2011] 11 Taxmann.co.92(Mumbai Trib) in which it was held that transfer of leasehold rights in a plot of land cannot be includd within the scoe of "land or building or both". As such the sales consideration shall be taken at Rs.55,00,000/- instead of Rs.96,00,000/- i.e. value adopted by Stamp Valuation Authority i.e. actual sale consideration.
3. For that other grounds, if any, would be urged at the time of hearing."
3. Brief facts of the case are that the Delhi State Industrial Development Corporation had executed a perpetual lease deed in respect of the leasehold rights in the plot of land no. D-1551, Narela Industrial Complex, New Delhi. Admittedly the said land is owned by the Government i.e. Narela Industrial Complex, New Delhi and initially the perpetual lease deed of this land was executed in favour of one Subhash Chandra Ahuja by registered document no.7652 on 22.04.2002 with the office of the Sub-Registrar to District no.VI, Delhi and the said Subhash Chandra Ahuja handed over the said document and assigned the leasehold rights in favour of assessee, who had transferred the aforesaid leasehold rights vide two separate agreements dated 12.09.2008 to Shri Sita Ram Gupta and Smt. Ruchika Gupta for a consideration of Rs.27,50,000/- each i.e. Rs.55,00,000/- in aggregate. The 3 ITA No.-03/Pat/2013 AO adopted the value as of the Stamp Valuation Authority at Rs.96 lakhs treating the leasehold rights as "Land or building or both".
4. Aggrieved by the order of the AO, assessee preferred an appeal before Ld. CIT(A) and the Ld. CIT(A) also upheld the order of the AO and approved applicability of Section 50C whereby the value adopted for capital gain purposes is Rs.96 lakhs as well as "adopted for stamp duty purposes"
as against actual sale consideration of Rs.55,00,000/-.
5. Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us on the ground mentioned hereinabove.
6. Ground nos. 1 &3 are general in nature preferred no adjudication.
7. Ground no.2 is the sole ground raised by the assessee thereby challenging the orders of the authorities below in application of Section 50C in respect of leasehold rights in the land in question, which is owned by the Govt. i.e.Narela Industrial Complex, New Delhi.
8. We have heard the counsel for both the parties and perused the material placed on record as well as the orders of the authorities below. From the records, we find that Delhi State Industrial Development Corporation had executed of perpetual lease deed in respect of the property in question in favour of one Shri Subhash Chandra Ahuja by registered document and later on the said Shri Subhash Chandra Ahuja transferred the 4 ITA No.-03/Pat/2013 aforesaid leasehold rights in favour of the assessee, who had further transferred the said leasehold rights through two different agreements dated 12.09.2008 to Shri Sita Ram Gupta and Smt. Ruchika Gupta, which have a total sale consideration of Rs.27,50,000/- each. The Ld. Lower Authorities had adopted the value as of the Stamp Valuation Authority at Rs. 96 lakhs, treating the leasehold rights as "land or building or both". Since, the assessee was only having leasehold rights and had transferred the same. Therefore, as per the submisssions of Ld. AR the provisions of Section 50C is not applicable in view of the order passed by Co-ordinate bench of ITAT in the case of Atul G Puranik v. ITO 12(1) (1) reported in [2011] 11 Taxmann.co.92(Mumbai Trib).
9. We have examined the issue of invocation of the provisions of Section 50C of the Act in respect of the leasehold rights in the land. We find that this issue has already been examined by various Benches of the Tribunal wherein, it has been consistently held that the provisions of Section 50C of the Act cannot be invoked in transaction involving transfer of leasehold rights of land or building.
10. Ld. AR relied on the orders of the Co-ordinate Benches of the ITAT in the case of Shri Farid Gulmohamed vs. ITO in ITA No. 5136/Mum/2014 5 ITA No.-03/Pat/2013 wherein, the identical issue was involved. The operative portion of the order of Co-ordinate bench are reproduced below:
"5.3.4 We find from the record that there is no dispute that the foreshore land at Napean Sea Road, Mumbai is a leasehold land for which the leasehold rights were acquired on 27.11.1953 for a period of 99 years from the Governor of Bombay and the ownership of which vests in the Collector of Mumbai ( We have also examined the issue of invocation of the provisions of section 50Cof the Act in respect of leasehold rights in land. We find that this issue has been examined by varigys Benches of the Tribunal, wherein it has been consistently held that the provisions of section 50C of the Act cannot be invoked in transaction involving transfer of leasehold rights in land or building. Relevant portions thereof are extracted hereunder.
5.3.5 In the decision of the Coordinate Bench of this Tribunal in the case of Nadir Nazarali Dhanani (ITANo. 100/Mum/2013 dated 09.10.2015) at para7 thereof it was held as under: -
"7. We have considered the rival submissions and have perused the material available on record. It is evident from the assessment order, the Assessing Officer has computed long term capital gain on assignment of lease hold rights of the plot by taking the market value as per section 50C of the Act only for the reason that the lease hold rights are for 60 years, hence, for all practical purpose, the assessee should be held to be the owner of the property. However, as could be seen from the terms of the allotment letter, the lease hold rights conferred on the assessee is on certain terms and conditions attached thereto. Therefore, it cannot be said that the assess e has absolute rights of an owner. In this context, a reference can be made to the decision of the Tribunal, Pune Bench., in Kancast Pvt. Ltd. v/ s ITO, 55 Taxman. com 171, wherein the co-ordinate bench, while considering the application of provisions of section 50C, in respect of transfer of lease hold rightsof 99 years, held that as the assessee is only having lease hold rights, the rovisions of section 50C would not apply. It will be pertinent to observe while so deciding, the coordinate bench also took note of the decision of the Tribunal, Mumbai Bench in Shavo Norgren Pvt. Ltd. (supra). The other decisions relied upon by the learned Counsel for the assessee also express 6 ITA No.-03/Pat/2013 similar view. Therefore, as the assessee was having only lease hold rights for a period of 60 years, he cannot be considered to be the owner of the property so as to compute capital gain by adopting the market value as per the provisions of section 50C of the Act. In the aforesaid view of the matter, we agree with the decisions of the learned Commissioner (Appeals) in deleting the additions made on account of long term capital gain. Thus, ground no.1, raised by the Revenue is dismissed.
5.3.6 In the case of Kumarpal Mohanlal Jain (ITA No. 7231/Mum/2010 dated 30.11.2015) the Co-ordinate Bench of this Tribunal at para 6 has held as under: -
"6. We have considered the rival submissions. Admittedly, the MIDC has originally given the lease of the land in the year 1964. The Assessee had purchased the leasehold rights in the property in 1991 for a sum of Rs.9 lakhs and after carrying out his business for 15 years had sold the same for Rs.25 lakhs vide deed of assessment dated 29.04.05. Hence, the assessee had sold the leasehold rights for the remaining period of 55 years. A perusal of the provisions of section 50C of the Act reveals that the same are applicable for the transfer of land or building or both. however, the leasehold rights or the tenancy rights are different from the ownership of land or building itself. Reliance in this respect can be placed on the following decisions:
1. Kancast (P.)Ltd. vs. ITO - 2015 68 SOT 110 (Pune - Trib.)
2. M/s. Fordham Pressings (India) Pvt. Ltd. vs. DCIT /ITA No.6033/Mum/2010] decided on 25.04.2012
3. M/s. Heatex Products Pvt. Ltd. vs. ACIT /ITA No.8197/Mum/2010] decided on 24.07.2013
4. ITO vs. M/s. Pawaskar Shipping & Trading Company Pvt. Ltd. (ITA No.872/ Mum/2008] decided on 29.07.2011 In view of the settled position on this issue, the section 50C is not applicable to the case in hand. Hence, the capital gains offered by the assessee by adopting the sale consideration actually received by him are to be taxed as such. We, therefore, do not find any justification on the part of the Ld. CIT(A) in adopting the value of the DVO. We accordingly direct the AO to tax the capital gains on the assessee by adopting the sale value of the property at Rs.25 lakhs as offered by the assessee."7 ITA No.-03/Pat/2013
5.3.7 In the case of Atul G. Puranik vs. ITO (132 ITD 499) the Coordinate Bench of this Tribunal at para 11.4 has held as under: -
"11.4 In view of the aforenotedjudgments 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 ITA No.3051/ M/ 10 Atul G. Puranik: 18 applicable only in respect of "land or building or 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 righ 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 1.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 subsection (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 lease 8 ITA No.-03/Pat/2013 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."
5.3.8 In the case of Hari Om Gupta (45 ITR (Trib) 137) (Lucknow), the Tribunal at para 9 to 11 thereof have observed and held as under: -
9. From these transactions, it appears that it was a distress sale and the market value of the property cannot be assessed for computing the long term capital gain. Moreover, we have also examined 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 heldthat 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 stampvaluation 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 section 50C of the Act clearly provides that it would apply only to "a capital asset, being land or building or both". The moot question before us is as to whether such expression would cover the transfer of a capital asset being leasehold rights in land or building. There cannot be a dispute to the proposition that the expression land by itself cannot include within its fold leasehold right in land also. Of-course, leasehold right in land is also a capital asset and we find no fault with this stand of the Revenue. So however, every kind of a 'capital asset' is not covered within the scope of section 50C of the Act for the purposes of ascertaining the full value of consideration. Infact, the heading of section itself provides that it is "Special provision for full value of consideration in certain cases". Therefore, .there is a significance to the expression "a capital asset, being land or building or 9 ITA No.-03/Pat/2013 both" contained in section 50C of the Act. The significance is that only capital asset being land or building or both are covered within the scope of section 50Cof the Act, and not all kinds of capital assets.
10. In-fact, the Mumbai Bench of the Tribunal in the case of Atul G. Puranik: (supra) which was pressed into service by the assessee before the lower income-tax authorities, clearly brings out the aforesaid proposition. In our view, the said decision of the Tribunal has been wrongly disregarded by the CIT(A). The plea of the CIT(A) is based on the meaning of expression 'immovable property' contained in Explanation below section 269UA(d)(i) of the Act. According to the CIT(A), the Explanation below section 269UA(d)(i) of the Act makes it clear that the land, building, etc. included in the phrase 'immovable property' also includes any rights therein. The CIT(A) has correlated this to section 2(47) of the Act which defines the expression 'transfer' in relation to capital asset. As per the CIT(A), section 2(47) of the Act contains a reference to the meaning of the 'immovable property' contained in section 269UA(d) of the Act and therefore transfer in relation to a capital asset defined in section 2(47) of the Act would include within its purview transfer of a capital asset, being leasehold rights in land also. Upto this stage, there can be no quarrel with the stand of the CIT(A). Theincongruity starts when the CIT(A)further goes to say that because of the aforesaid provisions, it was "not necessary to mention 'rights in land or building' specifically u/ s 50Cof 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.10 ITA No.-03/Pat/2013
12. Apart from the aforesaid discussion, we find that the Mumbai Bench of the Tribunal in the case of M/s Pradeep Steel Re-Rolling Mills Pvt. Ltd. (supra) has considered an identical controversy wherein it has been held that section50C of the Act would apply only to capital asset, being land or building or both and it would not apply in relation to leasehold rights in land or building. To the similar effect is the decision of the Jaipur Bench of the Tribunal in the case of M/s Jaipur Times Industries (supra). The Jaipur Bench of the Tribunal followed an earlier decision of the Mumbai Bench of the Tribunal in the case of Shavo Norgren (I)Ltd. vs. DCIT vide ITA no.8101 of2011 dated 14.12.2012 to hold that section 50Cof the Act does not apply to transfer of leasehold rights in land. The decision of the Ahmedabad Bench of the Tribunal in the case of Shri Yasin Moosa Godil (supra) is also on similar lines.
13. In view of the aforesaid legal position and in the absence of any decision to the contrary brought out by the Revenue, we conclude by holding that section 50C of the Act does not come into operation in the present facts where what is transferred by the assessee is only the leasehold rights in land which were acquired by it from Maharashtra Industrial Development Corporation {i.e. MIDC) on a 99 years lease basis. As a consequence, we set aside the order of the CIT(A)and direct the Assessing Officer to compute the long term capital gain on transfer of leasehold land by adopting the full value of consideration of Rs.2,35,04,OOO/- declared by the assessee in the computation of income and allow the appropriate relief to the assessee. Thus, on this Ground assessee succeeds."
11. Since it has been repeatedly held by different Benches of the Tribunal that provisions of section 50C of the Act cannot be invoked in respect to the transfer of leasehold rights, we find no infirmity in the order of the Id. CIT(A), who has rightly adjudicated the issue following the order of the Tribunal. We accordingly confirm the same. "
5.3.9 In the case of Kancast (P) Ltd. (ITA No. 1265/PN/2011 dated 19:01.2015) the ITAT Pune Bench at para 13 of its order has held as under.-11 ITA No.-03/Pat/2013
"13. In view of the aforesaid legal position and in the absence of any decision to the contrary brought out by the Revenue, we conclude by holding that section 50C of the Act does not come into operation in the present facts where what is transferred by the assessee is only the leasehold rights in land which were acquired by it from Maharashtra Industrial Development Corporation (i.e. MIDC) on a 99 year lease basis. As a consequence, we set aside the order of the CIT(A) and direct the Assessing Officer to compute the long term capital gain on transfer of leasehold land by adopting the full value of consideration of Rs.2,345,04,OOO/- declared by the assessee in the computation of income and allow the appropriate relief to the assessee. Thus, on this Ground assessee succeeds. » .
5.3.10 In view of the factual and legal matrix of the case as discussed above from paras 5.1 to 5.3.9 of this order (supra) we do not find any justification in the orders of the authorities below in invoking the provisions of section 50C of the Act and adopting the value of property as determined by the stamp valuation authority, for the purpose of computing the capital gain on transfer of the assessee's leasehold rights in the said foreshore land at Napean Sea Road, Mumbai. In this view of the matter and following the aforesaid decisions of the various ITAT Benches cited at paras 5.3.5 to 5.3.9 of this order, we direct the AO to compute the capital gains on the transfer of the leasehold rights of the aforesaid foreshore land at Napean Sea Road, Mumbai by adopting the value of the property at n,35,00,000/- as offered by the assessee. It is accordingly ordered. Consequently the grounds at S.Nos. 1 & 3 and the additional grounds raised by the assessee are allowed."
11. In view of the factual and the legal matrix of the case as discussed above, we do not find any justification in the orders of the authorities below in invoking the provisions of Section 50C of the Act and adopting the value of property as determined by the Stamp Valuation Authority for the purpose of computing the capital gain on transfer of assessee's leasehold rights in the 12 ITA No.-03/Pat/2013 said plot. In this view of the matter, while adhering to the principles of judicial consistency and respectfully following the decisions of the various Benches of the ITAT as cited above in the order. We direct the AO to compute the capital gain on the transfer of leasehold rights of the aforesaid plot by adopting the value of the property at Rs.55 lakhs as offered by the assessee. It is ordered accordingly, the ground raised by the assessee is allowed.
12. In the result, the appeal filed by the assessee is partly allowed. Order is pronounced in the open court on 06th October, 2017.
Sd/- Sd/-
(J.Sudhakar Reddy) (Sandeep Gosain)
Accountant Member Judicial Member
Date of order:06th October, 2017.
S.Sinha(PS)
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.:
3. The CIT(A)-Patna
4. CIT , Patna
5. Income Tax Appellate Tribunal,Patna
6. Guard file.
//True Copy// BY ORDER
PRIVATE SECRETARY
13 ITA No.-03/Pat/2013