Income Tax Appellate Tribunal - Ahmedabad
Bhavnagar Jilla Sahkari Kharid Vechan ... vs Acit, Circle-2, , Bhavnagar on 19 November, 2019
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'बी' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 1119/Ahd/2018
Assessment Year : 2013-14
Bhavnagar Jilla Sahkari Kharid Assistant Commissioner of
Vechan Sangh Ltd., Vs Income-tax,
Opp. Nareshwar Temple, Heris Circle-2,
Road, Amba Chowk, Bhavnagar
Bhavnagar - 364 001
PAN : AAALT 0030 F
अपीलाथ / (Appellant) यथ / (Respondent)
Assessee by : Shri Tushar Hemani, AR
with Ms. Aditi Sheth, AR
Revenue by : Shri Vidhut Trivedi, Sr DR
सुनवाई क तार ख/ Dateof Hearing : 19/11/2019
घोषणा क तार ख / Date of Pronouncement: 19/11/2019
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER :-
1. The assessee is in appeal before the Tribunal against the order of the learned CIT(A)-6, Ahmedabad dated 19.02.2018 passed for Assessment Year 2013-14.
2. The assessee has taken four grounds of appeal, but its grievances revolve around a single issue viz. the learned CIT(A) has erred in confirming the addition of Rs.44,58,189/- which was added by the Assessing Officer with the aid of Section 50C of the Income-tax Act, 1961.
3. The brief facts of the case are that the assessee has filed its return of income electronically on 11.10.2013 declaring total income of Rs.1,26,78,230/-.
ITA No. 1119/Ahd/2018Bhavnagar Jilla Sahkari Kharid Vechan Sangh Ltd Vs. ACIT AY : 2013-14 2 It has sold two properties whose details have been noticed by the Assessing Officer on page no.2 in paragraph no.3 of the assessment order. They read as under:-
Date Consideration Stamp Duty Paid Value @ 4.9% stamp duty 26.03.2013 35,15,000 4,09,000 83,46,938 26.03.2013 1,13,36,000 13,74,000 2,80,40,816
4. The learned Assessing Officer has confronted the assessee as to why the value of the property for the purpose of deeming the full sale consideration under Section 50C be not taken equivalent to the amount on which the sale duty was paid. The assessee contended that it has taken these properties on lease and it has only sold the lease rights and Section 50C is not applicable on sale of leasehold rights. Learned Assessing Officer did not accept this contention. He made a reference to the Valuation Officer, but the DVO has not submitted his report and accordingly he adopted the value of the properties on which the stamp duty was paid. He made an addition of Rs.2,15,36,754/-.
5. Dissatisfied with the above addition made by the Assessing Officer, the assessee carried the matter in appeal before the learned First Appellate Authority. It has reiterated its contentions. The learned CIT(A) has observed that the property was taken by the assessee at a long term lease of 60 years, i.e. it has taken the leasehold rights from Bhavnagar Municipal Corporation in 1976 for 30 years which has been renewed in 1990 for further 30 years. Thus, according to learned CIT(A), there is no substantial difference between the sale of the property obtained under long term leasehold rights vis-à-vis as a free hold purchase. In principle, the learned CIT(A) has upheld invocation of Section 50C, but substantially reduced the deemed sale consideration after taking into consideration the DVO's report. The learned CIT(A) has confirmed addition of Rs. 44,58,189/- as against Rs.2,15,36,754/- made by the Assessing Officer. This amount has been reduced on the basis of report of the DVO who ITA No. 1119/Ahd/2018 Bhavnagar Jilla Sahkari Kharid Vechan Sangh Ltd Vs. ACIT AY : 2013-14 3 has submitted his report during the pendency of appeal before the First Appellate Authority. The DVO determined the Fair Market Value of both the properties as under:-
Sr. Property Fair Market Declared As on date
No. Value (In Rs.) Value (In Rs.)
1 City survey ward-4,
naksha sheet no.36, 46,76,123 35,15,000
Uparna Society, Survey
no.309, F.P. No.45,
Bhavnagar-Ruvapari 26.03.2013
Road, Bhavnagar
2. City survey ward-4,
naksha sheet no.24, 1,46,33,696 1,13,36,000
Uparna Society, Survey
no.303, F.P. No.46,
Bhavnagar-Ruvapari
Road, Bhavnagar
Accordingly, the difference has been added.
6. Before us, the learned Counsel for the assessee at the very outset contented that the actual sale consideration would be replaced under Section 50C by deeming sale consideration equivalent to the amount on which the stamp duty was paid. But this deeming fiction can be invoked on the basis of land or building or both. On the other nature of capital rights, Section 50C is not applicable. This issue has been considered in various cases and he relied upon the judgment of Hon'ble Bombay High Court in the case of CIT vs. Greenfield Hotels & Estates (P.) Ltd. [2016[ 389 ITR 68 (Bombay) and the order of the ITAT, Ahmedabad Bench in the case of Sureshchandra Parekh Vs. ITO (ITA No. 841/Ahd/2015). He placed on record copy of this order.
7. On the other hand, learned Departmental Representative relied upon the order of the learned CIT(A).
ITA No. 1119/Ahd/2018Bhavnagar Jilla Sahkari Kharid Vechan Sangh Ltd Vs. ACIT AY : 2013-14 4
8. We have duly considered the rival contentions and gone through the record carefully. Learned First Appellate Authority has recorded a categorical finding that these properties were taken on lease by the assessee from Bhavnagar Municipal Corporation. She was of the opinion that there is hardly any difference between the leasehold rights vis-à-vis an independent right in the property. Therefore, she equated both the nature of rights; however, in various authoritative pronouncements this aspect has not been upheld. The Tribunal is unanimous in its conclusion that the transfer of leasehold rights does not fall within the ambit of Section 50C. The discussion made by the Tribunal in the case of Sureshchandra Parekh Vs. ITO (supra) reads as under:-
"7. As regards the question as to whether the provisions of section 50C can be invoked in respect of the lease hold property, this issue is no longer res integra. There are several decisions of this Tribunal including the case of DCIT vs. Tejinder Singh (supra), Atul G. Puranik vs. ITO [132 ITD 499 (Mum Trib)] in support of the proposition. Hon'ble Delhi High Court in the case of CIT vs. Shri Kishan Das - ITA No.64 of 2014, judgement dated 10.02.2014, has approved this school of thought and inter alia observed as follows :-
"3. It is contended on behalf of the Revenue that the Tribunal fell into error because Section 50C does not make any distinction between properties of one kind and the other and that so long as the state authorities prescribed a different rate than the one involved in the transaction, such prescribed rate would be deemed the rate for the application for Section 50C. Contending that the distinction made in the present case between the fresh leasehold rights and the consideration payable and the residual rights was unjustified, it was argued that such difference is artificial and unsound. Learned counsel relied upon the decision of the Tribunal in Arif Akhatar Hussain v. ITO ITA/543/Mum/2010 to submit that even leasehold rights such as the present one, which comprehended entitlements in respect of land, building and other interest would fall within Section 50C and the presumption to be drawn as a consequence. The decision in Shavo Norgren (P) Ltd. v. DCIT, Circle 3(3) ITA 8101/Mum//2011 by the Mumbai Bench was also relied upon to say that the development rights would be apprehended within Section 50C. The Tribunal in this case relied upon the decisions of the Lucknow Bench in Carlton Hotel (P) Ltd. v. ACIT 2010 (35) SOT 26 (Luck); Mumbai Bench in Atul. G. Puranik v. ITO, 12(1)(1) and that of the Calcutta Bench in Dy. CIT v. Tejender ITA No. 1119/Ahd/2018 Bhavnagar Jilla Sahkari Kharid Vechan Sangh Ltd Vs. ACIT AY : 2013-14 5 Singh 19 Taxman.Com 4 In all these, the various Benches of the Tribunal appear to have strictly construed the letter of Section 50C to say that the conveyance has to be complete in respect of all entitlements to the property. In the present case, the Tribunal has upheld the valuation of the assessee. We notice that apart from the three Benches, decisions of which have been relied on, the Tribunal also considered the distinction made between Section 50C and 54D(1) which specifically provides that capital gains from, transfer by way of compulsory acquisition under any law of capital asset being land, building or any right in the land or building...................... ?. Section 50C, on the other hand, talks of, transfer by assessee of a capital asset being land or building or both. The contrast in language, given that Section 50C is a specific provision, which seeks to enact a presumption is significant. The valuation of the concerned State agency or the government that the cost of the land is, in the circumstances, higher, is determinative. We notice that in the present case, there has been no such valuation. That apart, the Tribunal adopted an approach which, with respect, appears to be correct, in that it took note of the proportionate transfer of leasehold rights for 54 years. If the Revenue's contentions were to be conceded, then in the given facts of case, if the leasehold rights for residual period of 3 or 4 years were to be valued at par with the cost of acquisition of the full tenure of the lease of 90 years, absurd and anomalous results would ensue."
9. Respectfully following the above decision of the Coordinate Bench, we are of the view that in the present case, with the help of Section 50C, the full sale consideration declared by the assessee cannot be replaced with the deemed sale consideration contemplated under Section 50C. The Assessing Officer has made the addition with the help of Section 50C only. Therefore, we allow the appeal of the assessee and delete the addition.
10. As far as charging interest under Section 234 A/B/C is concerned, it will be consequential.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 19th November, 2019 at Ahmedabad.
Sd/- Sd/-
(WASEEM AHMED) (RAJPAL YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad, Dated 19/11/2019
*Bt
ITA No. 1119/Ahd/2018
Bhavnagar Jilla Sahkari Kharid Vechan Sangh Ltd Vs. ACIT AY : 2013-14 6 आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ! / The Appellant
2. "यथ! / The Respondent.
3. संबं&धत आयकर आयु(त / Concerned CIT
4. आयकर आय( ु त (अपील)/ The CIT(A)-
5. वभागीय त न&ध,आयकर अपील य अ&धकरण ,राजोकट/DR,ITAT, Ahmedabad,
6. गाड1 फाईल /Guard file.
आदे शानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ&धकरण ITAT, Ahmedabad
1. s