Sec. 50C Not Applicable on Transfer of Leasehold Rights in Land and Building | ITAT

Case Details: Shivdeep Tyagi vs. ITO - [2024] 163 taxmann.com 614 (Delhi-Trib.)

Judiciary and Counsel Details

• Kul Bharat, judicial member & Avdhesh Kumar Mishra, accountant member
• Sahil Sharma & Sanjay Parashar, Advs. for the Appellant.
• Anuj Garg, Sr. DR for the Respondent.

Facts of the Case

Assessee, an individual, was a salaried employee. He filed his return of income for the relevant assessment year and declared income. The return of income was processed under section 143(1). Subsequently, the Assessing Officer (AO) reopened the assessee’s case based on AIR information that the assessee sold a right in a leasehold property for Rs. 60,00,000 but did not offer the capital gains tax.

Reassessment was completed at an income of Rs. 75,94,850 for stamp duty purposes against the actual sale consideration of Rs. 60,00,000. On appeal, the CIT(A) upheld the reassessment proceedings, and the matter reached before the Delhi Tribunal.

ITAT Held

The Tribunal held that the leasehold right in a plot of land is 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 recognised under the Act.

Section 54D of the Act deals with certain cases in which capital gains on the compulsory acquisition of land and buildings are charged to tax. Section 54D(1) 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…..”. Thus, it is palpable from section 54D that ‘land or building’ is distinct from ‘any right in land or building’.

Section 50C states that 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 for stamp valuation authority 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.

Relying upon the decision of the Hon’ble Supreme Court in the case of Amarchand N. Shroff [1963] 48 ITR 59 (SC), the Tribunal held that a deeming provision could be applied only in the scope of the law and not beyond the explicit mandate of the section. Hence, the provisions of Section 50C of the Act are applicable only with respect 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 not apply.

Accordingly, the provisions of Section 50C do not apply to the transfer of leasehold rights in land.

List of Cases Referred to

• Atul G. Puranik v. ITO [2011] 11 taxmann.com 92/132 ITD 499/11 ITR(T) 120 (Mumbai) (para 5),
• Ritz Suppliers (P.) Ltd. v. ITO [2020] 113 taxmann.com 349/182 ITD 227 (Kolkata – Trib.) (para 5),
• Smt. Sowmya Sathyan v. ITO [2021] 124 taxmann.com 74/187 ITD 149 (Bangalore – Trib.) (para 5),
• CIT v. Amarchand N. Shroff [1963] 48 ITR 59 (SC) (para 9),
• CIT v. Mother India Refrigeration Industries (P.) Ltd. [1985] 23 Taxman 8/155 ITR 711 (SC) (para 9),
• CIT v. Greenfield Hotels & Estates (P.) Ltd. [2017] 77 taxmann.com 308/245 Taxman 125/389 ITR 68 (Bombay) (para 11)
• Noida Cyber Park (P.) Ltd. v. ITO [2021] 123 taxmann.com 213/186 ITD 593 (Delhi – Trib.) (para 11).