A perusal of section 50C suggests that it is only for the limited purpose of computing capital gain in respect of sale of land and building, only when such sale takes place, stamp duty value has to be substituted for the sale consideration, if the sale consideration is less than the stamp duty value. In case of the surrender of tenancy right, provisions of section 50C would not apply.
IN THE ITAT MUMBAI BENCH ‘F’
Fleurette Marine Novelle Hatam
AND N.K. BILLAIYA, ACCOUNTANT MEMBER
IT APPEAL NOS. 7178 & 7468 (MUM.) OF 2013
[ASSESSMENT YEAR 2009-10]
AUGUST 19, 2015
Ronak Doshi for the Appellant. Randhir Kumar Gupta for the Respondent.
N.K. Billaiya, Accountant Member – These are cross appeals by the Revenue and the assessee against the very same order of the Ld. CIT(A)-10, Mumbai dt. 27.8.2013 pertaining to assessment year 2009-10. Both these appeals were heard together and are disposed of by this common order for the sake of convenience.
2. The grievance of the Revenue reads as under:
“On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that assessee was nowhere owner of the land/building but has merely transferred the tenancy rights without appreciating the fact that rights in land of building have applicability of Sec. 50C as held in Mumbai ITAT’s judgement dated 24.12.2010 in the case of Arif Akhatar Hussain wherein it was held that u/s. 2(47)(v) giving of possession in part performance of a contract as per Sec. 53A of the transfer of property act is deemed to be transfer.”
3. The grievances of the assessee read as under:
|“1.||On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Income-tax Officer (International Taxation)-TDS-3, Mumbai (“the AO”) to compute long term capital gains on the basis of Departmental Valuation Officer’s (DVO) report inspite of concluding that section 50C of the Act would not be applicable in case of transfer of tenancy right.|
|2.||The CIT(A) failed to appreciate and ought to have held that, as per Sec. 48 of the Act, full value of consideration ‘received’ or ‘accrued’ and not the ‘Fair market Value’ as determined by DVO u/s. 55A of the Act is chargeable to capital gains tax.”|
4. The assessee is a non-resident individual. Return for the year was filed on 27.7.2009 declaring income of Rs. 50,25,487/-. The return was selected for scrutiny under CASS and accordingly statutory notice were issued and served upon the assessee.
4.1 The return was selected for scrutiny assessment because as per AIR information, assessee has surrendered his tenancy right by an agreement with deed of assignment of tenancy right wherein the sale consideration was mentioned as Rs. 28 lakhs in which the assessee had ½ shares which came to Rs. 14 lakhs. This property was acquired by the assessee through succession. The assessee has claimed Long Term Capital Gain of Rs. 14 lakhs as against Fair Market Value of the Stamp authority at Rs. 2,18,89,180/-. It was claimed by the assessee that provisions of Sec. 50C are not applicable to the surrender of tenancy right. The computation of the assessee was not accepted by the AO who was of the firm belief that provisions of Sec. 50C are clearly applicable and therefore the Stamp duty value should have been taken by the assessee as full value of consideration. The AO recomputed Long Term Capital Gain on surrender of tenancy right and made the impugned addition.
5. The assessee carried the matter before the Ld. CIT(A) and once again claimed that provisions of Sec. 50C are not applicable on surrender of tenancy right. Reliance was placed on the decision of the Tribunal in the case of ACIT v.Munsons Textiles [IT Appeal No. 6320 (M) of 2010.] The Ld. CIT(A) was convinced that the assessee has merely transferred tenancy right therefore provisions of Sec. 50C are not applicable and the action of the AO in invoking the provisions of Sec. 50C of the Act was completely incorrect and unjustified. However, the Ld. CIT(A) further observed that since the tenancy rights are also capital asset and accordingly capital gains have to be worked out. The Ld. CIT(A) directed the AO to compute the capital gains by considering the DVO’s report.
6. The Revenue and the assessee are in appeal against the aforementioned findings of the Ld. CIT(A).
7. The Ld. Departmental Representative strongly relied upon the assessment order.
8. The Ld. Counsel for the assessee once again stated that the provisions of Sec. 50C do not apply in the case of surrender of tenancy right. Reliance was placed on the decision of the Tribunal in the case of Munsons Textiles (supra), Smt. Kishori Sharad Gaitonde v. ITO IT Appeal No. 1561/Mum./2009 and Dy. CIT v. Tejinder Singh  50 SOT 391
9. The Ld. Departmental Representative could not bring any distinguishing decision in favour of the Revenue.
10. We have carefully perused the orders of the authorities below and the decisions of the Co-ordinate Benches brought to our notice by the Ld. AR. The undisputed fact is that the assessee has transferred the tenancy right which has resulted into capital gains. The only issue to be considered by us is whether provisions of Sec. 50C are applicable in the case of surrender of tenancy right.
Section 50C read as under:
|(1)||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 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 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.|
|(2)||Without prejudice to the provisions of sub-section (1), where-|
|(a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer ;|
|(b) the value so adopted or assessed or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.|
|Explanation – 1. For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).|
|Explanation – 2. For the purposes of this section, the expression “assessable” means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.|
|(3)||Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.|
11. Undisputedly tenancy right is a capital asset but whether transfer of such capital asset has to be looked upon in the light of the provisions of Sec. 50C of the Act. A perusal of Sec. 50C suggests that it is only for the limited purpose of computing capital gain in respect of sale of land and building, only when such sale take place Stamp duty value has to be substituted for the sale consideration, if the sale consideration is less than the stamp duty value. In our considered opinion, in case of the surrender of tenancy right, provisions of Sec. 50C would not apply. Our view is fortified by the decisions of the Co-ordinate Benches (supra). The decision referred to by the Revenue in its ground of appeal do not apply on the facts of the present case. Dismissing Revenue’s appeal, we hold that provisions of Sec. 50C are not applicable on the transfer of tenancy right.
12. As we have dismissed Revenue’s appeal, we do not find any reason for referring the matter to the DVO and adopting DVO’s valuation for the computation of Long Term Capital Gains. Ground No. 1 of assessee’s appeal is allowed.
13. Ground No. 2 becomes otiose.
14. In the result, the appeal of the Revenue is dismissed and that of the assessee is allowed.