M & A CritiqueLEGAL CORNER – July 2016 – CASE LAW:
Transfer of Leasehold rights in land won’t attract Section 50C
The assesse filed his return of income for A.Y. 2010-11 on 21.07.2010 declaring income of 4,14,78,131/- While Scrutiny AO observed that assesse had assigned leasehold right in a property for a total consideration of Rs.90,00,000/-, whereas the market value of the said property was Rs.3,41,59,500/-
AO was of the opinion that income escaped and based on such opinion AO initiated proceedings under section 147 of the Act. The CIT (A) also upheld the order of AO. Aggrieved assesse is in appeal before a tribunal.
Section 50C provides that Where the consideration received or accruing as a result of the transfer by an assesse of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by stamp valuation authority for the purpose of payment of stamp duty 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.
As per the facts of the case assesse had assigned leasehold right which means assesse only a beneficial owner but not legal owner because the lease is subject to certain terms & conditions as stated in lease agreement which restricts assesse from absolute ownership and only confers leasehold rights It is because in Sec 50C the word “land” is only with respect to lands which are owned by the assesse as such and not to for leasehold rights in land. Thus, the applicability of Sec 50C cannot be extended to transfer of leasehold rights.
The appeal of assessed was allowed.
DCIT vs. Tejinder Singh (ITAT Kolkata)
ITAT held that Section 50C of the Income-tax Act, 1961 will apply on receipt of consideration on ’transfer of a capital asset, being land or building or both’ but will not apply in the case of transfer of tenancy / leasehold rights.
