The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that the leasehold rights can not be computed as capital gains in respect of transactions in land or building under Section 50C of the Income Tax Act.
The assessee, Noida Cyber Park Pvt. Ltd. stated that Section 50C, being a deeming provision, has to be strictly interpreted, a proposition which is quite acceptable and, according to the assessee, Section 50C(1) covers a capital asset being “land or building or both” whereas in the instant case, what is transacted is merely leasehold rights in land and building, which is a distinct ‘Capital Asset’.
Section 50C(1) of the Act, in so far as it is relevant for our purpose, prescribes that where the sale 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 value adopted by the Stamp Valuation Authority for the purposes of payment of stamp duty, then the value so adopted by the Stamp Valuation Authority be deemed to be the full value of the consideration received or accruing as a result of the transfer for the purposes of computing Capital Gains in the hands of the seller under section 48 of the Act.
The two-member bench headed by G.S. Pannu clarified that ostensibly, in Section 54D(1) of the Act, the ‘capital asset’ has been understood to be ‘land or building or any right in land or building’, thereby supporting the distinction sought to be canvassed before us. On the contrary, the phraseology in section 50C(1) of the Act only covers ‘land or building or both’ and does not refer to “any right in land or building”.
Thus, the expression ‘land or building’ in its coverage is quite distinct from the expression ‘any right in land or building’. The legislature, in its wisdom, has used the expression ‘land or building or both’ in Section 50C(1) of the Act, and not the expression ‘any right in land or building’.
The tribunal opined that the point sought to be raised by the assessee deserves to be upheld.
“In view of the aforesaid factual position and in law, we find that the present transaction of six properties in question does not warrant invoking section 50C(1) of the Act as the property in question is not of the nature covered by section 50C(1) of the Act. Therefore, on this point itself, we set aside the order of the ld. Commissioner of Income Tax (A) and direct the Assessing Officer to delete the addition,” the tribunal said.
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