In ITO v. Sh. Chander Sekhar, the ITAT Delhi held that income earned from transfer of leasehold rights is chargeable to Income Tax under section 50C of the Income Tax Act which provides for special provision for full value of consideration. While allowing a departmental appeal, the bench held that capital gains must be determined by price of the plot from the value of the property.
Assessee, in the instant case, was allotted a residential plot on 19.01.2004 in Sector-105, Noida through lottery on payment of allotment money of Rs. 1,30,000/-. The total purchase price of the plot was Rs. 16,75,000/-. Assessee entered into an agreement to sale with MIs Rosebud Construction Pvt. Ltd and agreed to transfer his leasehold rights in the said property for a consideration of Rs. 1,30,000/-. The balance amount to be paid for the acquisition of the plot i.e. Rs. 15,45,000/- was agreed to be paid by the Company directly to the Noida Authority. While completing assessment, AO took Full of Consideration as adopted by the Stamp Valuation Authority as Long Term Capital Gain, and determined the total Sale price at Rs. 99,20,000/-. This amount was added back to the total income of the assessee.
On appeal, the first appellate authority held that lease hold rights are not covered under the purview of section 50C.
Reversing the order of the first appellate authority, the Tribunal held that “the Capital Gains should be taken into account only after deducted the price of the plot from the value of the property i.e. Rs. 99,20,000 (-) Minus Rs. 16,75,000/- i.e. the cost of the plot (to be paid to the Noida Authority) = Rs. 82,45,000/-. Accordingly, we set aside the issue in dispute to the file of the AO with the direction to compute the capital gains on the difference of the Stamp duty amount and price of the impugned property after applying the relevant provisions of the Act.”
Read the full text of the Order below.
