1. Whether section 50C is applicable on the leasehold properties?
1.1. The provisions of section 50C of the Act are not applicable in case of transfer of leasehold rights in Land or Building. The said section can only be invoked in case of transfer of capital assets being Land or Building or both and the same has no application in case of transfer of any capital assets other than Land or Building.
2.2. The leasehold right in a plot of land is neither Land or Building or both nor it 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 very well recognized under the Income Tax Act, 1961.
2. Section 50C is a deeming provision and the fiction created in this section cannot be extended to any asset other than those specifically provided therein. In other words, the scope of the deeming fiction shall be restricted to the assets in the provision.
3. In this regards, the relevant provisions of Section-50C of the Income Tax Act, 1961 is being reproduced here for the sake of ready reference:-
(1). Where the consideration received or accruing as a result of the transfer by assessee of a capital asset, being land or building or both, is less than the value adopted or assessed 51[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 51[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.
(1). Where the consideration received or accruing as a result of the transfer by assessee of a capital asset, being land or building or both, is less than the value adopted or assessed 51[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 51[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 51[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 51[or assessable] by the stamp valuation authourity 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.
4. In this regards reliance is placed on the following judicial precedents:
a.. Rulings of Hon. ITAT Delhi in the case of Noida Cyber Park Pvt. ITA 165/del/2020 wherein it was held as under:
11. 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’. Therefore, the express use of one expression would exclude the other, a legal premise which is supported by the judgment of Hon’ble Supreme Court in the case of GVK Industries Ltd. Vs. ITO – (2011) 4 SCC 36 (SC). In this view of the matter, in our considered opinion, the point sought to be raised by the assessee deserves to be upheld. Such a distinction also has found approval of the Hon’ble Bombay High Court in the case of C.I.T. vs Greenfield Hotels & Estates Pvt. Ltd. (supra) and other Tribunal decisions which have been referred to in the earlier part of this order. Apart from that, we find that a recent decision of our Coordinate Bench in the case of of Manish Traders vs ITO in ITA No. 4481/D/2016 dated 22.7.2019 (reported in 2019 (7) TMI 1268 – ITAT Delhi has observed that assessee’s leasehold right for a period of 90 years in question is a capital asset to which provisions contained u/s 50C are not applicable.
12....In fact, we find that copies of the sale deed/ tripartite lease deed were furnished before the Assessing Officer and the communication of the Assessing Officer to the DVO dated 27.12.2017, a copy of which is placed at page 26 to 28 of the Paper Book reveals that the same has been forwarded by him to the DVO. In fact, the report of the DVO dated 21.6.2018 reveals that the nature of property being ‘lease hold’, has been specifically noted. Thus, in our considered opinion, there is no merit in the plea of the Ld. C.I.T. DR to prevent the assessee from pursuing the aforesaid argument before us. The defence by the C.I.T. DR, in our view, is misplaced and is hereby negated.
13. 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 of 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.”
(b) Ruling of Hon. High Court of Bombay in the case of “CIT vs Greenfield Hotels & Estates (P.) Ltd. [2017] 77 taxmann.com 308 (Bombay)”. The relevant findings of the Hon. Bench are being reproduced hereunder for the sake of ready reference:-
"2. The Revenue urges the following question of law for our consideration:
"Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the order of the CIT(A) in deleting the addition of Long Term Capital Gain of Rs.80,58,000/- on the ground that provisions of section 50C of the IT Act, 1961 were not applicable to transfer of land and building, being a leasehold property?"
3. The impugned order of the Tribunal has dismissed the Revenue's appeal from the order dated 15 June 2012 passed by the Commissioner of Income Tax (Appeals). The issue before the Tribunal was whether Section 50C of the Act would be applicable to transfer of leasehold rights in land and buildings. The impugned order of the Tribunal followed its decision in Atul G. Puranik v. ITO [2011] 132 ITD 499/11 taxmann.com 92 (Mum.)Which held that Section 50C is not applicable while computing capital gains on transfer of leasehold rights in land and buildings.
4. Mr. Kotangale, learned Counsel for the Revenue, states that the Revenue has not preferred any appeal against the decision of the Tribunal in the case of Atul G. Puranik (supra). Thus, it could be inferred that it has been accepted. Our Court in DIT v. Credit Agricole Indosuez [2015] 377 ITR 102/[2016] 69 taxmann.com 285 (Bom.) (dealing with Tribunal order) and the Apex Court in UOI v. Satish P. Shah [2001] 249 ITR 221/117 Taxman 373 (SC) (dealing with High Court order) has laid down the salutary principle that where the Revenue has accepted the decision of the Court/Tribunal on an issue of law and not challenged it in appeal, then a subsequent decision following the earlier decision cannot be challenged. Further, it is not the Revenue's case before us that there are any distinguishing features either in facts or in law in the present appeal from that arising in the case of Atul G. Puranik (supra).
5. In the above view, the question as framed by the Revenue does not give rise to any substantial question of law. Thus, not entertained.
6. Appeals dismissed. No order as to costs.”
c.. Hon. Mumbai Bench ‘A’ of ITAT in the case of “Atul G. Puranik v. Income Tax Officer, 12(1)(1) [2011] 11 taxmann.com 92 (Mumbai)”
wherein it was held as under:-
“11.4 In view of the aforenoted judgments rendered by the Hon'ble Apex Court and that of the Hon'ble jurisdictional High Court, it is clear that a deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of the section. Turning to sec. 50C, it is seen that the deeming fiction of substituting adopted or assessed or assessable value by the stamp valuation authority as full value of consideration is applicable only in respect of "land or building or both. If the capital asset under transfer cannot be described as 'land or building or both', then sec. 50C will cease to apply. From the facts of this case narrated above, it is seen that the assessee was allotted lease right in the Plot for a period of sixty years, which right was further assigned to M/s. Pathik Construction in the year in question. It is axiomatic that the lease right in a plot of land are 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 recognized under the I.T. Act. Sec. 54D deals with certain cases in which capital gain on compulsory acquisition of land and building is charged. Sub-sec.(1) of sec. 54D 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…..". It is palpable from sec. 54D that 'land or building' is distinct from 'any right in land or building'. Similar position prevails under the W.T. Act, 1957 also. Section 5(1) at the material time provided for exemption in respect of certain assets. Clause (xxxii) of sec. 5(1) provided that "the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in land or building or any asset referred to in any other clauses of this sub-section) forming part of an industrial undertaking" shall be exempt from tax. Here also it is worth noting that a distinction has been drawn between 'land or building' on one hand and 'or any rights in land or building' on the other. Considering the fact that we are dealing with special provision for full value of consideration in certain cases u/s.50C, which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. As sec. 50C applies only to a capital asst, being land or building or both, it cannot be made applicable to lease rights in a land. As the assessee transferred lease right for sixty years in the Plot and not land itself, the provisions of sec.50C cannot be invoked…..”
d.. Hon. MUMBAI Bench ‘F’ of ITAT in the case of “Sri Farid Gulmohamed vs. Income Tax Officer (International Taxation) 3(1) 5136/Mum/2014”.The relevant findings of the Hon. Bench are being reproduced hereunder for the sake of ready reference:-
"4. In the course of appellate proceedings, the assessee filed the following additional grounds of appeal:-
1. "The Assessing Officer as well as the learned CIT(A) had erred in law and on facts in not appreciating that the provisions of section 50C of the Act are not applicable in respect of leasehold rights in foreshore land.
5.3.10 In view of the factual and legal matrix of the case as discussed above from paras 5.1 to 5.3.9 of this order (supra) we do not find any justification in the orders of the authorities below in invoking the provisions of section 50C of the Act and adopting the value of property as determined by the stamp valuation authority, for the purpose of computing the capital gain on transfer of the assessee's leasehold rights in the said foreshore land at Napean Sea Road, Mumbai. In this view of the matter and following the aforesaid decisions of the various ITAT Benches cited at paras 5.3.5 to 5.3.9 of this order, we direct the AO to compute the capital gains on the transfer of the leasehold rights of the aforesaid foreshore land at Napean Sea Road, Mumbai by adopting the value of the property at `1,35,00,000/- as offered by the assessee. It is accordingly ordered. Consequently the grounds at S.Nos. 1 & 3 and the additional grounds raised by the assessee are allowed.
In view of our allowing the grounds at S. Nos. 1 & 3 and the additional grounds raised by the assessee, by holding that the provisions of section 50C of the Act cannot be invoked to compute the capital gains arising on transfer of leasehold rights, the assessee's grievance in this appeal has been addressed....”
e.. Hon. PUNE Bench ‘A’ of ITAT in the case of “Kancast Pvt. Ltd. vs. Income Tax Officer ward 9(3), Pune” wherein it was held as under:-
“13. In view of the aforesaid legal position and in the absence of any decision to the contrary brought out by the Revenue, we conclude by holding that section 50C of the Act does not come into operation in the present facts where what is transferred by the assessee is only the leasehold rights in land which were acquired by it from Maharashtra Industrial Development Corporation (i.e. MIDC) on a 99 years lease basis. As a consequence, we set aside the order of the CIT(A) and direct the Assessing Officer to compute the long term capital gain on transfer of leasehold land by adopting the full value of consideration of Rs.2,35,04,000/- declared by the assessee in the computation of income and allow the appropriate relief to the assessee. Thus, on this Ground assessee succeeds”
2. Whether section 56 (2)(x) is applicable on the leasehold properties?
2.1. The provisions of section 56 (2)(x) of the Act are not applicable in case of transfer of leasehold rights in Land or Building. The said section can only be invoked in case of transfer of capital assets being Land or Building or both and the same has no application in case of transfer of any capital assets other than Land or Building
2.2. The relevant part of section 56 (2)(x) is reproduced for ready reference:-
“where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
(b) any immovable property,—
(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:—
(i) the amount of fifty thousand rupees;
(ii) the amount equal to [five] percent of the consideration:
Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections;
Explanation.—For the purposes of this clause, the expressions "assessable", "fair market value", "jewellery", "property", "relative" and "stamp duty value" shall have the same meanings as respectively assigned to them in the Explanation to clause.(vii)
2.3. The definition of property u/s. 56(2)(vii) of the Act reads as under:
"(d) “property” means the following capital asset of the assessee, namely:—
(i) immovable property being land or building or both;
2.4. The above definition of immovable property what is included is only land or building or both and does not include Lease hold Rights. There is a specific meaning provided in the section itself, there is no scope to import any other meaning from any other enactment, or any where else and this would amount to an exercise of jurisdiction which is not provided in Law.
2.5. Moreover, Explanation 2(a) to sec 35(2), Explanation (a) (i) & (ii) to section 35D, Section 54D, section 54G and section 54GA , Explanation to section 269UA(d)(i) provide inclusion of rights, leaseholds, interests etc.
2.6. Had it been intention of the legislature to include leasehold rights in section 56 (2)(x), there would have been specific inclusion of the same as in aforesaid sections.
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