NUTRELA MARKETING P. LTD,MUMBAI vs. ITO 7(1)(1), MUMBAI

A.Y. 2006-07 Nutrela Marketing Pvt Ltd Accordingly, sale of the deed land sold was called for. The Ld.AO noted that, the value adopted by the 'Stamp Valuation Authority' for the purposes of payment of stamp duty in respect of properties in question was higher than the consideration received by the assessee as a result of transfer. The Ld.AO thus required the assessee to show cause as to why Section 50C of the Act should not be not invoked for the purpose of computation of Capital Gains. It was submitted that the assessee included the sale consideration received as business income and therefore no capital gains computation was submitted by the assessee before the Ld.AO. It was submitted that assessee is merely holding leasehold rights in the said land and factory building at Taloja as per the agreement to lease dated 05/01/1991 with Maharashtra Industrial Development Corporation (hereinafter referred to as MIDC). The assessee had submitted that as of this agreement with MID, the leasehold rights was allotted to the assessee on the industrial land at a premium of ₹13,87,600/-. It was further submitted that as per the agreement assessee cannot directly or indirectly transfer, assign, sell or create an encumbrance or part with its interest under or the benefit of the agreement to any other party without previous consent in writing of the Chief Executive Officer of MIDC. The Ld.AO however was of the opinion that the deeming provision under section 50 C would be applicable to the assessee. Accordingly, addition of Rs.5 crore was made in under section 50C in the hands of the assessee.

Aggrieved by the order of the Ld.AO the assessee is in appeal before Ld.CIT(A).

A.Y. 2006-07 Nutrela Marketing Pvt Ltd The Ld. CIT(A) upheld the addition under section 50 C of the act. However restricted the addition that the value adopted by the stamp duty authorities shall be made by the Ld.AO by observing as under:

“4.4 Ground No.2:

Relevant working regarding the issue involved is computed in the aforesaid chart is as under:

Sr. No. Particulars of Assets Cost/WDV Sale Value 3 Lease Hold 18,43,612/- Alleged value for stamp Industrial Land at purposes u/s.50C Taloja (95 years of Rs. 1,43,54,100/-(may Lease) be verified by AO also) • The profit on sale of aforesaid land shall be taken as long term capital gain. • While working out the long term capital gain, cost index will also have to be worked out. • The AO shall therefore charge the gain as long term capital gain on sale of land as per law and aforesaid directions. • The value adopted by Stamp Valuation Authority is Rs.1,43,53,100/-. The same shall be adopted for the purposes of Sec.50C. The AO may verify the facts in this regard. Besides, the said lease hold land is for 95 years. The assessee is owner thereof.”

Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.

4.2 The Ld.AR submitted that, the capital gain was earned on sale of leasehold right that cannot be treated as capital assets. It is submitted that, the assessee is was holding leasehold rights in the land and factory building at Taloja as per the agreement to lease dated 05/01/1991 with Maharashtra Industrial A.Y. 2006-07 Nutrela Marketing Pvt Ltd Development Corporation (hereinafter referred to as MIDC). He submitted that as per the agreement with MIDC, the leasehold rights was allotted to the assessee on the industrial land at a premium of ₹13,87,600/-. It was further submitted that as per Clause M of the agreement, the assessee cannot directly or indirectly transfer, assign, said or create an encumbrance or part with its interest under or the benefit of the agreement to any other party without previous consent in writing of the Chief Executive Officer of MIDC. The Ld.AR submitted that in the year 2006 assessee transferred the leasehold rights to M/s. Ruchi Pvt. Ltd, against which Rs.39,91,053/- was received. 4.3 The Ld.AR submitted that assessing officer while considering the issue resorted to the provisions of section 50C of the Act and substituted the sale consideration received by the assessee with value adopted by the stamp duty valuation authority at Rs.1,43,51,100/-. The Ld.AR submitted that, the authorities failed to appreciate the fact that provisions of section 50C is applicable to land or building or both and not in respect of leasehold rights transferred by the assessee in land. In support the Ld.AR placed reliance on the decision of coordinate bench of this Tribunal in case of (1) Atul G Puranik v ITO reported in 132 ITD 499 (Mum) (2) CIT v Greenfield Hotels & Estates (P) Ltd reported in 389 ITR 68 (Bom). 4.4 The Ld.AR submitted that section 50C deals with transfer of capital assets being, land or building or both. He submitted that it does not deal with capital assets as defined u/s.2(14) of the Act. He submitted that the nature of the assets transferred in the A.Y. 2006-07 Nutrela Marketing Pvt Ltd present facts are lease hold rights held by the assessee in the said land and not the ownership. It was submitted that the owner of the land has always been MIDC. He submitted that the agreement for transfer of the rights with the purchaser was tri- parte agreement with MIDC as owner. He thus submitted that the assessee only held the leasehold rights in the said land in terms of agreement of the lease dated 05/01/1991 with MIDC. 4.5. The Ld.AR thus submitted that invoking of section 50C of the Act in the present case is wholly unwarranted inasmuch as the 'capital asset' in question does not fall within the purview of section 50C(1) of the Act. he Ld.AR emphasized that what was been transacted by the assessee is only lease hold right in the land or building, which is quite distinct from the 'capital asset' referred to in Section 50C(1) of the Act. 4.6. Be that as it may, the Ld.AR in fairness brought to our notice decision of Hon’ble Bombay High Court (Nagpur Bench) in case of Vidharbha Veneer Industries v. ITO in of 2020 vide letter date 01/04/2025. He submitted that in the present decision by Hon’ble Bombay High Court, decided an identical issue by observing as under para 7 page 8 of paper book. “7. We, therefore, find that merely because the land was originally allotted by the MIDC by way of a lease to the predecessor of the appellant, who in turn has received the same by way of an assignment, that being one of the modes of transfer, of land or building, the mere use of a particular mode of transfer, cannot create any exception vis-a- vis the holding of the land or building by the Assessee. The word 'transfer' as used in Section 50C(1) of the IT Act, also cannot be used in a restricted sense and will have to be given widest amplitude, considering the nature and purpose of the section and thus would include all modes and methods of transfer as are permissible and recognizable in law.

A.Y. 2006-07 Nutrela Marketing Pvt Ltd 8. Atul Puranik (supra) relied upon by the learned counsel for the appellant does not consider the effect and import of Section 2(14)(a) in conjunction with the language used in section 50C of the IT Act, and merely goes on to hold, that since the land is held in a leasehold right, it cannot be equated with land or building, which does not address the issue altogether, neither does it consider the position, that mode of holding of a property, cannot be equated with the property itself, as against which what Section 50C read with Section 2(14) of the IT Act speaks about, is the property. We are therefore, not in agreement with what has been held in Atul Puranik (supra). In Commissioner of Income Tax v. Greenfield Hotels and Estates Pvt. Ltd., (2016) 389 ITR 0068 (Bom), all that has been said, is that since the Tribunal did not challenge its earlier view, it was binding upon it. As indicated above, Atul Puranik (supra), does not address the issue at all in light of the language of the statutory provision and therefore cannot be considered as a good law, in view of which, Greenfield Hotels and Estates Pvt. Ltd. (supra) would also be of no assistance. In view of the above discussion, we do not see any reason to entertain the appeal. The same is therefore dismissed.” 4.7. The Ld.AR thus submitted that, as on today, this issue has been held against the assessee since the Hon’ble High Court imported definition of capital assets u/s.2(14)(a) of the Act into section 50C of the Act.

Thus two things are noticeable from this 'provision: • THAT it is a deeming provision and • THAT it extends only to land or building or both.

6.2. It is also apparent that the deeming provision has been incorporated to substitute the value adopted or assessed or assessable by stamp valuation authority in place of consideration received or accruing as a result of transfer of land or building or both and in case the latter is lower than the former. From the language used in sub-section (1) of section 50C of the Act, it is clear that the value of land or building or both adopted or A.Y. 2006-07 Nutrela Marketing Pvt Ltd assessed or assessable by the stamp valuation authority shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such a transfer. 6.3. Hon'ble Supreme Court in CIT v. Amarchand N. Shroff reported in(1963) 48 ITR 59 considered the scope of a deeming provision and came to hold that it cannot be extended beyond the object for which it is enacted. Similar view has been reiterated by Hon'ble Supreme Court in CIT v. Mother India Refrigeration Industries (P.) Ltd. reported in (1985) 155 ITR 711 by laying down that, "legal fictions are created only for some definite purple and these must be limited to that purpose and should not be extended beyond their legitimate field".

6.4. Before us, the case sought to be made out by the assessee is that section 50C, being a deeming provision, has to be strictly interpreted, and, that, section 50C(1) covers capital asset being "land or building or both". Whereas in the instant case, what is transacted is leasehold rights in land and building, which is a distinct 'Capital Asset'. In our view, this distinction is well- founded, and can be gauged from the Act itself. We refer to section 54D(1) of the Act, that reads as under:

"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...." [emphasis supplied] A.Y. 2006-07 Nutrela Marketing Pvt Ltd 6.5. 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. In contrast, section 50C(1) of the Act is worded only cover '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'. In our view, the legislature, in its wisdom, used the expression 'land or building or both' in section 50C(1) of the Act, as against the expression 'any right in land or building'.

6.6. It is thus noted that, Parliament was aware of the distinction and has used differently between 'land or building' on one hand and 'or any rights in land or building' on the other. At this juncture it is apt to apply the legal maxim Expressio Unius Est Exclusio Alterius, meaning thereby, express mention of one implies the exclusion of another. This legal premise is supported by the decision of Hon'ble Supreme Court in the case of GVK Industries Ltd reported in (2011) 197 Taxman 337.

Be that as it may, the decision of Hon’ble Bombay High Court (Nagpur Bench) (supra) is a subsequent decision. Wherein identical issue has been decided against the assessee in case of Vidarbha Veneer Industries Ltd., wherein the previous decisions by Hon’ble Bombay High Court in case of Green Field Hotel & A.Y. 2006-07 Nutrela Marketing Pvt Ltd Estates (P) Ltd reported in 389 ITR 68 has been considered. Following the ‘doctrine of Stare Decisis’ the decision of Hon’ble Bombay High Court (Nagpur Bench) being the latest decision on the issue, needs to be followed. Respectfully following the decision of Hon’ble Bombay High in case of Vidarbha Veneer Industries Ltd. (supra) the view taken by Ld.CIT(A) is not found fault with Accordingly the grounds raised by the assessee is dismissed. In the result the appeal filed by the assessee dismissed. Order pronounced in the open court on 30/09/2025