RIECO INDUSTRIES LIMITEED,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 5, PUNE

The assessee has raised the following grounds of appeal:- 1. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in upholding A.O.'s action of relying on the Asstt. Valuation Officer's report for the purposes of sec. 50C, when the aforesaid section was not applicable to the instant case in the first place. The learned

The issue raised in the present appeal is against computation of income from capital gains in the hands of assessee, wherein the case of assessee is that since the land owned by it is leasehold land, then the provisions of section 50C of the Act are not applicable.

Briefly, in the facts of the case, the assessee was engaged in the manufacturing of air pollution control equipments, size reduction equipments, pneumatic conveying system and other spares. During the year under consideration, the assessee had sold two pieces of plots of land bearing No.49 and 50 at MIDC. The assessee had received lesser sale consideration than the stamp duty valuation adopted in the case for both the plots of land. The Assessing Officer during the course of assessment proceedings noted the aforesaid fact and made reference to the Valuation Officer under section 50C(2) of the Act. In the final analysis the said valuation was adopted for computing the income from capital gains in the hands of assessee. The said computation of Assessing Officer was upheld by CIT(A), against which the assessee is in appeal.

The learned Authorized Representative for the assessee pointed out that it was undisputed that both the plots of land sold by it were on leasehold for 95

The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below. The learned Departmental Representative for the Revenue had moved an application for adjournment, which was refused as the matter stands covered by order of Hon’ble Bombay High Court on the issue.

We have heard the rival contentions and perused the record. The issue which arises is with regard to transfer of capital asset being leasehold rights in land. The proposition which has been raised in the present appeal is whether on transfer of such leasehold rights in land / building would attract the provisions of section 50C of the Act or not.

We find that the issue stands covered by the order of Pune Bench of Tribunal in Kancast (P.) Ltd. Vs. ITO (supra), wherein it was held that when only leasehold rights in land which were acquired by the said assessee from MIDC on 99 years lease basis were transferred, then the provisions of section 50C of the Act were not attracted. Hence, the Assessing Officer was directed

The Hon’ble Bombay High Court in CIT Vs. Greenfield Hotels & Estates (P.) Ltd. (supra) had also upheld similar proposition that section 50C of the Act would not be applicable while computing capital gains on transfer of leasehold rights in land and building.

The issue arising in the present appeal before us is identical to the issue before the Hon’ble Bombay High Court in CIT Vs. Greenfield Hotels & Estates (P.) Ltd. (supra) and Pune Bench of Tribunal in Kancast (P.) Ltd. Vs. ITO (supra) and following the same parity of reasoning, we hold that where the assessee had transferred rights in leasehold land, then on such transfer the provisions of section 50C of the Act are not attracted and there is no merit in the computation of income on long term capital gains carried on by the authorities below. Accordingly, we direct the Assessing Officer to adopt the sale consideration as declared by assessee for working out the income from long term capital gains in the hands of assessee. The grounds of appeal raised by assessee are thus, allowed.

In the result, the appeal of assessee is allowed.