REKHA AGGARWAL,MUMBAI vs. ITO, JAIPUR

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ITA 559/JPR/2016Status: DisposedITAT Jaipur17 February 2017AY 2011-1213 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 50C of the Income Tax Act, 1961, is a deeming provision that applies only to capital assets being land or building or both. It cannot be extended to the transfer of a right to acquire a property. The Tribunal noted that the agreement of conveyance dated 06.04.2007, by which the assessee acquired the asset, referred to an 'allotment' and the 'demised premises' being a flat, indicating a right to acquire the flat. Similarly, the sale agreement also pertained to the transfer of this right. The Tribunal found that the distinction between 'land or building' and 'any right in land or building' is well-recognized under the Income Tax Act, as evidenced by Section 54D. Therefore, since what was transferred was a right of allotment and not the actual property itself, the deeming provisions of Section 50C were not applicable. The Tribunal relied on the Coordinate Bench decision in Atul G. Puranik (supra) which squarely supported the assessee's case. The ground taken by the assessee was allowed.

What were the facts?

The assessee, Mrs. Rekha Agarwal, filed an appeal against the order of the CIT(A)-2, Jaipur, for Assessment Year 2011-12. The Assessing Officer (AO) had treated the sale consideration of a flat at Medicity, Gurgaon, at Rs. 65,00,000/- as per DLC rates, applying Section 50C of the Income Tax Act, 1961, and brought Rs. 32,50,000/- to tax. The assessee contended that she sold a right to acquire a property, not the property itself, and therefore Section 50C was not applicable. The AO observed that the property was under construction at the time of purchase and sale, and thus only agreements were executed, not registered sale deeds. The CIT(A) upheld the AO's view, stating that the agreements referred to a flat, not just a right.

What were the issues?

1. Whether the assessee sold a right to acquire a property or the property itself, and consequently, whether Section 50C of the Income Tax Act, 1961, is applicable to the transfer of a right to acquire a property. Assessee's contentions: The assessee argued that Section 50C applies only to land or building or both, and a right in property is a movable asset, making Section 50C inapplicable. The value adopted by the AO for calculating long-term capital gain was illegal. The assessee relied on the Coordinate Bench decision in Atul G. Puranik vs. ITO (132 ITD 499) and Supreme Court judgments in CIT vs. Amar Chand N. Shroff and CIT vs. Mother India Refrigeration Industries P. Ltd., stating that deeming provisions cannot be extended beyond their intended purpose. Revenue's contentions: The Revenue, through the Addl.CIT, relied on the findings of the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 50C,Section 48,Section 54D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR

Before: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM

For Appellant: Shri H.M. Singhvi (CA)
For Respondent: Shri R.A. Verma (Addl.CIT)
Hearing: 16.02.2017Pronounced: 17/02/2017

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