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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-1,Kolhapur 07-09-2017 for the Assessment Year 2009-10.
Grounds raised by the assessee are extracted as under :
“1. The Ld.CIT(A) erred in law and on facts in confirming addition of Rs.8,50,000/- u/s.50C in respect of lease land rights of MIDC, Sangli. 2. The Ld.CIT(A) erred in not appreciating that the subject matter of transfer was leasehold rights in respect of land owned by MIDC to Rajesh Aluminium and in view of the decision of Hon’ble Mumbai High Court in case of CIT Vs. Greenfield Hotels & Estates Pvt. Ltd. 389 ITR 0068 (Bom) the provisions of section 50C cannot be applied to leasehold land. 3. The appellant craves to add, alter, modify or substitute any ground of appeal at the time of hearing.”
Briefly stated relevant facts are that the assessee is an individual
and is engaged in the business of manufacturing of Ayurvedik medicine
in the name of ‘Velankar Aurvedik Aushadhi Nirmate’ at MIDC,
Kupwad. Assessee filed the return declaring loss of Rs.26,15,488/-.
Subsequently, the assessee revised the return of income declaring total
income of Rs.1,45,920/-. Taking cue from the transaction of sale of
land/building/furniture to M/s. Rajesh Aluminium, for bringing the
capital gains to tax, a notice u/s.148 was issued in this regard. During
the course of assessment proceedings, assessee submitted that the
assessee got allotment of land in Industrial Development, MIDC, Sangli
in the year on 29-01-1986 and the same is now sold to M/s. Rajesh
Aluminium for a sum of Rs.14 lakhs. The valuation of the land as per
the Sub registrar’s office is Rs.22,22,500/-. The sale agreement is
dated 24-11-2018. Assessee made a prayer stating that the assessee is
not an absolute owner of the land. The land is only a leasehold land
and therefore, the provisions of section 50C of the Act do not apply to
the leasehold land sale transaction. Further, he submitted that the
agreement is signed between MIDC and M/s. Rajesh Aluminium and
therefore, the assessee is not a party to the agreement. In this regard,
assessee filed the written submissions as per his letter dated 09-08-
2016. He also argued that the undertaking was sold as a going concern
and therefore, the gains if any should constitute “long term capital
gains”. AO issued letter dated 17-08-2016 proposing to calculate the
short term capital gains of Rs.12,56,575/- taking the cost of the asset
at Rs.9,65,925/-. In reply, the assessee vide letter dated 08-09-2016
repeated the arguments stating that the capital gains do not arise on
the assessee and the provisions of section 50C do not apply to the
leasehold land. Without prejudice, assessee submitted that the asset
sold is of 4 years old and therefore, the same constitute long term
assets unused for business purposes for the past 3 years due to closure
of the undertaking. He also demanded for grant of indexation benefit
on the said land and building. According to his calculation, the capital
loss worked out to Rs.41,617/-. Assessee considered the sale proceeds
of Rs.14 lakhs and indexed cost of Rs.14,41,617/-. Assessee
considered the same and computed the long term capital gains as
against the short term capital gains of Rs.12,56,575/-. Para No.6 of the
assessment order is relevant and the same is extracted as under :
“6. I have carefully gone through the submission furnished by the assessee and the same is not acceptable as on going the return for A.Y. 2008-09 and other details furnished it is found that the assessee had obtained loan from MSFC for construction of the building and also it is seen that the assessee has claimed depreciation on the said property, therefore, the said factor building is a business asset. Thus this being a business asset short term capital gain is attracted on the sale of this asset. In view of the above short term capital gain is computed as under: Sale price as per section 50C Rs.22,22,500 Less : Cost as per books Rs. 9,65,925 --------------------- SHORT TERM CAPITAL GAIN Rs.12,56,575 (As per provisions of section 50 of the I.T. Act, 1961) --------------------
In view of the above short term capital gain of Rs.12,56,575 is adopted while computing the total income of the assessee for the A.Y. 2009-10 instead of Long term capital loss of Rs.26,15,488/- declared by the assessee for the year under consideration. As the assessee concealed the particulars of income to the extent of Rs.12,56,575/- penalty proceedings u/s.271(1)(c) is initiated separately.”
During the First Appellate proceedings, assessee raised the legal
issues on the validity of the assessment and also the applicability of
provisions of section 50C of the Act and other relates issues on merits.
At the end of the proceedings, the CIT(A), Kolhapur dismissed the core
issue relating to application of the provisions of section 50C of the Act
and also other aspects on validity of reopening as well as sale of
undertaking. Eventually, the CIT(A) partly allowed the appeal of the
assessee.
Aggrieved with the same, the assessee is in appeal before the
Tribunal with the grounds extracted above and the core issue raised in
the grounds relates to the applicability of provisions of section 50C of
the Act in respect of transfer of leasehold rights of land of MIDC to M/s.
Rajesh Aluminium. Assessee relied on the judgment of Bombay High
Court in the case of CIT Vs. Greenfield Hotels & Estates Pvt. Ltd. 389
ITR 0068 (Bom.). CIT(A) dealt with this issue in para 5 of the appellate
order in general and the contents of Para No.5.3 in particular.
Before me, Ld. Counsel for the assessee drew my attention to the
undisputed fact that the land in question is a leasehold one and in that
case the provisions of section 50C of the Act has no application. For
the proposition, he brought my attention to the decisions of Coordinate
Bench of the Tribunal in the case of Yeshwant Engineering Pvt. Ltd. &
Anr Vs.ITO 51 CCH 0260 (Pune Trib.) and in the case of Kancast Pvt.
Ltd. Vs. ITO 43 CCH 0435 (Pune Trib.) and submitted that the latter
case is very close to the facts of the present case.
Ld. DR relied on the order of the AO.
On hearing both the parties on the limited issue of the
applicability of provisions of section 50C of the Act, I find this issue now
stands covered by the decision of Pune Bench of the Tribunal in the
case of Kancast Pvt. Ltd. Vs. ITO, dated 19-01-2015 (supra) and the
same was not considered by the CIT(A) at the time of adjudication of the
issue before him. Further, the order of the Tribunal in the case of
Yeshwant Engineering Pvt. Ltd. and another Vs. ITO, dated 09-10-2017
(supra) is also relevant for the similar proposition (subsequent to the
order of CIT(A) order dated 07-9-2017). For the sake of completeness,
the relevant conclusions of the above decisions are extracted here as
under :
Conclusion in the case of Kancast Pvt. Ltd. Vs. ITO :
“When Assessee transferred only leasehold rights in land which were acquired by it from Maharashtra Industrial Development Corporation (i.e. MIDC) on 99 years lease basis, S.50C shall not come into operation.”
Conclusion in the case of Conclusion in the case of Kancast Pvt. Ltd. Vs. ITO
“Provisions of section 50C were not applicable to transfer of land and building being a leasehold property.”
8.1 Further, I have examined the judgment of Hon’ble Bombay High
Court in the case of CIT Vs. Greenfield Hotels and Estates Pvt. Ltd. 389
ITR 0068 (Bom.) and find the same is decided in favour of the assessee
and consequently, the provisions of section 50C of the Act are not
applicable to the case of transaction of transfer of land/building, being
a leasehold property.
Considering the above settled legal proposition, I am of the
opinion that the order of CIT(A) is required to be reversed on the legal
issue. Accordingly, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced on this 06th day of June, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 06th June, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Kolhapur 3. आयकर आयु� / The CIT-1, Kolhapur 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune