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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO
सुनवाई की तायीख / Date of Hearing : 06.02.2017 घोषणा की तायीख /Date of Pronouncement : 06.02.2017 आदेश / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 16.9.2016 is against the order of the CIT (A)-37, Mumbai dated 2.6.2016 for the assessment year 2006-07. In this appeal, assessee raised the following grounds which read as under:- “1. On the facts and in the circumstances of the case, the Ld CIT (A) erred in not holding that the assessment order was illegal and wholly without jurisdiction.
2. On the facts and in the circumstances of the case and in law, the notice u/s 148 and re-assessment proceedings are wholly without jurisdiction and void ab initio. The recorded reasons for reopening do not indicate any tangible material or any failure to make full and true disclosure by the assessee. There is no „reason to believe‟ that income has escaped assessment, and the reopening is on a mere change of opinion.
3. On the facts and in the circumstances of the case the Ld CIT (A) erred in upholding application of section 50C of the Income Tax Act, 1961 on the basis that the assessee had transferred a capital asset. The Ld CIT (A) failed to appreciate that section 50C applies only to „land‟ or „building‟ or „both‟ and the assessee had transferred neither.
4. On the facts and in the circumstances of the case and in law, the Ld CIT (A) ought to have followed the decisions of the jurisdictional ITAT Benches holding that tenancy rights are not covered within the scope of section 50C.”
2. At the outset, Ld Counsel for the assessee brought my attention to the above grounds and mentioned that assessee raised a legal issue relating to the provisions of section 50C of the Act if these provisions attract the transactions of „transfer of tenancy rights‟ for the AY 2006-07. The provisions of section 50C of the Act deals with the transactions involving „land‟ or „building‟ or „both‟ and not the „rights‟ in such assets. AO, in the re-assessment proceedings invoked the provisions of section 148 of the Act for taxing the „tenancy rights‟ in the case of the assessee. On this issue, on finding that the CIT (A) confirmed the addition, assessee is in further appeal before the Tribunal.
During the proceedings before me, Ld Counsel for the assessee mentioned the authorities considered that the „tenancy rights‟ attract the provisions of section 50C of the Act. In Ground no.4 of the appeal, assessee mentioned favourable decisions of the Tribunal on this issue were ignored before invoking the provisions of section 50C of the Act.
On hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the relevant material placed before me, I find, assessee surrendered the tenancy rights and earned capital gains. However, assessee relied on the binding Coordinate Bench decision of the Tribunal in the case of Atul G. Puranik vs. ITO [2011] (132 ITD 499) (Bom.) wherein, the Tribunal held that the lease right in a plot cannot be considered as „land‟ or „building‟ or „both‟. Therefore, the provisions of section 50C cannot be applied in the case of lease holding rights in land. Further, in the case of ACIT vs. M/s. Munsons Textiles in dated 3.2.2012 the Tribunal gave relief to the assessee relying on the above referred decision, wherein the core issue involved relates to the transfer of tenancy rights. Thus, it is a consistent view of the Tribunal that lease rights and tenancy rights are outside the scope of the provisions of section 50C of the Act. Considering the above, I find, the FAA has a view which is unfavourable to the assessee. This approach of the CIT (A) is highly deplorable and contrary to the judicial discipline. The authorities under our jurisdiction are bound to follow the decisions of the ITAT, Mumbai Bench. Therefore, I am of the opinion, the order of the CIT (A) is required to be reversed and the claim made by the assessee in the return is required to be accepted without any changes. Accordingly, grounds raised by the assessee are allowed.