KUMARPAL MOHANLAL JAIN,MUMBAI vs. ITO WD 18(1)(3), MUMBAI

The present appeal has been preferred by the assessee against the order dated 16.07.2010 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2006-07.

Earlier the appeal was decided by the Tribunal vide order dated 23.10.13. The assessee in his appeal has taken two grounds of appeal. However, the ground No.1 was inadvertently not decided by the Tribunal while deciding the appeal of the assessee vide order dated 23.10.13. The assessee moved miscellaneous application No.429/M/2013 pointing out the error occurred in the order dated 23.10.13. The said application was decided by the Tribunal vide order dated 04.04.14 and the order of the Tribunal was therefore recalled on the limited issue for disposal of ground No.1 only of the assessee’s appeal.

We have heard on ground No.1 of the assessee’s appeal. The assessee vide ground No.1 of the appeal has agitated the action of the Ld. CIT(A) in accepting the report of the DVO estimating the value of the property sold at Rs.53,94,000/- as against the sale consideration of Rs.25 lakhs disclosed by the assessee. Admittedly, the assessee during the year under consideration sold the leasehold rights in the MIDC land along with built up structure for a net consideration of Rs.25.80 lakh vide deed of assignment dated 29.04.05. The Stamp Duty Authorities levied the stamp duty upon the registration of the said deed adopting the value of the land and building at Rs.77,33,000/-. The Assessing Officer (hereinafter referred to as the AO) applied the provisions of section 50C of the Act and adopted the value of the property as determined by the Stamp Duty Authorities and taxed the capital gains accordingly.

In appeal, the assessee requested to the Ld. CIT(A) that the matter be referred to the DVO for appropriate valuation of the property. Consequently, the matter was referred to the DVO. The DVO determined the value of the property at Rs.53.94 lakhs. The Ld. CIT(A) adopted the value determined by the DVO and directed the AO to tax the capital gains accordingly. Being aggrieved, the assessee has come in appeal before us on this issue.

We have heard the rival contentions and have also gone through the records. The Ld. A.R. of the assessee has submitted that the Stamp Duty Authorities had adopted the value of ownership rights over land & building whereas the assessee had transferred only the leasehold rights. Original lease deed was for 95 years by the MIDC. However, the assessee has transferred the leasehold rights for the balance lease period of 55 years and further that the section 50C does not apply to the leasehold rights. He has further submitted that even the DVO has adopted the fair market value more than the Stamp Duty Authorities. The Ld. D.R., on the other hand, has relied upon the order of the Ld. CIT(A).

We have considered the rival submissions. Admittedly, the MIDC has originally given the lease of the land in the year 1964. The Assessee had purchased the leasehold rights in the property in 1991 for a sum of Rs.9 lakhs and after carrying out his business for 15 years had sold the same for Rs.25 lakhs vide deed of assessment dated 29.04.05. Hence, the assessee had sold the leasehold rights for the remaining period of 55 years. A perusal of the provisions of section 50C of the Act reveals that the same are applicable for the transfer of land or building or both, however, the leasehold rights or the tenancy rights are different from the ownership of land or building itself. Reliance in this respect can be placed on the following decisions:

In the result, the appeal of the assessee on the limited issue in relation to ground No.1 is hereby allowed. Even at the cost of repetition, we again mention that the other ground of appeal of the assessee has already been decided by the Tribunal vide order dated 23.10.13.