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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER
PER BENCH:- This assessee’s appeal for A.Y. 2009-10, arises from order of the CIT(A)-2, Rajkot dated 23-02-2017, in Appeal No. CIT(A)-2/0174/2014- 15, in proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short “the Act”.
The assessee has raised the following grounds of appeal:-
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“01. That the Learned C.I.T. (A) 2, Rajkot has grievously erred in confirming that the reassessment proceedings v/s 147 were validly initiated.
That alternatively and without prejudice to the above, the Learned C.I.T. (A) - 2, Rajkot has grievously erred in confirming the addition made u/s 50C of the of Rs.82,27,950/-
02 That the appellant craves for leave to add, amend or modify the grounds of appeal.”
The brief facts of the case are that the assessee is a cooperative Society engaged in the business of banking and is a duly recognised multistate scheduled bank. During the year under consideration, the assessee filed its original return of income declaring a taxable income of Rs. 6,09,18,830/- which included long-term capital gains of ₹ 43,82,175/-. The original assessment was completed at a taxable income of ₹ 13,73,38,960/-, however, the long-term capital gain was assessed at ₹ 43,82,175/-i.e. at the same figure which was originally filed in the return of income. The assessment of the assessee was reopened under section 148 of the Act for the reason that the assessee had transferred ownership rights of room number 88, 1st floor, Sitaram building, Mumbai for ₹ 6,72,520/-, while the sale value adopted for the purpose of stamp duty was ₹ 89,00,470/-. Therefore, the assessee has suppressed the sale value of property in his return of income to the extent of ₹ 82,27,950/-. Before the AO, the assessee contended that the property under consideration as a leasehold property, and the provisions of section 50C are not applicable to transfer of leasehold property. The assessing officer however held that the Lucknow ITAT in the case of Shri Hari Om Gupta in ITA number 222/LKW/2013, held that leasehold right
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of the land for 99 years is a capital asset to which the provisions of section 50C of the Act are applicable. Therefore, the capital gain on the transfer of such leasehold the right is to be computed in accordance with the provisions of section 50C of the Act.
In appeal before Ld. CIT(Appeals), the assessee challenged the jurisdiction of the AO to reopen proceedings under section 147 of the Act, however, Ld. CIT(Appeals) rejected the assessee’s contention by holding that the assessee has failed to prove that the sale of the impugned property and capital gains thereon had been declared in the return of income. On merits, Ld. CIT(Appeals) dismissed the appeal of the assessee by holding that what the assessee was sold was not a leasehold property, but the ownership rights in the property had been transferred under the impugned sale deed and therefore tenancy right of the buyer had been converted into ownership rights by the sale deed under consideration, where the assessee was shown to the landlord property. While dismissing the appeal on merits, Ld. CIT(Appeals) made the following observations:
“3.1.4 Decision
Having considered facts and circumstances of the case and rival contentions I find that the assessee in the Return of Income had declared capital gain in respect of sale of only one property on 02/03/2009 for consideration of Rs, 1,27,12,615/-. The said property's indexed cost of acquisition was claimed at Rs. 83,30,440 /- and capital gain of Rs. 43,82,775/- was returned and assessed. In assessee's letter filed before AO on 12/11/2011 assessee has admitted to have sold three other properties on 12/09/2008, 17/07/2008 and 12/12/2008 and it is not the case of assessee that he had offered Capital Gain on these sales. More particularly the assessee has failed
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to prove that the sale of Room 8B, 1st floor, Sitaram Building, Princess Estate Munabhai and capital gain thereof had been declared in the Return of Income.
In these facts I find no infirmity in reopening if the assessment. The case laws cited by the assessee are distinguishable on facts. In the present ease the impugned sale has not been rejected by assessee in return of Income and therefore it can be seen that assessee failed to disclosed fully and truly the relevant material facts. Even though in case of re-opening within 4 years, failure on part of assessee is not pre-requisite for reopening the case, in this case even the failure exits. In absence of assessee disclosing full and true facts, there can be no question of A.O. having examined the issue and of there being a change of opinion or review. The contentions of assessee are rejected. The ground of Appeal 1 is rejected.”
The assessee is in appeal before us against the aforesaid order of Ld. CIT(Appeals). The counsel for the assessee submitted that the capital gains on the aforesaid property was duly reflected in the return of income filed by the assessee and drew our attention to page 2 of the paper book to show that an amount of ₹ 43,82,175/-were offered as capital gains in the computation of income for the impugned assessment year. The counsel for the assessee further submitted that the assessee had sold leasehold rights in respect of 50 properties situated in Sitaram building, and furnished before us a list of such properties transferred to various persons. He submitted that the assessee had only sold the lessor rights in such property to the tenants, and this fact was brought to the attention of the AO during the course of assessment proceedings, which he refused to take on record owing to the bulky details. However, no addition in the original assessment was made on this count. The counsel for the assessee then drew our attention to page 12 the paper book containing the reasons for reopening the assessment. The counsel for
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the assessee submitted that the AO erred in facts by observing that the transaction in relation to the impugned property was not disclosed in the return of income by the assessee. The counsel for the assessee submitted that reopening of assessment is not permitted in the instant set of facts since in the original assessment, the issue of long-term capital gains in respect of the impugned property was discussed and hence in the instant set of facts in the case of mere change of opinion. By way of an alternate contention, the counsel for the assessee submitted that section 50C of the Act can at best be a ground to state that insufficient consideration has been received but cannot be a ground for escapement of income so as to initiate proceedings under section 147 of the Act. On merits, the counsel for the assessee drew attention to pages 19 of the paper book to contend that what has been transferred is “leasehold rights” and no ownership in the property has been transferred so as to attract provisions of section 50C of the Act. He drew attention to page 62 of the paper- book) at paragraph 22 to contend that the assessee had only transferred its “leasehold rights” in the said property and no ownership rights are transferred by the impugned sale deed. He relied on pages 61-73 of the paper book to contend that various judicial precedents have held that section 50C of the Act is not attracted in case of transfer of leasehold rights in the property. The Ld. DR in response relied upon the Lucknow ITAT decision in the case of Shri Hari Om Gupta in ITA number 222/LKW/2013, held that leasehold right of the land for 99 years is a capital asset to which the provisions of section 50C of the Act are applicable.
We have heard the rival contentions and perused the material on record. Interestingly, in case of Shri Hari Om Gupta in ITA number
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222/LKW/2013[2017] 82 taxmann.com 398 (Lucknow - Trib.),on which reliance has been placed by the Department, the ITAT has held thatprovisions of section 50C of the Act cannot be invoked in respect of transfer of leasehold rights in a plot/land. In this case, the assessee has acquired the impugned property on lease from Kanpur Development Authority vide lease deed for a period of 99 years.The ITAT observed as under, while deciding the issue in favour of the assessee: “Since it has been repeatedly held by different Benches of the Tribunal that provisions of section 50C of the Act cannot be invoked in respect to the transfer of leasehold rights, we find no infirmity in the order of the ld. CIT (A), who has rightly adjudicated the issue following the order of the Tribunal. We accordingly confirm the same.”
6.1 Recently, the Delhi Tribunal in the case of Noida Cyber Park (P.) Ltd. [2021] 123 taxmann.com 213 (Delhi - Trib.) held that Section 50C covers only capital asset being land or building or both; it would not cover transfer of leasehold rights in land and building. The counsel for the assessee has also relied on various case laws which have held that section 50C of the Act cannot be applied in respect of transfer of leasehold rights in a property. In the instant set of facts, we note that what the assessee has transferred are leasehold rights in the property which vested in him, to the tenant of the property. The same is evident from the terms of “Agreement of Ownership” and page 53 of the paper book. Accordingly, in our considered view, in view of the consistent position taken by various Courts/Tribunals on this issue, we hold that Ld. CIT(Appeals) erred in facts and law in holding that what the
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assessee transferred were ownership rights in the property in question and therefore provisions of section 50C of the Act applied to transfer of rights in the impugned property. What we note is that the assessee itself had leasehold rights in the said property and hence in instant facts, the assessee cannot transfer/confer ownership rights in the said property in favour of the tenant. Further, the assessee has also produced before us a list of 50 properties in respect of which leasehold rights were transferred by the assessee in the same premises i.e. Sitaram building. The Department has only questioned the transfer value in respect of one single property while accepting the sale/transfer value respect of all the other properties. Therefore, considering the above facts and the consistent position taken by various Courts/Tribunals on the issue of applicability of section 50C of the Act on transfer of leasehold rights in the property, we allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06-07-2022
Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Rajkot : Dated 06/07/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file.
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By order,
Assistant Registrar, Income Tax Appellate Tribunal, Rajkot