Case Law Details
On applicability of Section 50C of the Act in absence of registered document- Capital gain has to be computed on the basis of sale consideration received or accruing to the taxpayer. Even if the document was not registered, the capital gain has to be computed on the basis of the sale consideration shown and received by the taxpayer unless there was material to show that the sale consideration was understated. In this case, the document was not registered and no stamp duty had been paid. Therefore, stamp duty value cannot be adopted for the purpose of computation of capital gain and the value shown in the agreement has to be adopted as there is no material to show that the taxpayer had understated the sale consideration.
It is pertinent to note that an amendment has been made in Section 50C of the Act with effect from 1 October 2009 to bring unregistered document also under the purview of Section 50C of the Act. In view of this amendment, this Ruling would not hold good for the sale transactions entered into post 1 October 2009. However, it would still hold good for the sale transactions that are entered into prior to 1 October 2009
On applicability of Section 50C of the Act to tenancy rights –Only for the limited purpose of computation of capital gain in respect of sale of land and building, stamp duty value has to be substituted for sale consideration in view of specific provisions of Section 50C of the Act.Therefore, provisions of section 50C of the Act cannot be applied in case of transfer of tenancy rights in respect of land or building or both.
INCOME TAX APPELLATE TRIBUNAL, MUMBAI
ITA No. 6320/M/2010
Assessment Years: 2007- 08
Asst. Commissioner of Income Tax
Vs.
M/s. Munsons Textiles
Date of pronouncement: 03.02.2012
ORDER
Per RAJENDRA SINGH (AM)
This appeal by the revenue is directed against the order of CIT(A) dated 24.6.2010 for the assessment year 2007-08. The only dispute raised in this appeal is regarding the sale value in respect of transfer of tenancy rights for the purpose of computation of capital gain.
2. Facts in brief are that the assessee during the year had transferred tenancy right of the factory godown measuring 1800 sqft. for a sum of Rs.55.00 lacs. The AO noted that the deed of assignment was not registered for the purpose of stamp duty as required under section SS of the Maharashtra Rent Control Act. The AO therefore held that the sale consideration shown could not be accepted as the unregistered document was not valid evidence. He, therefore, concluded that market value had to be substituted for sale consideration shown in the document. The AO further observed that the property was situated in a prime locality in South Bombay and the sale consideration was understated. The AO also held that the transfer of tenancy right was akin to transfer of building and, therefore, provisions of section SOC were applicable. He, therefore adopted stamp duty value as sale consideration for the computation of capital gain.
2.1 In appeal, CIT(A) held that tenancy right was no doubt a capital asset but the same could not be considered as land and building. Therefore, provisions of section SOC were not applicable. Moreover, the tenancy surrender agreement was not registered and therefore, the stamp duty value was not known. CIT(A) further held that the sale consideration shown by the assessee was in conformity with the market value. The AO himself had taken the value of entire asset at Rs.91,36,OSO/-. The asset was more than 40 years old and stamp duty reckoner value was normally SO% of the market value. The assessee was only a sub-tenant and therefore consideration towards surrender of tenancy rights had to be split between the owner and the tenant. CIT(A) concluded that the sum of Rs.SS.00 lacs as disclosed by the assessee was reasonable considering the total market value of Rs.93.6 lacs. He, therefore, deleted the addition made by the AO aggrieved by which revenue is in appeal before the Tribunal.
3. Before us, the ld. DR appearing for the revenue assailed the order of CIT(A). He supported the view of the AO that the transfer of tenancy rights was akin to ownership right and therefore CIT(A) was not justified in not adopting the value as per section 50C of the IT Act. The ld. AR for the assessee on the other hand supported the order of CIT(A) and argued that provisions of section 50C were not applicable in case of tenancy rights. He placed reliance on the decision of Mumbai Bench of the Tribunal in case of Atul G. Puranik vs. ITO (132 ITD 499)(Bom). It was also argued that in case document was not registered and no stamp duty was paid, provisions of section 50C could not be applied even in case of transfer of land/building. Reliance was placed on the Lucknow Bench of the Tribunal in the case of Carlton Hotel (P.) Ltd. (122 TTJ 515) and the decision of the Jaipur Bench of the Tribunal in the case of Smt. Vijay Laxmi Dhaddha Vs. ITO (20 DTR (Jp.)(Trib.) 365). It was accordingly urged that the order of CIT(A) should be upheld.
4. We have perused the records and considered the rival contentions carefully. The dispute is regarding the sale value of the transfer of tenancy rights for the purpose of computation of capital gain. There is no dispute that the transfer of tenancy rights is a capital asset and income is assessable as capital gain. The dispute is only about sale value. Assessee had shown value of Rs.55.00 lacs in respect of transfer of tenancy rights relating to about 1800 sq.ft. area of factory godown. Capital gain has to be computed on the basis of sale consideration received or accruing to the assessee. Even if the document was not registered, the capital gain has to be computed on the basis of the sale consideration shown and received by the assessee unless there was material to show that the sale consideration was understated. Market value cannot be substituted for sale consideration while computing capital gain. Only for the limited purpose of computation of capital gain in respect of sale of land and building, stamp duty value has to be substituted for sale consideration in view of specific provisions of section 50C. Therefore, provisions of section 50C can not be applied in case of transfer of tenancy rights in respect of land or building or both. This view is supported by the decision of the Tribunal in case of Atul G. Puranik vs. ITO (supra), in which it was held that right in plot of land cannot be considered as land or building or both and therefore, provisions of section 50C could not be applied in case of lease hold rights in land. Further the Lucknow Bench of the Tribunal in the case of Carlton Hotel (P.) Ltd. vs. ACIT (supra), has held that even in case of transfer of land, provisions of Section 50C cannot be invoked in case the property was not registered and no stamp duty was paid. In this case, admittedly the document was not registered and no stamp duty had been paid. Therefore, following the aforesaid decision of the Tribunal, stamp duty value can not be adopted for the purpose of computation of capital gain and the value shown in the agreement has to be adopted as there is no material to show that the assessee had understated the sale consideration. We, therefore, see no infirmity in the order of CIT(A) and the same is, therefore, upheld.
5. In the result appeal of the revenue is dismissed.
Order pronounced in the open court on 3.2.2012.
