Mahendra Silk Mills Pvt. Ltd Vs ITO (ITAT Mumbai)
Section 50C Applies to Leasehold Rights; But Stamp Value to Follow Agreement Date-ITAT Grants Major Relief
The core dispute was whether capital gains on transfer of leasehold land and building should be taxed in A.Y. 2009–10 using stamp duty value u/s 50C, and whether such provision applies to leasehold rights.
The ITAT delivered a balanced but significant ruling:
On applicability of Section 50C:
- The assessee argued that leasehold rights are outside 50C
- However, relying on the Bombay High Court ruling in Vidarbha Veneer Industries (2025), the ITAT held:
- “Capital asset” includes property held in any manner (owner, lessee, etc.)
- Transfer of substantial leasehold rights akin to ownership attracts Section 50C
- Accordingly, 50C was held applicable even to leasehold rights
On crucial relief (date of valuation):
- The assessee had entered into agreements in 2001–2002, received consideration through banking channels, and claimed capital gains in A.Y. 2003–04
- Registration happened later (A.Y. 2009–10), leading AO to adopt higher stamp value
The ITAT held:
- Proviso to Section 50C (agreement date vs registration date) is curative and retrospective
- Where consideration (or part) is received through banking channels, stamp value on agreement date must be adopted
Result:
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