Deeming Provisions Of Section 50C Can’t Be Applied For Leasehold Rights: Delhi ITAT

 

Shivdeep Tyagi Appeal No: ITA No. 484/Del/2024

Facts:

1.  The AO, based on AIR information, found that the assessee sold a leasehold property for Rs. 60,00,000/- but did not declare the capital gains derived thereon for tax in the relevant year.

2.  The AO reopened the assessment under section 147/143(3) of the Income Tax Act and taxed the entire sale consideration of Rs. 75,94,850/- (stamp duty value) due to the lack of proof of cost of acquisition provided by the assessee.

3.  The assessee argued that Section 50C of the Income Tax Act is a deeming provision and is not applicable to the transfer of leasehold rights. It applies only to capital assets that are land or building or both.

Note:

Section 50C:

This section deems the value adopted or assessed by the stamp valuation authority as the full value of consideration for the purpose of calculating capital gains if the actual consideration is less than the stamp duty value.

It is applicable only to transfers of capital assets being land or building or both.

Delhi ITAT held as below:

1.  Hon SC is Amarchand N. Shroff and Mother India Refrigeration Industries (P.) Ltd. ruled that deeming provisions cannot extend beyond their explicit mandate. Hon Bombay High Court in Greenfield Hotels & Estates (P.) Ltd. and Delhi ITAT in Noida Cyber Park (P.) Ltd. held that Section 50C does not apply to leasehold rights.

2.  Section 50C, being a special deeming provision, its applicability cannot be extended to any asset other than those specifically provided therein.

3.  Thus Sec 50C applies only to the transfer of capital assets that are land or building or both, and not to leasehold rights.

4.  The appeal is partly allowed for statistical purposes, and the matter regarding the reopening of the assessment was restored to the file of the CIT(A) for fresh adjudication.

The Copy Of the Order as Under:

1718708912-Shivdeep Tyagi, 484-2024 (1)