During the assessment proceedings, Assessing Officer (AO) noticed that Stamp Duty value of the property transferred by assessee was more than its sale consideration. AO required assessee to show cause as to why Section 50C should not be invoked for the purpose of computation of capital gains. Assessee contended that Section 50C not applicable in its case as “capital asset” transferred does not fall within the purview of Section 50C. Section 50C covers a “Capital Asset” being land or building or both” whereas assessee had transferred merely leasehold rights in the property.

Assessee further contended that expression “land or building or both” used in Section 50C would not include leasehold right in land or building or both. Assessee submitted that it had taken land on lease for a period of 90 years and constructed a tower out of which a portion had been sub-leased. What had been transacted was only leasehold right in the land or building, which was quite distinct from the ‘capital asset’ referred to in Section 50C.

On appeal, Delhi ITAT held that the expression ‘land or building’ in its coverage is quite distinct from the expression ‘any right in land or building’. The legislature, in its wisdom, has used the expression ‘land or building or both’ in section 50C, and not the expression ‘any right in land or building’. Therefore, the express use of one expression would exclude the other. The Hon’ble Supreme Court has supported this legal premises in the case of GVK Industries Ltd. v. ITO – [2011] 197 Taxman 337 (SC). Thus, transfer of leasehold rights does not warrant invoking of Section 50C as the said property is not of the nature covered by Section 50C.