The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has recently held that section 50C of the Income Tax Act, 1961 cannot be invoked in respect of the right to receive compensation on compulsory acquisition of land and the TDR rights as the same would not come within the meaning of “immovable property”.
During the relevant year, the assessees had jointly sold their land admeasuring 405 sq. yds along with buildings thereon situated on the roadside at Punjagutta Main Road. The aforesaid property was notified for acquisition for road widening in the year 1998. Due to the impending acquisition by the Government the property had lost its marketability. The assessee received a total compensation of Rs. 46,22,878/- along with the TDR Rights.
The Assessing Officer had reopened the assessee, a HUF by observing that there is escapement of income since the SRO value of the property sold jointly by them was higher than the actual sale consideration received by both the assessees.
The Tribunal observed that to avoid genuine hardships to the assessee, the provisions of Section 50C(2) of the Act provided for referring the matter to the Valuation officer of the Revenue to determine the actual market value of the immovable property sold by considering all the relevant factors which may not have been considered by the State Valuation Authority.
“It is pertinent to mention that the provisions of section 50C was introduced to curb the menace of unaccounted cash being infused in the real estate transactions. Quite often the actual sale consideration paid for acquiring immovable property is more than the sale consideration disclosed in the sale deed executed. In order to overcome the escapement of Capital Gain Tax on such transactions, Section 50C was introduced in the Statute, so as to at least adopt the market value of the State Revenue Authority as the sale consideration for the purpose of computing Capital Gain under the provisions of the Act,” the Tribunal observed.
It was further noted that in the case of the assessee, the value of the property is already determined by the State Government which is nothing but the amount of Rs. 46,22,878/- coupled with certain TDS rights.
Deleting the addition, the Tribunal held that “it is pertinent to mention that no compensation is paid by way of cash for the acquisition of the land in the case of both the assessees. Moreover considering the facts and circumstances of the case, it is apparent that the assessees have not actually transferred their immovable property consisting of land and building but have only transferred their right to receive the amount of the compensation of Rs. 46,22,878/- and the TDR rights and both these assets do not fall under the category of immovable property.”
Subscribe Taxscan Premium to view the Judgment
