The Income Tax appellate tribunal (ITAT) in a case recently held that Section 50C (1) of the Income Tax Act 1961 cannot be invoked in case of transfer of leasehold right.
As per section 50C (1) of the Income Tax Act 1961 refer that an assessee received any consideration by way of transfer of asset it may be land, or building, or both in such a case the value of the asset is less than that assessed by the authority of state government for the purpose of payment of stamp duty, the assessed value is consider as the full value of the consideration in case of result of the above transfer.
The assessee Narendra Shantikumar Firodia is an individual and partner in certain firms carrying out businesses like manufacturing of C.I. casting, mobile, electrical goods, builders and developers etc. He filed a return of income along with claiming of long term capital loss arising from transfer of immovable property. After the scrutiny assessment the assessing officer pointed out that the value of transfer of property is lower than the value adopted for stamp duty valuation and it would invoked the provisions of section 50C Income Tax Act 1961 and made additional amount.Against these additional assessee filed an appeal before the ITAT.
On behalf of the assessee C. H. Naniwadekar contended that “provisions of section 50C are self-contained which calls for no addition thereto or subtraction therefrom, hence utterly land and building or both only falls within the realm of section 50C, thus it expunges all other assets from its terrain”. Further the revenue erred in holding the transfer of leasehold property is a subject matter of section 50C.
Counsel for the revenue submit that “land & building irrespective of whether leasehold or freehold falls with the ambit of section 50C, as it make no distinction while defining the class of assets falling within its purview”
After considering the contentions of the both parties The Division bench of ITAT Pune comprising G. D. Padmahshali, Accountant Member, and SS Viswanethra Ravi, Judicial Member, allowed the appeal and held that the transaction of transfer of leasehold right in question did not warrant invoking of section 50C(1) of the Income Tax Act 1961.
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