The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the Section 50C of the Income Tax Act 1961 is applicable to transfer of capital asset of land or building and not to the transfer of rights.
The assessee, Fashion Group International, was a partnership firm, claimed a long term capital loss in its return of income for the relevant assessment year on transfer of two properties.
The assessee had purchased two properties for construction of factory building via two separate Agreement to Sell. The assessee intended to construct a factory building on the impugned land. However, due to certain restrictions from HUDA, the assessee could not register the land in its name.
As the properties were not in its name, the assessee was unable to construct the factory building. The sale consideration / was fully paid at the time of entering into the Agreement to Sell. it could not construct the factory building and also could not sell the same to any third party.
The assessee and the seller settled the dispute between the two parties holding when the amount was received from the ultimate buyer the same would be forwarded to the assessee. The Assessing Officer invoking the provisions of Section 50C of the Income Tax Act and applying the stamp valuation of the properties, made an addition
Rano Jain, on behalf of the assessee submitted that the assessee was never owner of the property and what was transfer during the year under consideration was only right in the property under agreement to sell
Sanjay Kumar on behalf of the revenue submitted that the assessee was claiming long term capital loss and it was right in making addition under Section 50C of the Income Tax Act.
The two-member Bench of Chandra Mohan Garg, (Judicial Member) and Pradip Kumar Kedia, (Accountant Member) allowed the ppeal filed by the assessee holding that the provisions of Section 50C of the Income Tax Act were applicable in case of transfer of a capital asset being land or building or both.
In the present case the transfer was not any land or building or both on the part of the assessee. At best it could only be said to be transfer of rights in properties.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
