This appeal was filed by Khazan Singh Anand (the appellant) against the order dated 22.05.2019 passed by the Commissioner of Income Tax (Appeals)-14, New Delhi, for the assessment year 2016-17. The case was heard by the Income Tax Appellate Tribunal (ITAT), Delhi Bench “SMC-I”, through video conferencing.
The appellant, Khazan Singh Anand, residing at Kothi No. 2, GF Kailash Enclave, Pitampura, New Delhi, with PAN AAAPA1872A, filed his return of income for the assessment year 2016-17 on 04.07.2016, declaring an income of Rs. 567,120. The case was selected for limited scrutiny for the reason that the sale consideration of property shown in the income tax return was less than the value as per stamp authority. Consequently, notice under Section 143(3) was issued on 14.07.2017.
During the year, it was found that the assessee was allotted leasehold rights for plot No. 25, Pocket A3 in Sector 28, Rohini, New Delhi, on 27.11.2014 by the Delhi Development Authority (DDA). The total cost of the plot was Rs. 1,395,120, which was sold on 26.10.2015 for Rs. 20 lakhs. However, the circle rate of the plot as per the stamp duty rate was Rs. 42,10,000. The assessee declared the resultant capital gain as short term capital gain of Rs. 554,880, supported by a market value certification from a registered valuer.
The primary issue raised by the appellant was the applicability of Section 50C of the Income Tax Act on the transfer of leasehold rights. The assessee contended that Section 50C applies only to the transfer of land and building or both, but not to the transfer of leasehold rights.
The assessee argued that the leasehold rights are neither land nor building and thus should not fall under the purview of Section 50C. The assessee relied on various judicial precedents, including the decisions of the Hon’ble Bombay High Court in CIT vs. Greenfield Hotels and Estates Pvt. Ltd and the coordinate benches in cases like Noida Cyber Park Pvt. Ltd ITA No. 165/Del/2020 and Ritz Suppliers Pvt. Ltd vs. ITO.
The Assessing Officer (AO) rejected the contention of the assessee and substituted the sale consideration of Rs. 20 lakhs with the stamp duty valuation of Rs. 42,10,000 under Section 50C of the Act. Consequently, the short term capital gain was recalculated at Rs. 2,764,880, leading to an addition of Rs. 2,210,000. The total income of the assessee was determined at Rs. 2,777,120 against the returned income of Rs. 567,120.
Aggrieved by the order of the AO, the assessee appealed to the CIT(A), who confirmed the addition made by the AO. The CIT(A) upheld the applicability of Section 50C on the transfer of leasehold rights and dismissed the appeal.
The appellant further appealed to the ITAT. The tribunal considered the arguments and judicial precedents presented by the appellant. The tribunal found that the issue is covered in favor of the assessee by the decision of the Hon’ble Bombay High Court in CIT vs. Greenfield Hotels and Estates Pvt. Ltd and other coordinate bench decisions.
The tribunal held that Section 50C does not apply to the transfer of leasehold rights in land and plot. Accordingly, the tribunal directed the AO to delete the addition of Rs. 2,210,000 made under Section 50C of the Act as short term capital gain.
The appeal of Khazan Singh Anand was partly allowed, with the tribunal ruling that the provisions of Section 50C are not applicable to the transfer of leasehold rights. The order pronounced on 02.12.2020 concluded the case in favor of the appellant, setting a significant precedent for similar cases.
Order pronounced in open court on 02/12/2020.
Sd/-
(Amit Shukla)
Judicial Member
Sd/-
(Prashant Maharishi)
Accountant Member
Date: 02/12/2020
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
Khazan Singh Anand vs ITO Ward-40(5), New Delhi: Appeal Against Capital Gain Addition for AY 2016-17
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