DCIT vs. Tejinder Singh (ITAT Kolkota)

S. 50C does not apply to transfer of tenancy/ leasehold rights

The assessee held lease hold rights for 99 years in a house property. By a tripartite agreement, the owner sold his rights in the property while the assessee assigned his leasehold rights. The assessee received Rs. 3.19 crores. The AO held that as the stamp duty valuation of the said property was higher than the agreed consideration, s. 50C applied and the assessee was assessable on the basis of the stamp duty valuation. This was reversed by the CIT (A) on the ground that s. 50C did not apply to leasehold rights. On appeal by the department to the Tribunal, HELD dismissing the appeal:

There is a distinction between a receipt for transfer of ownership rights in property and a receipt for transfer of tenancy rights in respect of a property because though both are assessable as capital gains, in the case of tenancy rights, the “cost of acquisition” is deemed to be Nil u/s 55(2)(a) unless if it is purchased for a cost. The fact that the assessee assigned his rights, together with the owner, pursuant to the tripartite agreement did not mean that the assessee’s had ownership rights in the property. S. 50 C applies “where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government …… for the purpose of payment of stamp duty in respect of such transfer”. The sine qua non for application of s. 50 C is that the transfer must be of a “capital asset, being land or building or both”. A “leasehold right in land or building” cannot be equated with the “land or building”. Accordingly, s. 50C has no application to the assignment of leasehold/ tenancy rights

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