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| DATE: | April 18, 2012 (Date of publication) |
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| Click here to download the judgement (yasin_moosa_godil_50C_transfer_rights.pdf) |
S. 50C is a deeming provision which does not apply to “rights in land & building”
The assessee booked a flat in a building which was under construction for which he had paid Rs. 16.12 lakhs. The builder had not handed over possession of the flat to the assessee nor had he executed any registered sale deed in favour of the assessee. The assessee entered into an agreement pursuant to which he transferred his rights, title and interest in the said flat in consideration of the amount paid by him to the builder. The AO took the view that as the flat was valued at Rs. 57.57 lakhs for stamp duty purposes, capital gains had to be computed on that basis u/s 50C. This was reversed by the CIT (A). On appeal by the department, HELD dismissing the appeal:
S.50C 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 by any authority of a State Government for the purpose of payment of stamp duty …” S. 50C is a deeming provision and extends to only to land or building or both. A deeming provision can be applied only in respect of the situation specifically given and cannot go beyond the explicit mandate of the section. If the capital asset under transfer cannot be described as “land or building or both”, s. 50C will cease to apply. As the assessee had transferred booking rights and received back the booking advance, the booking advance cannot be equated with the capital asset and therefore s. 50C cannot be invoked (Tejinder Singh followed).
As per the view the trtibunal has handed down, the the deeming provisions of section 50C , in terms, are of no application to a transaction the subject of transfer not being land or building or both. However, in one’s conviction, the special definitions in the Act of the two relevant terms ‘ capital asset’ and ‘transfer’ are wide enough to cover the gains arising from any such transaction considered by the tribunal. On that premise, the transaction , according to a view, could be rightly taken to be chargeable under the head of ‘capital gains’.
A contrary opinion, that too with no reservation, has, it has been noted, expressed in certain quarters; that is to the effect that the gains from any such transaction would be charged under the head of ’income from other sources’ , not as ‘capital gains’. That, prima facie, does not sound right; in any case, suffers from flawed logic, and does not appear to be right. Such opinion is bound to make a difference, should, in a given case, it qualifies for consideration under ‘long term’.