Section 50C - Applicability to Confirming Party

[ravindra_manek123]

Dear all,

Kindly give your valuable opinion under following situation-

Mr. S is owner of a plot.

He has entered into a sale agreement (without possession) with Mr. C, assessee for sale of his plot. However no registered sale deed is executed for it.

Before executing any sale deed, property is sold to Mr. P (under the direction of assessee, Mr. C) in which Mr. C, assessee has agreed as confirming party for giving up his rights.

Now, under this situation, can provisions of section 50C be made applicable to Mr. C who has only acted as confirming party?

As per my understanding same cannot be invoked as assessee has never assumed ownership of said property and hence he can never transfer it.

It is the actual owner Mr. S, against whom only Section 50C can be applied.

Any case law / circular will be of great help.

Please note that matter is of Financial Year 2008-09 and hence amendment made u/s. 50C has no applicability to it (However, I think, same can be taken as plea for its non application).

Waiting for an early reply.

Thanks in advance.

Regards
CA Ravindra R. Manek

[ashutosh majumdar]

S. 50C applies w.e.f. AY 2003-04. Why do you say it does not apply to FY 2008-09?

Anyway, s. 50C is confined to the transfer of "land and building". What Mr. C holds is "rights in land and building" and not "land and building" itself.

There are two judgements of the Tribunal where the distinction between "rights" and "land & building" has been recognized and it has been held that s. 50C does not apply to the former.

These are

(i) Atul G. Puranik vs. ITO (Mum.)(Trib.)
Capital Gains - Stamp Duty Valuation - Does not apply to transfer of "leasehold rights" as it is not "land or building" Section 50C is a deeming provision which extends only to a capital asset which is "land or building or both". A deeming provision cannot be extended beyond the purpose for which it is enacted. If a capital asset cannot be described as "land or building or both", section 50C cannot apply. A lease right in a plot of land is neither "land or building or both". The distinction between a capital asset being "land or building or both" and any "right in land or building or both" is well recognized. "Land or building' is distinct from "any right in land or building". Consequently, section 50C does not apply to leasehold rights. (A. Y. 2006-07)

(ii) Transfer of Tenancy Rights 50C Transfer of tenancy right. As in the case of assessee, the capital assets transferred was tenancy right, held that such transaction not covered under the provisions of sec. 50C. Kishori Sharad Gaitonde ITA No. 1561/M/09, BCAJ Pg. 28, Vol. 41 B Part 5, February 2010 439

I don't think these are reported in ITD. However, you will get a copy of these judgements in this site.

Ashutosh.