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2025 Supreme(Bom) 835
IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH
Avinash G. Gharote, Abhay J. Mantri, JJ.
Vidarbha Veneere Industries Ltd. – Petitioner
Versus
Income Tax Officer, Ward-7(1), Civil Lines - Respondent
Income Tax Appeal No. 34 of 2022
Decided On : 01-04-2025
Mr. R.R.Dawda, Adv. for the appellant.
Mr. Bhushan N. Mohata, Adv.for the respondent.
The court held that leasehold rights are considered capital assets under Section 50C of the Income Tax Act, affirming that the manner of holding property does not exempt it from tax obligations.
Headnote:
(A) Income Tax Act, 1961 - Sections 50C and 2(14) - Applicability of Section 50C to leasehold property - The Tribunal dismissed the appellant's claim that Section 50C does not apply to leasehold rights, emphasizing that the manner of holding property does not affect its classification as a capital asset. (Paras 3-8)
(B) Legal interpretation - The court clarified that 'held by an assessee' encompasses various forms of property holding, including leasehold, and that the term 'transfer' in Section 50C should be interpreted broadly. (Paras 6-7)
Facts of the case:
The appellant contested the Tribunal's ruling that Section 50C applies to leasehold property transferred by the MIDC to the appellant. The appeal was based on the interpretation of the Income Tax Act regarding capital assets.
Findings of Court:
The court upheld the Tribunal's decision, stating that the mode of holding property does not exempt it from tax implications under Section 50C.
Issues: The primary issue was whether leasehold rights constitute a capital asset under Section 50C of the Income Tax Act.
Ratio Decidendi: The court reasoned that the definition of 'capital asset' includes all forms of holding property, and the term 'transfer' must be interpreted in a broad sense to include leasehold rights.
Result: Appeal dismissed.
JUDGMENT :
Avinash G. Gharote, J.
Heard.
2. Rule. Rule returnable forthwith. The petition is heard finally with the consent of the learned counsel for the parties.
3. The appeal questions the order dated 24/03/2017 (Pg.72), passed by the learned Tribunal in MA No.07/Nag/2016, whereby the claim of the appellant of non-applicability of Section 50C of the Income Tax Act, 1961 (for short “IT Act”) to a property held in leasehold right has been negated by dismissing the appeal.
4. Mr. Dawda, learned counsel for the appellant, by relying upon the language of Section 50C read with the definition of ‘Capital Asset’ as defined in Section 2(14) of the IT Act submits, that since the lands in question which are Plot Nos.G-17, 18, 6 and 7, situated in the MIDC, Nagpur, were transferred by the MIDC, in favour of M/s. Vidarbha Veneeer Industries Ltd. by way of a lease dated 31/03/1979, rights under which have been assigned by the lessee, by way of a Deed of Assignment dated 30/08/2004 in favour of the present appellant (Pg.118), the same would not attract Section 50C of the IT Act and therefore, the income tax would not be payable on the sale consideration. In support of his contention learned counsel placed his reliance upon Atul G.Puranik v. Income Tax Officer, (2011) 30 CCH 0239 MumTrib.
4. Mr.Mohata, learned counsel for the respondent, supports the impugned decision contending, that the manner in which, a property is held, is immaterial, for the purpose of applicability of Section 50C of the IT Act.
5. Section 50C of the IT Act reads as under:-
“50C. (1) 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 (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer :
(emphasis supplied)
[Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:
Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], on or before the date of the agreement for transfer:]
[Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.]”
The expression ‘Capital Asset’ has been defined in Section 2(14)of the IT Act reads as under:-
“(14) "capital asset" means —
(a) property of any kind held by an assessee, whether or not connected with his business or profession;”
(emphasis supplied)
6. The expression used in Section 50C of the IT Act is ‘consideration received or accruing as a result of transfer of a capital asset, being land or building or both’. This will have to be related to the definition of ‘capital asset’, as occurring in Section 2(14) of the IT Act. A perusal of the definition of ‘Capital Asset’ as contained in Section 2(14) of the IT Act would indicate, that it includes property of any kind, “held by an assessee”. What is material to note is,
