B. Ramakotaiah, Accountant Member - This is an assessee's appeal against the orders of the CIT (A)-7 Mumbai dated 2.9.2011 on the issue of computation of Long Term Capital Gain. Assessee has raised the following grounds:

"1. The learned CIT (A) has erred in law and on facts in upholding the order passed by the AO under section 143(3) of the Income Tax Act, 1961.

2. The learned CIT (A) has erred in law and on facts in confirming the assessment of a sum of Rs.2,39,91,000/ -as long-term capital gain on transfer of leasehold rights.

3. The learned CIT (A) has erred in law and on facts in confirming the action of the Assessing Officer in not treating Rs. 14,30,220/ - as consideration for transfer of building. The learned CIT (A) ought to have reduced the said amount from sale consideration of rights in land.

4. The learned CIT (A) has erred in law and on facts in upholding invocation of Section 50C of the Act to the transaction of transfer of capital asset made by the appellant.

5. Without prejudice to the above, even if Section 50C of the Act is held to be applicable, the Assessing Officer ought to have referred the valuation of the capital asset to the District Valuation Officer. Since the Assessing Officer has not followed this procedure, the learned CIT (A) ought to have held the order of the Assessing Officer to be illegal and invalid/unsustainable.

6. Without further prejudice to the above, even if section 50C of the Act is held to be applicable, the stamp duty rate applicable as on April, 2007, i.e. the date of the Memorandum of Understanding ought to have been considered instead of stamp duty rate as on February 2008.

7. The learned CIT (A) has erred in law and on facts in sustaining the computation of long-term capital gain without even giving the indexed cost of acquisition as deduction. The learned CIT (A) ought to have held that computation of capital gain made by the Assessing Officer without reducing cost of acquisition/indexed cost of acquisition is unsustainable in law.

2. Briefly stated, from the statement of facts submitted before the CIT (A), Assessee had taken a plot of land on lease from Maharashtra Industrial Development Corporation (MIDC) in the year 1967 for a lease of 95 years commencing from 1st January, 1967. Assessee had also paid premium to MIDC as per their rules prevalent at that time. In the previous year 2007-08 assessee entered into a MOU for transfer of part of the said land on 9th April 2007, received an advance of Rs. 30 lacs and applied to MIDC for their consent. MIDC gave their consent on 25/1/2008 for two different plots sub divided from the original one and accordingly the transfer of the lease was affected by agreement dated 7th March, 2008. At the time of entering into MOU an advance of Rs. 30 lacs was obtained by assessee and subsequently the two plots together with Building thereon were transferred for a total sum of Rs. 2,01,57,606. Assessee worked out capital gain of Rs. 1,60,38,687 after deducting the value of building at Rs. 14,30,220/- and the market value as on 1/4/1981 increased by indexation cost to Rs. 26,88,699. The AO applied Sec. 50C of the Income tax Act and considered the market value of the plot of land at Rs. 2,39,91,000 and considered this as long term capital gain for the purpose of computation of income. While taking this view the AO did not allow any cost as deduction and also did not exclude the value of building standing on the plots of land which was valued at Rs. 14,30,220 and adjusted in the block of assets while computing depreciation under the Income tax. Assessee's contention was that since this plot of land was a leasehold right only, it was neither a land nor a building and therefore Section 50C would not be applicable to such transaction.

2.1 While completing the assessment AO relied more on the terms of the agreement and completed the assessment denying claims and making addition. Before the CIT (A) assessee contested all the issues and the learned CIT (A) in