Section 50C Extends to Leasehold Rights via Assignment | HC

Case Details: Vidarbha Veneere Industries Ltd. vs. Income-tax Officer - [2025] 174 taxmann.com 223 (Bombay)

Judiciary and Counsel Details

• Avinash G. Gharote & Abhay J. Mantri, JJ.
• R.R. Dawda, Adv. for the Appellant.
• Bhushan N. Mohata, Adv. for the Respondent.

Facts of the Case

The assessee held land through lease rights assigned to it by a previous lessee. MIDC transferred the land in question in favour of VVI through a lease. The rights under the lease were assigned by VVI, the lessee, in favour of the assessee by way of a deed assignment. The assessee claimed that section 50C did not apply to a property held in leasehold right and thus, tax would not be payable on sale consideration.

The Assessing Officer (AO) rejected the claim of the assessee. On appeal, the Commissioner (Appeals) upheld the order of the AO. The Tribunal also upheld the order of the Commissioner (Appeals). The matter reached the Bombay High Court.

High Court Held

The High Court held that the expression used in section 50C is ”consideration received or accruing as a result of transfer of a capital asset, being land or building or both”. This must be related to the definition of ”capital asset”, as in section 2(14). A perusal of the definition of ”capital asset” in section 2(14) would indicate that it includes property of any kind, held by an assessee. What is material to note is that the expression is ”held by an assessee” and not owned by an assessee.

Insofar as the immovable property, i.e. land or building, is concerned, there are several ways in which it can be held. The holding can be either as an owner, lessee, sub-lessee, allottee, tenant, licensee, gratuitous licensee or any other mode, permissible or recognised by law. Therefore, the expression ”held by an assessee” does not restrict how the land or building can be held. The holding of land is merely a method by which rights to the land can be held or acquired by a person. That cannot be equated with land or building but rather would be a species of the right to have it, which, as indicated above, are of multiple natures.

Therefore, it is found that merely because the MIDC originally allotted the land by way of a lease to the predecessor of the assessee, who in turn has received the same by way of an assignment, that being one of the modes of transfer, of land or building, the mere use of a particular mode of transfer cannot create any exception vis-à-vis the holding of the land or building by the assessee.

The word ”transfer” as used in section 50C(1) also cannot be used in a restricted sense and will have to be given the widest amplitude, considering the nature and purpose of the section. Thus, it would include all modes and methods of transfer that are permissible and recognisable in law.

List of Cases Reviewed

• Order of ITAT, Nagpur in MA No. 07/Nag/2016, dated 24-3-2017 (para 8) affirmed
• Atul G. Puranik v. Income Tax Officer, (2011) 30 CCH 0239 Mum Trib.
• Commissioner of Income Tax v. Greenfield Hotels and Estates, Pvt. Ltd., (2016) 389 ITR 0068 (Bom), (para 8) distinguished