Section 50C does not apply to transfer of booking right in a flat.
Facts:
During the course of assessment proceedings the AO noticed that in the preceding assessment year, the assessee had booked a flat with a builder which was under construction. Out of the agreed aggregate consideration of Rs. 16,12,000, an amount of Rs.1,00,000 was kept outstanding, since the builder had failed to give the possession of the flat in time and also failed to allot the promised parking place. As the entire amount was not paid by the assessee, the builder had neither handed over the possession of the flat to the assessee nor had executed any registered sale deed in favour of the assessee. In the current assessment year, the assessee requested the builder to cancel the booking of the flat and return the booking amount as paid by him towards the said flat. Upon such request, a tri-party registered sale agreement for transfer of said flat was executed between the assessee, the builder and the new buyer wherein the assessee was to transfer all his rights, title and interest in the said flat to the buyer and the builder was to give the possession of the said flat to the buyer and was also to allot the said flat to the buyer which was originally to be allotted to the assessee. Accordingly, during the year under consideration, the appellant received back the booking amount paid by him to the builder from the buyer.
During the course of assessment proceedings, the AO observed that the Jt. Sub-Registrar’s Office had considered the value of the said flat at Rs.57,57,255 for registration of flat as against the total value of Rs.16,12,000. Accordingly, on the basis of information received from the Jt. Registrar’s Office, the AO treated the difference amount of Rs.41,45,255 (i.e. Rs. 57,57,255 – Rs. 16,12,000) as the unexplained income of the appellant and made addition thereof to the total income of the assessee.
The CIT(A) deleted the addition on the ground that such addition can only be made u/s 50C and in the present case provisions of section 50C do not apply since what is transferred is only booking rights in the flat.
Held:
It is an undisputed fact that prior to the execution of the tripartite agreement the assessee had neither paid full consideration of the flat nor had the assessee acquired the possession of the flat from builder. From the agreement it is evident that it is the builder who is transferring the capital asset i.e. the flat to the new buyer, by handing over the possession of the flat as also the legal ownership thereof to the new buyer and the assessee only received back the booking advance paid by him to the builder, by relinquishing his booking right on the said flat.
It is settled legal proposition that deeming provision can be applied only in respect of the situation specifically given and one cannot go beyond the explicit mandate of the section. It is essential that for application of section 50C, the transfer must be of a capital asset, being land or building or both. If the capital asset under transfer cannot be described as “land or building or both” then section 50C will not apply. From the facts of the case narrated above, it is seen that the assessee has transferred booking rights and received back the booking advance. Booking advance cannot be equated with land or building and therefore section 50C cannot be invoked.
