Section 50C – Transfer of tenancy right – Held such transaction not covered under the provisions of section 50C.

During the year, the assessee had sold a tenancy right for Rs.
30 lakhs. In her return of income, the assessee had computed the long term
capital gain based on the said consideration. However, the AO observed that for
the purpose of stamp duty, the Sub-Registrar had adopted the market value of Rs.
33.11 lakhs. Therefore, applying the provisions of section 50C, he computed the
capital gain based on the market value of Rs. 33.11 lakhs.

One of the issues raised before the tribunal was whether the
provisions of section 50C were applicable to a tenancy right.

The tribunal noted that by virtue of section 50C, a legal
fiction had been created for assuming the value adopted or assessed by any
authority of the State Government as the full value of sale consideration
received in respect of transfer of land or building. Relying on the decisions of
the Supreme Court in the case of Amar Chand Shroff and in the case of Mother
India Refrigeration Industries Pvt. Ltd., the tribunal observed that the legal
fiction cannot be extended beyond the purpose for which it was enacted.
Accordingly, it noted that as per the plain reading of the provisions of section
50C, it applies only to those items of capital assets which are either land or
building or both. Since in the case of the assessee, the capital assets
transferred was tenancy right, it held that the provisions of section 50C were
not applicable.

Cases referred to: