Income Tax Appellate Tribunal on Non-Applicability of Section 50C to Leasehold Rights and Eligibility for Section 54G Deduction.

Headnote:

The Delhi Bench “F” of the Income Tax Appellate Tribunal held that Section 50C of the Income Tax Act, 1961, is inapplicable to the transfer of leasehold rights in land or building, as it applies only to the transfer of ownership in land or building itself. The Tribunal further allowed deduction under Section 54G, holding that the assessee had purchased an industrial plot within the prescribed period for shifting an industrial undertaking from an urban to a non-urban area.

Background:

• The assessee transferred leasehold rights in an industrial property and invested the sale consideration in the purchase of a new industrial plot for relocation.

• The Assessing Officer invoked Section 50C, adopting the stamp duty valuation as the deemed sale consideration, and denied deduction under Section 54G.

• The assessee contended that Section 50C was not applicable as the transaction involved only transfer of leasehold rights and that the investment qualified for deduction under Section 54G.

Court’s Observations:

• Section 50C applies only when the capital asset transferred is land or building, not rights therein such as leasehold interests. Reliance was placed on V.S. Chandrashekar v. ACIT (Karnataka High Court) and other judicial precedents.

• The leasehold rights granted for a fixed term do not constitute ownership of land or building within the meaning of Section 50C.

• The assessee’s investment in an industrial plot within one year before the transfer met the conditions of Section 54G. The Assessing Officer’s restriction to one year after transfer was held legally erroneous.

• The Tribunal directed the deletion of the addition made under Section 50C and allowed the deduction under Section 54G.

Legal Provisions Discussed:

• Section 50C, Income Tax Act, 1961 – Special provision for full value of consideration in certain cases.

• Section 54G, Income Tax Act, 1961 – Exemption on capital gains on shifting of industrial undertaking from urban to non-urban area.

• Sections 147–151, Income Tax Act, 1961 – Reassessment provisions.

Held:

Transfer of leasehold rights does not attract Section 50C. The assessee is entitled to deduction under Section 54G for reinvestment in an industrial plot within the prescribed period.

Result: Appeal allowed in favour of the assessee.

Section 54G Deduction

Citation: 2025:ITAT:DEL:2412

Case: Neha Gupta v. ITO, Ward 35(5), New Delhi

Court: Income Tax Appellate Tribunal, Delhi Bench “F”

Coram: Shri Challa Nagendra Prasad (Judicial Member) & Shri Brajesh Kumar Singh (Accountant Member)

Appeal No.: ITA No. 2412/Del/2018