The ITAT Mumbai Bench, in a recent ruling in the case of Suvarna Chandrakant Bhojane v. ITO, has clarified that the deeming provisions of Section 50C of the Income-tax Act, 1961, cannot be invoked where the assessee merely receives cash compensation and no transfer of immovable property actually takes place.
In this case, the assessee, along with her husband, had
entered into a development agreement with a builder, under which they were
entitled to receive a specified number of flats upon completion of
construction. Since the developer failed to hand over the flats within the
stipulated time, the assessee received cash compensation of INR 1.85 crores in
lieu of the flats, which she offered to tax as long-term capital gains. The
Assessing Officer, however, applied Section 50C and substituted the stamp duty
value of INR 3.51 crores as deemed consideration for computing capital gains.
The Tribunal noted that the compensation was not received
on account of transfer of any immovable property but merely as payment for
non-fulfilment of the builder’s obligation under the development agreement. It
held that Section 50C applies only where there is a transfer of a capital asset
being land or building or both, and not to transactions involving mere receipt
of monetary compensation. The Bench also observed that in the case of the
assessee’s husband, arising from the same transaction, the CIT(A) had already
held Section 50C inapplicable, and that finding had attained finality since the
Department did not file an appeal.Accordingly, the ITAT allowed the appeal and
directed deletion of the addition made by the Assessing Officer.
This ruling reaffirms that Section 50C can operate only
where there is an actual transfer of land or building and cannot be extended to
cases of contractual or compensatory receipts. Taxpayers should carefully
evaluate the nature of consideration received under development agreements to
ensure appropriate characterization and avoid unwarranted application of
deeming provisions.
No comments:
Post a Comment