INCOME TAX ACT, 1961

Section 50C

Capital gains - Applicability of section 50C - Transfer of development rights in buildings -

Assessee purchased development rights in respect of some buildings. Those development rights were shown on asset side of balance sheet under the head 'Investments'. Subsequently, the assessee entered into a JV agreement and agreed to contribute the said development rights as 'capital contribution' at an agreed consideration to an AOP. AO treated such transfer of the development rights under section 50C of the Act, in spite of claim made by the assessee that provisions of section 45(3) would apply in its case. Accordingly, the AO treated the same as 'capital asset' and computed the value as per Stamp Valuation authority, thereby assessing the long-term capital gains. Held: Scope of section 50C is restricted to two types of capital assets being land or building or both. Capital assets transferred by assessee were development rights in buildings not the buildings itself, thus, invocation of section 50C was not justified. Further, provisions of section 45(3) provides that when a person transfers his capital asset to a firm or a body of individual or to AOP by way of capital contribution for becoming a partner/member therein, then for the purposes of section 48, the amount recorded in the books of account of the assessee firm or AOP, the value of the capital asset shall be deemed to be full value of consideration received or accruing as a result of the transfer of capital asset. In view of the same, the provisions of section 50C would not be applicable in the instant case and provisions of section 45(3) would be applied.

REFERRED : Sunil Siddharthbhai v. CIT (1985) 156 ITR 509 (SC) : 1985 TaxPub(DT) 1358 (SC) Voltas Ltd. v. ITO (2016) 74 taxmann.com 99 (Mumbai) : 2016 TaxPub(DT) 4501 (Mum-Trib)

FAVOUR : In assessee's favour

A.Y. : 2012-13

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