I gave up my rights under an agreement to purchase land and the property was conveyed by the owner with me signing as a consenting party. The Assessing Officer has substituted the guidance value under section 50C. Does section 50C reach a right in land at all?
The Karnataka High Court held that it does not. Section 50C speaks of 'land or building or both'. Explanation 1 to section 2(47) uses the wider expression 'immovable property', and wherever Parliament meant land to carry rights or interests in land with it, it said so - the Court listed section 35(1)(a), section 54G(1), section 54GA(1), section 269UA(d) and the Explanation to section 155(5A). From the plain and unambiguous language of section 50C the Court held that it does not apply to a case of rights in land, and on these facts that the section applies only to a transferor of land, which was the owner and not the assessee, who was only a consenting party and not a transferor or co-owner. The Bombay High Court has since taken the opposite view.
Decided by the High Court (High Court of Karnataka at Bengaluru; the coram is not established - the judgment's own text was not reachable and the orders that reproduce it do not name the judges) on 2021-02-02, reported as [2021] 129 taxmann.com 273 (Kar.); [2021] 432 ITR 330 (Kar.); ITA No. 70 of 2015, judgment dated 2 February 2021, with an order of correction dated 31 March 2023 and an order on review dated 10 April 2024. It bears on section 50C, section 2(47), section 2(14) of the Income Tax Act 1961, in Capital Gains, How Tax Law Is Read and Assessment & Scrutiny matters.
This is the decision on the other side of the leasehold question, and it is the side Tribunals are actually following. The Bombay position is the one a practitioner meets first: that section 50C reaches an assignment of MIDC leasehold rights because section 2(14) says 'held by' and not 'owned by'. A reader who takes only that into a hearing outside Maharashtra will be answering the wrong argument, because the departmental representative's difficulty in Delhi, Pune and Mumbai has been this judgment, not Vidarbha. Its value is the construction point. Section 50C says 'land or building or both'; Parliament elsewhere says land 'or any right in land', and the Court lists five places where it did. That is a reason a bench can act on, and it is stronger than the factual answer that the assessee was only a consenting party, because it does not depend on how the deed was drawn. The case also supplies the practical shape of the argument for every assignment of an allotment, a development right, a tenancy or an agreement to purchase: identify who transferred land, identify what the assessee transferred, and then take the point that the section names the first and not the second. Where the two High Courts collide, the rule in Vegetable Products is the route through.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee carried on business as the proprietor of a firm of developers. In December 2005 he entered into an unregistered agreement for sale to purchase land for Rs.4.25 crore. The land was afterwards conveyed by its owner, a company, and the assessee signed the conveyance as a consenting party rather than as a transferor or co-owner; what he parted with was his rights under the agreement. For assessment year 2010-11 he claimed a loss of Rs.60,43,859 on that transaction. The Assessing Officer brought section 50C to bear on the consideration. The Income Tax Appellate Tribunal, Bangalore Bench, by its order of 28 November 2014 in ITA Nos. 215 and 243/Bang/2014, held that the land was held as an investment so that the result fell under capital gains rather than business, and held section 50C applicable on the footing that the assessee possessed a right to land. The assessee appealed to the High Court of Karnataka in ITA No. 70 of 2015, which framed four substantial questions of law: whether the Tribunal's finding that the land was held as investment and not as stock in trade was perverse; whether the loss was chargeable under the head capital gains rather than profits and gains of business or profession; whether section 50C applied to the sale of the land by the appellant; and whether the Tribunal was right in not allowing the business loss of Rs.60,43,859 for the year.
On the third substantial question the Court held that section 50C did not apply. Its reason, in its own words, was that "wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(1)(a), Section 54G(1), Section 54GA(1) and Section 269UA(d) and Explanation to Section 155(5A)", so that "Section 50C applies only in case of a transferor of land which in the instant case is M/s Namaste Exports and not the assessee who was only a consenting party and not a transferor / co-owner of the property", and that "from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land". The Court added the settled rule that an assessee cannot be taxed without clear words for that purpose and that an Act of Parliament is to be read on the natural construction of its words. The fourth question, on the business loss, came back to the Tribunal: by an order of correction of 31 March 2023 and an order on review of 10 April 2024 the High Court modified its judgment so that the Tribunal was called upon to reconsider substantial question No. 4 for complete and effective adjudication. The Tribunal did so on 25 June 2024 in ITA No. 243/Bang/2014, recording that section 50C was not applicable and directing the capital gain or loss to be computed on the consideration stated in the sale deed, and partly allowed the appeal.
The Court compared the words Parliament used. Explanation 1 to section 2(47) speaks of 'immovable property'; section 50C speaks of 'land'. Parliament knows how to make land carry rights and interests in land with it, and has done so in terms in several places - the Court named section 35(1)(a), section 54G(1), section 54GA(1), section 269UA(d) and the Explanation to section 155(5A). It did not do so in section 50C. From that contrast the Court concluded that on the clear, plain and unambiguous language of section 50C the section does not apply to a case of rights in land, and it reinforced that with the rule of construction that an assessee is not to be taxed without clear words and that a statute is to be read on the natural construction of its language. The Court then applied the conclusion to the facts. The person who transferred land was the owner company; the assessee had rights under an agreement to purchase and signed the conveyance as a consenting party, not as transferor or co-owner. Section 50C being a provision addressed to the transferor of land, it could not be worked against him. Both limbs are in the same passage, which is why the case is cited both for the general proposition about rights in land and for the narrower proposition about a consenting party.
Wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(1)(a), Section 54G(1), Section 54GA(1) and Section 269UA(d) and Explanation to Section 155(5A).
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Handle my notice → Ask a CA on WhatsAppThe Karnataka High Court held that it does not. Section 50C speaks of 'land or building or both'. Explanation 1 to section 2(47) uses the wider expression 'immovable property', and wherever Parliament meant land to carry rights or interests in land with it, it said so - the Court listed section 35(1)(a), section 54G(1), section 54GA(1), section 269UA(d) and the Explanation to section 155(5A). From the plain and unambiguous language of section 50C the Court held that it does not apply to a case of rights in land, and on these facts that the section applies only to a transferor of land, which was the owner and not the assessee, who was only a consenting party and not a transferor or co-owner. The Bombay High Court has since taken the opposite view. This was decided by the High Court (High Court of Karnataka at Bengaluru; the coram is not established - the judgment's own text was not reachable and the orders that reproduce it do not name the judges) and bears on section 50C, section 2(47), section 2(14) of the Income Tax Act 1961. It is reported as [2021] 129 taxmann.com 273 (Kar.); [2021] 432 ITR 330 (Kar.); ITA No. 70 of 2015, judgment dated 2 February 2021, with an order of correction dated 31 March 2023 and an order on review dated 10 April 2024. This is the decision on the other side of the leasehold question, and it is the side Tribunals are actually following. The Bombay position is the one a practitioner meets first: that section 50C reaches an assignment of MIDC leasehold rights because section 2(14) says 'held by' and not 'owned by'. A reader who takes only that into a hearing outside Maharashtra will be answering the wrong argument, because the departmental representative's difficulty in Delhi, Pune and Mumbai has been this judgment, not Vidarbha. Its value is the construction point. Section 50C says 'land or building or both'; Parliament elsewhere says land 'or any right in land', and the Court lists five places where it did. That is a reason a bench can act on, and it is stronger than the factual answer that the assessee was only a consenting party, because it does not depend on how the deed was drawn. The case also supplies the practical shape of the argument for every assignment of an allotment, a development right, a tenancy or an agreement to purchase: identify who transferred land, identify what the assessee transferred, and then take the point that the section names the first and not the second. Where the two High Courts collide, the rule in Vegetable Products is the route through. If it applies to you, the first step is this: Fix what was actually transferred before arguing about valuation. A conveyance by the owner in which you sign as a consenting party, and a release or assignment of rights under an agreement to purchase, are not transfers of land by you. Put the recitals of the deed on the record and show who conveyed what.
The assessee carried on business as the proprietor of a firm of developers. In December 2005 he entered into an unregistered agreement for sale to purchase land for Rs.4.25 crore. The land was afterwards conveyed by its owner, a company, and the assessee signed the conveyance as a consenting party rather than as a transferor or co-owner; what he parted with was his rights under the agreement. For assessment year 2010-11 he claimed a loss of Rs.60,43,859 on that transaction. The Assessing Officer brought section 50C to bear on the consideration. The Income Tax Appellate Tribunal, Bangalore Bench, by its order of 28 November 2014 in ITA Nos. 215 and 243/Bang/2014, held that the land was held as an investment so that the result fell under capital gains rather than business, and held section 50C applicable on the footing that the assessee possessed a right to land. The assessee appealed to the High Court of Karnataka in ITA No. 70 of 2015, which framed four substantial questions of law: whether the Tribunal's finding that the land was held as investment and not as stock in trade was perverse; whether the loss was chargeable under the head capital gains rather than profits and gains of business or profession; whether section 50C applied to the sale of the land by the appellant; and whether the Tribunal was right in not allowing the business loss of Rs.60,43,859 for the year. The matter was decided on 2021-02-02 by the High Court (High Court of Karnataka at Bengaluru; the coram is not established - the judgment's own text was not reachable and the orders that reproduce it do not name the judges). On those facts the High Court held as follows. On the third substantial question the Court held that section 50C did not apply. Its reason, in its own words, was that "wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(1)(a), Section 54G(1), Section 54GA(1) and Section 269UA(d) and Explanation to Section 155(5A)", so that "Section 50C applies only in case of a transferor of land which in the instant case is M/s Namaste Exports and not the assessee who was only a consenting party and not a transferor / co-owner of the property", and that "from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land". The Court added the settled rule that an assessee cannot be taxed without clear words for that purpose and that an Act of Parliament is to be read on the natural construction of its words. The fourth question, on the business loss, came back to the Tribunal: by an order of correction of 31 March 2023 and an order on review of 10 April 2024 the High Court modified its judgment so that the Tribunal was called upon to reconsider substantial question No. 4 for complete and effective adjudication. The Tribunal did so on 25 June 2024 in ITA No. 243/Bang/2014, recording that section 50C was not applicable and directing the capital gain or loss to be computed on the consideration stated in the sale deed, and partly allowed the appeal.
The Court compared the words Parliament used. Explanation 1 to section 2(47) speaks of 'immovable property'; section 50C speaks of 'land'. Parliament knows how to make land carry rights and interests in land with it, and has done so in terms in several places - the Court named section 35(1)(a), section 54G(1), section 54GA(1), section 269UA(d) and the Explanation to section 155(5A). It did not do so in section 50C. From that contrast the Court concluded that on the clear, plain and unambiguous language of section 50C the section does not apply to a case of rights in land, and it reinforced that with the rule of construction that an assessee is not to be taxed without clear words and that a statute is to be read on the natural construction of its language. The Court then applied the conclusion to the facts. The person who transferred land was the owner company; the assessee had rights under an agreement to purchase and signed the conveyance as a consenting party, not as transferor or co-owner. Section 50C being a provision addressed to the transferor of land, it could not be worked against him. Both limbs are in the same passage, which is why the case is cited both for the general proposition about rights in land and for the narrower proposition about a consenting party. In the words reproduced by the source cited on this page: "Wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(1)(a), Section 54G(1), Section 54GA(1) and Section 269UA(d) and Explanation to Section 155(5A)."
It was decided by the High Court on 2021-02-02 and is reported as [2021] 129 taxmann.com 273 (Kar.); [2021] 432 ITR 330 (Kar.); ITA No. 70 of 2015, judgment dated 2 February 2021, with an order of correction dated 31 March 2023 and an order on review dated 10 April 2024. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 50C, section 2(47), section 2(14), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. On the third substantial question the Court held that section 50C did not apply. Its reason, in its own words, was that "wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(1)(a), Section 54G(1), Section 54GA(1) and Section 269UA(d) and Explanation to Section 155(5A)", so that "Section 50C applies only in case of a transferor of land which in the instant case is M/s Namaste Exports and not the assessee who was only a consenting party and not a transferor / co-owner of the property", and that "from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land". The Court added the settled rule that an assessee cannot be taxed without clear words for that purpose and that an Act of Parliament is to be read on the natural construction of its words. The fourth question, on the business loss, came back to the Tribunal: by an order of correction of 31 March 2023 and an order on review of 10 April 2024 the High Court modified its judgment so that the Tribunal was called upon to reconsider substantial question No. 4 for complete and effective adjudication. The Tribunal did so on 25 June 2024 in ITA No. 243/Bang/2014, recording that section 50C was not applicable and directing the capital gain or loss to be computed on the consideration stated in the sale deed, and partly allowed the appeal. It arises in Capital Gains, How Tax Law Is Read and Assessment & Scrutiny matters, on section 50C, section 2(47), section 2(14) of the Income Tax Act 1961, and was decided by High Court of Karnataka at Bengaluru; the coram is not established - the judgment's own text was not reachable and the orders that reproduce it do not name the judges. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take the interpretation point, not only the facts. The Court's reason is that Parliament used the wider language elsewhere and did not use it in section 50C; that is an argument about the section itself and it survives even where the consenting-party point does not. Be candid about the conflict. The Bombay High Court in Vidarbha Veneere Industries Ltd v ITO, decided 1 April 2025, holds that section 50C does reach an assignment of leasehold rights, reasoning from the words 'held by' in section 2(14). If you are in Maharashtra or Goa you are arguing against your own jurisdictional High Court. Outside both states, argue the rule in CIT v Vegetable Products Ltd (1973) 88 ITR 192 (SC). Where two non-jurisdictional High Courts differ, the construction favourable to the assessee is to be adopted, and Tribunal benches have taken that route to this judgment. Do not assume the answer carries into the other circle-rate provisions. Whether the same reading applies to section 43CA or to section 56(2)(x) is a separate question, and at least one Bench has gone the other way on a provision it treated as pari materia. Where the year is a tax year beginning before 1 April 2026, the Income-tax Act, 1961 still governs it under section 536(2)(c) of the Income-tax Act, 2025, so section 50C is the provision in issue and this judgment is live law for it.
The judgment itself could not be reached, so no check was possible. The judgment has not been reversed and is followed, but it is one side of a live conflict between High Courts and the reader should treat it as that. The Bombay High Court, Nagpur Bench, in Vidarbha Veneere Industries Ltd v ITO, IT Appeal No. 34 of 2022, decided 1 April 2025, holds the opposite: that leasehold rights in land are a capital asset because section 2(14) speaks of property 'held by' and not 'owned by' an assessee, and that section 50C therefore applies to an assignment of leasehold rights. Tribunal benches outside Maharashtra have preferred the Karnataka view. The Pune Bench set this judgment out at length in Vimal Baburao Jadhav on 17 September 2021; the Delhi Bench applied it in Fashion Group International on 24 May 2023 and again in Neha Gupta on 17 October 2025, where the departmental representative relied on the Bombay decision and the Bench declined to follow it; the Mumbai Bench applied it in Vanraj Ranchhoddas Merchant on 29 December 2025 and deleted the section 50C addition. Where two non-jurisdictional High Courts differ, benches have applied CIT v Vegetable Products Ltd (1973) 88 ITR 192 (SC) and taken the construction favouring the assessee. The status recorded here is about sourcing and not about authority. The judgment's own text has not been read, either in the High Court's own record or in any reported source searched; what those carry is the later Tribunal orders that quote it. This record has been built from the passage as those orders reproduce it, and the sentences quoted on this page appear in that form in four separate decisions of three different benches. What could not be established, and is therefore not stated, is the coram, the paragraph numbering of the judgment as reported, and the Court's own words of disposal on the first, second and fourth substantial questions. The Income-tax Act, 1961 was repealed on 1 April 2026 by section 536(1) of the Income-tax Act, 2025, and section 536(2)(c) continues it for proceedings in respect of any tax year beginning before that date. The successor to section 50C in the 2025 Act has not been established and is therefore not given here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
A word first about where this text comes from, because it governs how far the case should be pressed. The judgment itself has not been read. It has not been located in the High Court's own record, and it is not carried in the reported sources searched under the party name, the citation or any phrase from it; what those sources carry is the later Tribunal orders that quote it. The passage set out on this page is therefore the passage as those orders reproduce, and the reproduction is consistent across four decisions of three different benches - Pune in 2021, Delhi in 2023 and again in 2025, and Mumbai in 2025 - together with the Bangalore order made on remand in the assessee's own case, which sets out the four substantial questions of law. Nothing on this page has been inferred to fill a hole. The Court's own words of disposal on the first, second and fourth questions are not reproduced in any of them, so they are not given. The caution, and the reason this record is marked as a trap, is that the case is quoted for one of two propositions and the quoter rarely says which. The wide proposition is that section 50C, on its plain language, does not apply to a case of rights in land, and that is supported by the list of five provisions in which Parliament did extend land to rights and interests in land. The narrow proposition is that section 50C is addressed to a transferor of land, and the assessee here was a consenting party and not a transferor or co-owner. They sit in one passage. A Bench that wants to follow the case takes the first; a Bench that wants to distinguish it takes the second and points out that the taxpayer before it actually conveyed something. Anyone relying on the decision should be ready for both readings. The second thing to be candid about is the conflict. The Bombay High Court reached the opposite result in 2025 on reasoning this judgment never met, namely that section 2(14) defines a capital asset as property 'held by' rather than 'owned by' an assessee. Neither court has answered the other's argument. Until the question goes higher, the answer a practitioner gets depends on where he is standing, and outside Maharashtra and Karnataka it depends on a rule about how to choose between two High Courts rather than on either of them. The judgment does not decide how a rights transaction is to be computed once section 50C is out of the way, beyond the Tribunal's later direction to use the consideration in the deed. It does not deal with a lease, which is the transaction the Bombay High Court was concerned with, so the two decisions are not on identical facts even though their reasoning collides. It does not say whether the same reading of 'land' carries into section 43CA or section 56(2)(x). It does not address section 2(14) or the words 'held by', which is the ground the Bombay High Court reasoned from, so the conflict is not a case of one court answering the other. And it does not separate the two limbs of its own holding - the consenting-party point and the rights-in-land point stand in the same passage, and a bench that wanted to confine the case to its facts could do so. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
On the third substantial question the Court held that section 50C did not apply. Its reason, in its own words, was that "wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(1)(a), Section 54G(1), Section 54GA(1) and Section 269UA(d) and Explanation to Section 155(5A)", so that "Section 50C applies only in case of a transferor of land which in the instant case is M/s Namaste Exports and not the assessee who was only a consenting party and not a transferor / co-owner of the property", and that "from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land". The Court added the settled rule that an assessee cannot be taxed without clear words for that purpose and that an Act of Parliament is to be read on the natural construction of its words. The fourth question, on the business loss, came back to the Tribunal: by an order of correction of 31 March 2023 and an order on review of 10 April 2024 the High Court modified its judgment so that the Tribunal was called upon to reconsider substantial question No. 4 for complete and effective adjudication. The Tribunal did so on 25 June 2024 in ITA No. 243/Bang/2014, recording that section 50C was not applicable and directing the capital gain or loss to be computed on the consideration stated in the sale deed, and partly allowed the appeal.
TaxSphere, “V.S. Chandrashekar v ACIT”, https://taxnotice.vittsphere.com/caselaw/case/vs-chandrashekar-v-acit-50c-does-not-reach-rights-in-land/ (validity last checked 2026-09-23)
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