PR COMMISSIONER OF INCOME TAX CENTRAL vs. SMT SAVITRA SINGH

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 342 / 2017 Pr. Commissioner of Income Tax, Alwar. ----Appellant Versus Smt. Savitra Singh, W/o Rao Sajjan Singh, C/o Rao Education Academy, Village- Kothi Narayanpur, Rajgarh, Alwar. ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 27/02/2018 1. By way of this appeal, the appellant has assailed the judgment and order of the tribunal whereby tribunal has partly allowed the appeal filed by the assessee. 2. Counsel for the appellant has framed following substantial questions of law:- “(1) Whether under the facts and circumstances of the case the AO was justified in computing long term capital gain on the admitted transfer of the capital asset by gift deed dated 03.04.2008 by considering the sale consideration at Rs.92,80,860/- on the basis of the adjudication by Collector (Stamps) Alwar by order dated 15.02.2013 and the order dated 15.02.2013 has attained finality by which the assessee has admitedly deposited the stamp duty of Rs.6,21,846/-? (2) Whether under the facts and circumstances of the case the Tribunal has committed an error of law in deleting the additions made on account of long term capital gain on admitted fact that assessee has paid stamp duty of Rs.6,21,846/- after adjudication

(2 of 11) [ITA-342/2017] by Collector (Stamps) Alwar and therefore would expose the assessee to pay long term capital gain u/s.50C read with Section 2(47) of the I.T. Act? (3) Whether on the facts and circumstances of the case the ITAT was justified in holding that the provisions of section 50C are not attracted in the case and deleted the addition on the long term capital gain of Rs.91,71,313/- made by AO when the transaction is covered u/s.2(47)(v) of the I.T. Act, 1961?” 3. The facts of the case are that the assessee vide lease deed dated 22.02.2007 leased out 2,950 sq. mtrs of land along with the construction thereon on 1500 sq. mtrs to Rao Shiksha Samiti for 30 years at rent of Rs. 1 lakh per annum w.e.f. 01.03.2007. This deed was registered with the SubRegistrar, Rajgarh. Thereafter, vide 2 separate deeds dated 03.04.2008, the assessee donated the said land to Rao Shiksha Samiti.The Accountant General (Audit), Rajasthan raised an objection that at the time of executing the lease deed, value of this property should have been considered at Rs. 1,43,91,000/- and accordingly there is a short levy of Rs. 9,52,914/-. The assessee raised the objection and thereafter the Collector (Stamps), Alwar vide order dated 15.02.2013 determined the value of the property at Rs. 92,80,860/- and directed the assessee to pay stamp duty of Rs.6,21,846/-. The AO on the basis of the order of Collector (Stamps) issued notice u/s 148 on 11.03.2014 and the reasons for reopening were communicated to the assessee on 05.09.2014 wherein it wasstated that the lease was made for more than 20 years and the stamp duty was charged on market value treating it as conveyance deed and not lease deed. Later, this property was gifted to Rao Shiksha Samiti. Therefore, the conduct of the

(3 of 11) [ITA-342/2017] assessee was to transfer the property. As per Section 2(47)(v), it should be treated as conveyance deed and not as lease deed. The assessee has, therefore, failed to compute the capital gain as per Section 50C of the Act and income chargeable to tax has escaped assessment for AY 2007-08.The assessee raised objection against the initiation of reassessment proceedings u/s 147. The AO however, rejected the objection of the assessee vide his order dated 06.02.2015 for the reason that as the lease was made for more than 20 years, there is a transfer u/s 2(47)(v) and therefore, capital gains is liable to be taxed in terms of Section 50C of the Act. 4. Vide order dt. 6.2.2018, the court passed the following order:- “Counsel for the appellant will find out whether the judgment in the case of ITO vs. Tara Chand Jain (2015) 155 ITD 956 (Jaipur) (Trib.) which has been relied upon by the tribunal has been challenged by the department or not.” 5. In pursuance of the said order, the judgment in the case of ITO vs. Tara Chand Jain (2015) 155 ITD 956 (Jaipur) (Tri.) is produced before us which reads as under:- Section 50C of Income-Tax Act, 1961 (2015) 85[Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed 86[or assessable] by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or

(4 of 11) [ITA-342/2017] assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. 2 -------------------------------------------------- 6.8. On going through the above provisions, it transpires that if the full value consideration shown to have been received or accruing on transfer of a capital asset being land or building or both is less than the value adopted or assessed or assessable (w.e.f. 1.10.2009) by Stamp Valuation Authority, the value so adopted etc. shall for the purpose of section 48 be deemed to be the full value of consideration received or accruing as a result of such transfer. This section 50 C was inserted by the Finance Act, 2002 with effect from 1.4.2003 with a view to substitute the declared full value consideration in respect of land or building or both transferred by the assessee with the value adopted or assessed or assessable by the Stamp Valuation Authority. Except for this provision, there is nothing in the Act which require for treating the value adopted by the Stamp Valuation Authority to replace the full value consideration taken by the assessee. 6.9. Section 50C is a deeming provision and it is only applicable in respect of capital assets which are land or building or both. It is thus clear that this deeming provision of section 50C will come into play only if the capital asset transferred by the assessee is a land or building or both. If, in the absence of capital asset transferred is neither the land nor building nor both, this deeming provision shall not be applicable to such transfer. 6.10. It is seen from the above mentioned statement of fact i.e. the ownership of the land is with the State Government. The land is acquired and the assessee is merely a Kastkar, this clearly shows that the assessee is only having the limited rights in the land sold. The limited rights of Kastkar on the land cannot be equated with the ownership of land or with building or with both. The Income Tax Act clearly recognized the distinction between the land or building or any right in the land or building under section 50C of the Act. Thus the Act has given the separate treatment to land, building and rights in the land.

(5 of 11) [ITA-342/2017] 6.11. In the opinion of the Bench, the rights in land cannot be equated with the land or building. Therefore, it is concluded that section 50C is applicable to transfer of capital asset only in respect of land or building or both and is not applicable to right in land. In the present case, the assessee has only transferred the right in land for a valuable consideration, therefore, in the opinion of the Bench, the long term capital gain cannot be calculated by invoking the deeming provisions provided under section 50C. Therefore we hold that section 50 C is not applicable to present case. This is also of view of Mumbai Tribunal in the case of Atul G. Puranik vs. ITO (2011) 11 ITR (Trib.) 120. 6.12. Even otherwise, the assessee has sold the property on 18.04.2007 and has filed the return of income on 31.07.2008. At the time of selling the property to the purchaser the sale consideration shown by the assessee in the document executed was Rs. 74,91,000/- only and has shown the capital gain to the extent of 50% in the return of income, being the half ownership rights in the property. The agreement was neither registered nor properly stamped and was merely executed on the stamp paper of Rs. 100/-. Section 50C as available ,in the rule book ,on the date of filing of the return or on the date of transfer of the land provides as under :- Section 50-C as per IT Act 2007 : “ Section 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub- section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub- section

(6 of 11) [ITA-342/2017] (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub- section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation.—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). (3) Subject to the provisions contained in sub- section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. With effect from 1.10.2009 by the Finance (No. 2) Act 2009 the word “assessable” was inserted with effect from 1.10.2009 and thereafter section 50-C provides as under :- Section 50-C as per IT Act 2010 : “Section 50C (1) Where the consideration received or accruing as a result of the transfer by an assessee or a capital asset, being land or building or both, is less than the value adopted or assessed (or assessable) by any authority or a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed (or assessable) shall, for the purposes of

(7 of 11) [ITA-342/2017] section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section (1), where – (a) the assessee claims before any Assessing Officer that the value adopted or assessed (or assessable) by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed (or assessable) by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, The Assessing Officer may refer the value of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation (1) For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2. For the purposes of this section, the expression “assessable” means the price which the stamp valuation

authority

would

have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed for assessable by the stamp valuation

(8 of 11) [ITA-342/2017] authority referred to in sub-section (1), the value so adopted or assessed (or assessable) by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. In the matter of CIT vs. R. Sugantha Ravindram, 352 ITR 488, the Hon’ble Madras High Court after referring to the Circular issued by the Board has concluded that the word “assessable” is only prospective in nature and not applicable in respect of the transfer which had taken place prior to the insertion of word “assessable” in section 50C. The relevant para of the judgment in the case of R. Sugantha Ravindram (supra) is as under :- 8. We have perused the above circular. It is stated therein that the scope of the provisions does not include transaction which are not registered with stamp duty valuation authority and executed through agreement to sell or power of attorney. Consequently, it is made clear therein that the amendments have been made applicable with effect from October 1, 2009, and, therefore, they will apply only in relation to transaction undertaken on or after such date. The relevant portion of the circular is extracted hereunder (page 319 of 324 ITR) : "23.4. Applicability.—These amendments have been made appli cable with effect from 1st October, 2009, and will accordingly, apply in relation to transactions undertaken on or after such date." 9. Learned counsel for the Revenue is not disputing about the existence of such circular issued by the Board. If the Board has issued a circular clarifying the applicability of section 50C in pursuance of the amendment made by the Amendment Act 2 of 2009, we fail to understand as to how the Revenue can canvass the same issue in this case which in effect is against the circular issued by the Board. Certainly, the Revenue is bound by the circular issued by the Board. At this juncture, it is pertinent to note that in a decision made

(9 of 11) [ITA-342/2017] in the case of State of Tamilnadu v. India Cements Ltd. reported in [2011] 40 VST 225 (SC), the honourable Supreme Court has held that the circulars issued by the Revenue are binding on the Department and, therefore, they cannot repudiate that they are inconsistent with the statutory provisions. The relevant paragraphs 21 and 22 are extracted hereunder (page 237) : "21. It is manifest from the highlighted portion of the circular that as per the clarification issued by the Commissioner of Commercial Taxes, in exercise of the power conferred on him under section 28A of the TNGST Act, the benefit of the sales tax deferral scheme would be available to a dealer from the date of reaching of BPV or BSV, which ever is earlier, as is pleaded on behalf of the first respondent. It is trite law that circulars issued by the Revenue are binding on the Depart mental authorities and they cannot be permitted to repudiate the same on the plea that it is inconsistent with the statutory provisions or it mitigates the rigour of the law. 22. In Paper Products Ltd. v. CCE [2001] 247 ITR 128 (SC) ; [1999] 7 SCC 84), while interpreting section 37B of the Central Excise Act, 1944, which is in pari materia with section 28A of the TNGST Act, this court had held that the circulars issued by the Central Board of Excise and Customs are binding on the Department and the Department is pre cluded from challenging the correctness of the said circulars, even on the ground of the same being inconsistent with the statutory provision. It was further held that the Department is precluded from the right to file an appeal against the correctness of the binding nature of the circulars and the Department's action has to be consistent with the circular which is in force at the relevant point of time." 10. Even otherwise, we are of the firm view that the insertion of the words "or assessable" by amending section 50C with effect from October 1, 2009, is neither a clarification nor an explanation to the already existing provision and it is only an

(10 of 11) [ITA-342/2017] inclusion of new class of transactions, namely, the transfers of properties without or before registration. Before introducing the said amendment, only the transfers of properties where the value adopted or assessed by the stamp valuation authority were subjected to section 50C application. However, after introduction of the words "or assessable" after the words "adopted or assessed", such transfers where the value assessable by the stamp valuation authority are also brought into the ambit of section 50C. Thus, such introduction of new set of class of transfer would certainly have the prospective application only and not otherwise. Hence, the assessee's transfer admittedly made earlier to such amendment cannot be brought under section 50C ." Thus it is clear that the amended provision of section 50C is not applicable to the transfer which had already taken place prior to the amendment. In the present case the assessee has transferred the capital asset for a consideration of Rs. 74,91,000/- and the document was neither registered nor evaluated for the purpose of stamp duty purposes by the Stamp Valuation Authority at the time of execution of said document . Therefore, there was no evaluation of stamp duty payable on the document. Thus in our view the deeming provision of section 50C do not come in to play thereby replacing the full valuation of consideration of the document with the value calculated by the Stamp Valuation Authority / registering Authority. In the absence of any adoption or assessment by the authority of state government for the purposes of the Stamp duty in respect of subject transfer ( as the document was not registered ), there was no occasion for the AO to either refer the matter to the Registering Authority or to the Stamp Valuation Authority for the purpose of arriving at the valuation of the property. 6.13. Therefore, in the interest of justice we set aside this issue to the Assessing Officer and directed to apply the provisions of Income Tax including Section 55A to determine the correct capital gain in this transaction and decided the case

(11 of 11) [ITA-342/2017] after considering the above observations of this Bench and also give reasonable opportunity of being heard to the assessee after bringing of required evidences on record. 6.14. The assessee challenged in the second ground of appeal that the ld CIT(A) is allowed the appeal partly by applying DVO’s valuation in coowners case U/s 50C but Section 50C is not applicable in the case of assessee. Therefore, the order of the ld CIT(A) is reversed to that extent as observed in preceding paras. Accordingly, the revenue’s appeal as well as assessee’s appeal are set aside to the Assessing Officer. “ 6. Counsel for the appellant-department submits that the said judgment will not apply in the facts of the present case. 7. In our considered opinion, the appropriate remedy available for the appellant is to approach the tribunal and point out the tribunal that judgment in Tara Chand (supra) will not apply in the facts of the case. 8. In case ROM is moved by the appellant, it will open for the department to challenge both the orders. 9. The period taken for filing of this appeal will be taken into consideration while considering the ROM. 10. With the above observations, the appeal stands disposed of. (VIJAY KUMAR VYAS)J. (K.S. JHAVERI)J. Brijesh 7.