THE PR. COMMISSIONER OF INCOME TAX vs. BELLANDUR CHIKKAGURAPPA JAYARAMAREDDY

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ITA/372/2022HC KarnatakaKAHC01035046202215 July 2024Bench: KRISHNA S DIXIT,RAMACHANDRA D. HUDDAR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court agreed with the assessee's submission. It held that Parliament, in its wisdom, has legislated to consider the date of the agreement for fixing the amount of consideration, rather than the date of registration, subject to certain conditions. The Court noted that the second proviso to Section 50C(1) applies only if a part of the consideration is received by an account payee cheque or bank draft or through an electronic clearing system on or before the date of the agreement. The Court found that the fact matrix of the case did not present any exceptions that would prevent the application of this principle. Therefore, the Revenue had no discretion to adopt a date other than the date of the agreement for the purpose of Section 50C. The appeal was dismissed as not meritorious.

What were the facts?

The Revenue has appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated January 5, 2022, for Assessment Year 2014-15. The ITAT had allowed the assessee's appeal, reversing the order of the Commissioner (Appeals) and granting relief to the assessee. The dispute pertains to the valuation of a capital asset, specifically land or building, for the purpose of calculating capital gains. The core of the disagreement lies in determining the relevant date for adopting the stamp duty valuation. The assessee claims the value on the date of the Memorandum of Understanding (MOU) should be used, while the Revenue contends otherwise.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee proved the satisfaction of the second proviso to Section 50C(1) by paying part of the sale consideration on the date of the MOU (August 4, 2013), thus requiring the guidance value to be computed as prevailing on the MOU date, despite the MOU being an unregistered document not creating title? 2. Whether the Tribunal's order was perverse in setting aside the disallowance of capital gains, ignoring the findings and materials presented by the assessing authority and upheld by the Commissioner of Income Tax (Appeals)? Assessee's Contention: The questions of law framed by the Revenue do not arise as Section 50C of the Income Tax Act, 1961, for the relevant assessment year, supports the assessee's position. The provisos were introduced in later financial years, but the core principle of considering the agreement date is applicable. Revenue's Contention: The Revenue argued that the MOU was unregistered and thus not a valid document for determining title or for the purpose of Section 50C. They contended that the Tribunal erred in relying on it and ignoring the findings of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 50C(1),Section 48

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:27141-DB ITA No. 372 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF JULY, 2024 PRESENT THE HON'BLE MR JUSTICE KRISHNA S DIXIT AND THE HON'BLE MR JUSTICE RAMACHANDRA D. HUDDAR INCOME TAX APPEAL NO. 372 OF 2022 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX, 5th FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BENGALURU - 560 095.

2.

THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE -4(3)(1), 2nd FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU - 560 095. …APPELLANTS (BY SRI. Y.V. RAVIRAJ, STANDING COUNSEL A/W SRI. DILIP M, ADVOCATE)

AND:

BELLANDUR CHIKKAGURAPPA JAYARAMAREDDY, NO.11, 1st CROSS ROAD, MICO LAYOUT, BTM II STAGE, BENGALURU - 560 076, PAN: AASPJ 162IN. …RESPONDENT (BY SRI. MADHUSUDHAN U.A, ADVOCATE)

THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 05/01/2022 PASSED IN ITA NO.1322/BANG/2019, FOR THE ASSESSMENT YEAR 2014-2015 PRAYING TO I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL,

Digitally signed by SHAKAMBARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:27141-DB ITA No. 372 of 2022

BENGALURU IN ITA NO. 1322/BANG/2019 DATED 05/01/2022 FOR ASSESSMENT YEAR 2014-2015 ANNEXURE-C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-4(3)(1), BENGALURU.

THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, KRISHNA S DIXIT J., DELIVERED THE FOLLOWING:

JUDGEMENT

This appeal by the Revenue seeks to call in question the Tribunal's Order dated 05.01.2022 concerning the Assessment Year 2014-15 whereby, the Assessee's Appeal in ITA No.1322/Bang/2019 came to be allowed and Assessee has been granted to relief by reversing the order of Commissioner (Appeals).

2.

The appeal has been presented with the following substantial questions of law: 1. "Whether, on the facts and in the circumstances of the case and law, the Tribunal is right in law in holding that the assessee has proved that 2nd proviso to Section 50C(1) is satisfied since assessee has paid part of sale consideration on the date of MOU on 8/4/2013 and in view of this, he guidance value has to be computed as prevailing on the date of MOU and therefore same is allowable ignoring that MOU relied upon by assessee is an unregistered document which is not valid document for purpose of Transfer of Property as MOU dated

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NC: 2024:KHC:27141-DB ITA No. 372 of 2022

8/4/2013 does not create any title in favour of assessee"?

2.

Whether, on the facts and in the circumstances of the case and law, the Tribunal's order can be said as perverse in nature in setting aside disallowance of Capital Gains ignoring the findings and materials brought on record by assessing authority and which has been rightly upheld by Commissioner of Income Tax (Appeals)?"

3.

A Co-ordinate bench of this Court had directed notice and accordingly, the same having been served, the assessee is represented by his Senior Counsel Shri A.Shankar, who opposes the appeal contending that the questions framed above do not arise in the matter inasmuch as the provisions of Section 50-C of the Income Tax Act, 1961, as they were for the relevant Assessment Year, although, the provisos have been introduced in the later financial years, do not support them.

4.

Having heard the learned Counsel for the parties and having perused the appeal papers, we are broadly in agreement with the submission of learned Senior Advocate representing the assessee inasmuch as Parliament in it's wisdom has injuncted that the date of the agreement itself should be kept in view and not the date on which the same has

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NC: 2024:KHC:27141-DB ITA No. 372 of 2022

been registered, subject to all just exceptions into which argued case of the appellant does not fit.

5.

Section 50-C (1) of the Act reads as under: "50C. [ Special provision for full value of consideration in certain cases. [Inserted by Act 20 of 2002, Section 24 (w.e.f. 1.4.2003).]

(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 ] [ Inserted by Act 21 of 1998, Section 23 (w.r.e.f. 1.4.1998).][or assessed or assessable] [ Substituted by Act 33 of 2009, Section 25, for certain words (w.e.f. 1.10.2009).][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] [Inserted by Act 20 of 2002, Section 24 (w.e.f. 1.4.2003).] [or assessed or assessable] [ Substituted by Act 33 of 2009, Section 25, for certain words (w.e.f. 1.10.2009).][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.

[Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:

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NC: 2024:KHC:27141-DB ITA No. 372 of 2022

Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a [bank account or through such other electronic mode as may be prescribed] [Inserted by Act 20 of 2002, Section 24 (w.e.f. 1.4.2003).], on or before the date of the agreement for transfer.] (Third Proviso not being relevant is not produced)”

The text of the provisions of Section 50-C is as clear as Gangetic waters. In the fact matrix of the case, it leaves no discretion with the Revenue to adopt any date other than the date of agreement in question.

In view of the above, the appeal being not meritorious, is liable to be and accordingly rejected, costs having been made easy.

Sd/- JUDGE

Sd/- JUDGE YN List No.: 1 Sl No.: 12

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