APPANA HARI NAGA VENKATA RAO,,VISAKHAPATNAM vs. THE ITO,, VISAKHAPATNAM

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 222/VIZ/2017 (Asst. Year : 2011-12) Appana Hari Naga Venkat Rao, vs. ITO, Ward-1(4), D.No. 15-32-7, Gokul Road, Visakhapatnam. Maharanipeta, Visakhapatnam. PAN No. ADOPA 5287 G (Appellant) (Respondent)

Assessee by : Shri G.V.N. Hari – Advocate. Department By : Smt. Suman Malik – Sr.DR

Date of hearing : 12/12/2018. Date of pronouncement : 06/02/2019.

O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-1, Visakhapatnam, dated 13/02/2017 for the Assessment Year 2011-12. 2. The grounds of appeal raised by the assessee are as under:- ―1. The order of the learned Commissioner of Income Tax (Appeals)-1, Visakhapatnam is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.1,05,02,500/- made by the assessing officer by adopting the SRO value of Rs.2,95,02,500/- as on the date of registration i.e., on 08.10.2010 as the deemed

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sale consideration in terms of S.50C as against the actual consideration of Rs.1,90,00,000/- received by the appellant. 3. The learned Commissioner of Income Tax (Appeals) ought to have held that the assessing officer was not justified in not adopting the SRO value as on 17.07.2010 for purposes of S.50C in as much as the sale deed registered on 08.10.2010 was in pursuance of the agreement of sale executed on 17.07.2010. 4. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) ought to have referred the matter to the DVO for ascertaining the fair market value of the property for purposes of S.50 C of the Act. 5. Any other ground that may be urged at the time of appeal hearing.‖ 3. Facts of the case, in brief, are that assessee is an individual filed his return of income for the year under consideration on 17/06/2011 admitting total income of Rs. 2,94,160/-. The Assessing Officer has noticed that assessee had sold a house site admeasuring 1941.51 sq.yds. for a consideration of Rs. 1.90 crores as against SRO value of Rs. 2,95,02,500/- and as per the provisions of section 50C, the sale consideration of Rs. 2,95,02,500/- as deemed consideration. The Assessing Officer, thus, noted that the income chargeable to tax under the head capital gain has escaped assessment and accordingly issued notice under section 148 of the Act. The Assessing Officer after considering the explanation of the assessee, assessment was completed under section 143(3) r.w.s. 147 of the Act by determining taxable long term capital gain at Rs. 1,31,92,445/-.

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While completing the assessment, the Assessing Officer adopted the deemed consideration under section 50C of Rs. 2,95,02,500/- for computation of capital gains and restricted the claim of deduction under section 54 to Rs. 58,00,000/- as against assessee’s claim of Rs. 84,89,945/-. In the assessment order, the Assessing Officer has noted that the assessee has adopted sale consideration at Rs.1.90 crores while computing taxable capital gains instead of adopting SRO value of Rs. 2,95,02,500/-. The Assessing Officer called upon the assessee to show-cause as to why the market value of Rs. 2,95,02,500/- should not be adopted in view of the provisions of section 50C for arriving at the taxable capital gains. The assessee has submitted before the Assessing Officer that the actual sale consideration as on the date of agreement of sale was equal to the SRO value and subsequent enhancement in the SRO value by the registering authority would not affect the transaction entered earlier, so the provisions of section 50C are not applicable. The assessee relied on the order of the ITAT, Visakhapatnam Bench in the case of M/s. Lahari Properties vs. ACIT in ITA No.12/VIZ/2009, dated 22/06/2010. The Assessing Officer did not accept the explanation of the assessee and noted that the sale agreement claimed to have been entered on 17/07/2010 was not a registered sale agreement,

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which has no sanctity. The Assessing Officer further noted that the SRO value of the property adopted by the Stamp Valuation Authority was not disputed at the time of transferring the property through sale deed. As per section 50C, it is mandatory to adopt the SRO value as per Stamp Valuation Authority as deemed consideration for arriving at the taxable capital gains. Accordingly, the Assessing Officer adopted the sale price as per section 50C of Rs. 2,95,02,500/- for computing taxable capital gains. 4. On being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has filed a detailed submission, which is as under:- ―1. The appellant entered into an "Agreement to Sell" with Vira Chand Bothra on the 17th Day of July 2010 for a total consideration of Rs.190,00,000 (Rupees One Crore Ninety Lakhs only) which is the market value of the said property as on the date of entering into the said agreement to sell. 2. As per the Agreement to sell, the appellant had received an amount of Rs.80,00,000 (Rupees Eighty Lakhs) as advance by way of Banker's Cheque dated 14th July 2010 payable at ING Vysya Bank, Visakhapatnam. 3. The said Banker's Cheque of Rs.80,00,000/- was cleared and was credited into my ICICI Bank Account on 20th July 2010 making the Agreement to sell complete in all respect during the month of July itself. 4. Subsequently, the Purchaser had paid the balance amount from time to time till the date of registration and on 8th of October 2010 the Registration of the said property took place with the Registering Authority on the agreed consideration of Rs.190,00,00 which is binding on me. 5. However, while registering the document, the Purchaser had paid the differential Stamp duty on the Market value of

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the property as on date of registration which stood at Rs.2,95,02,500/-. 6. The Assessing Officer proposed to make addition of Rs.105,02,500/- representing the difference between the market value adopted for registering the property and the actual consideration of the said property. 7. The appellant filed the copy of the Agreement, copy of the bank account, the market value certificate issued by the Registering Authority reconciling with the value adopted by both the parties, purchaser and seller at the time of signing the agreement and also explained that the provisions of section 50C are inapplicable in the present case as the transaction is made during July 2010 and the market value of the said property is in accordance with the market value as on date of signing the agreement to sell and hence, subsequent enhancement after the agreement is not attributable to the appellant. 8. Reliance is placed on the jurisdictional decision of Honourable Income-tax Appellate Tribunal, Visakhapatnam Bench decided in the matter of M/s.Lahiri Promoters, Visakhapatnam Vs. ACIT, Circle-1(1), Visakhapatnam in ITA No. 12/Vizag/2009. 9. The facts of the said case relied upon are squarely applicable to the present situation and the Assessing Officer ought to have considered the jurisdictional decision which is also binding on him. 10. The appellant therefore, submit that the present transaction resulting in the enhancement of values subsequent to the entering into a Genuine Agreement against which Advance was received during July 2010 itself and the amounts were cleared and credited to the Bank account of the seller of the property during July 2010 itself. 11. It is submitted that, the Assessing Officer should have considered the real intention of section 50C is not to trouble the genuine transaction but to bring the difference in tax who evade under the guise of the agreements made to suit the transaction.‖

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―4.3 I have considered the submissions made and details filed. It is not in dispute that the assessee had sold the subject immovable property vide sale deed dated 8th October, 2010 registered as Doc. No. 6316/2010 for a consideration of Rs.1,90,00,000/-, and whose value as per SRO was Rs.2,95,02,500/-. The assessee's contention against adoption of SRO value was that he had entered into a sale agreement for sale of the property on 17th July, 2010 and that the market value as on the date of sale agreement was the same as the consideration agreed for the transfer and therefore the SRO value as on the date of registration of the sale i.e on 8th October, 2010, at Rs.2,95,02,500/should not be adopted as the full value of consideration; and for which reliance was placed on the decision of the Hon'ble ITAT, Vizag in the case of Lahiri Promoters. The AO rejected the said contention as it was noted that the alleged sale agreement dated 17.7.2010 was not a registered sale agreement and has no sanctity. 4.4 During the appeal proceedings the same contentions were reiterated and it was submitted that the sale agreement dated 17th July, 2010 was binding on assessee, and as per which the agreed consideration was only Rs. 1,90,00,000/-. It was also submitted that the transaction was completed in July, 2010 and that the market value and the sale consideration was the same at that time and that subsequent enhancement after the agreement is not attributable to the appellant. I have perused the sale agreement dated 17th July, 2010, 4.5 under which the assessee had received advance of Rs.80 lakhs and the balance consideration should be paid by the purchaser before 30th September, 2010, and if the balance consideration was not paid by 30th September, the agreement would stand cancelled. The relevant clauses in the said agreement are as under: 1. The purchaser has paid the sum of Rs. 80,00,000/- (Rupees Eighty Lakhs only) to the vendor as an advance by way of bankers cheque No. 756358, dated 14/07/2010 of ING Vysya Bank, Visakhapatnam to the vendor. 2. The purchaser shall pay balance sale consideration of Rs. 1,10,00,000/- (Rupees One Crore Ten Lakhs only) to the vendor before 30th September, 2010. 3. The vendor shall register the sale deed in favour of the purchaser or his nominees before 30th September, 2010. 4. The stamp duty and registration fee shall be borne by the Purchaser or his nominee or nominees at the time of Registration of the sale deed. 5. The Vendor shall pay all corporation taxes up to the date of Registration of scheduled property. 6. The Vendor hereby assures the Purchaser that he property described in the schedule hereto annexed which is hereby agreed to be sold to the Purchaser under this Agreement is free from all encumbrances. 7. The Vendor shall produce necessary documents of title

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etc. as required by the Purchaser to enable him to avail loan at the time of registration. 8. The Vendor hereby assure the Purchaser that he has unimpeachable title to the said property and no one else has any right over the same and further declares that the said property is free from all other encumbrances, claims charges attachments or gift whatsoever in any manner. If the sale is not effected before 30th September, 2010 9. the sale transaction stands cancelled subject to refund of an amount of Rs.70,00,000/- (Rupees Seventy Lakhs only). However, if the balance amount of Rs.1,10,00,000 (Rupees One Crore ten lakhs only) is also paid before 30th September, 2010, the sale deed can be executed in favour of Vendor or his nominee or nominees at a later date. 10. Time is the essence of this agreement. If the balance payment to the extent of Rs.1,10,00,000/- (Rupees One Crore ten lakhs only) is not paid by 30th September, 2010, this agreement stands cancelled. Upon such cancellation, the vendor shall retain Rs.10,00,000/- (Rupees Ten Lakhs only) and refund balance amount of Rs.70,00,000/- (Rupees Seventy Lakhs only). The amount of Rs.10,00,000/- (Rupees Ten lakhs only) retained by vendor is treated as damages.

4.6 It is relevant to note that the said 'Agreement to Sell', was not registered and as such lacks sanctity and credibility and is not referred in the sale deed. Even otherwise, as per the recitals in the said Agreement, the assessee has not d any rights or interest over the subject property to the intended purchaser. The possession and ownership of the subject property remained vested with the assessee and there was no transfer of any interest, whatsoever pertaining to the subject immovable property under the said Agreement to Sell. None of the situations provided in Sec.2(47) of the I.T.Act defining 'transfer' were found attracted. As per the provisions of Sec.45 of the I.T.Act, the liability to capital gains arises with the transfer of a capital asset. The provisions of Sec.50C also refer to the consideration on transfer of a capital asset. The factual matrix of the case clearly show that there was absolutely no element of 'transfer' under the Agreement to Sell. The 'transfer' was effected only with the execution of Sale deed on 8 t October, 2010, and therefore, the market value as on October, 2010 should be reckoned for the purpose of capital gain computation as per the provisions of Sec.50C of the Act. In this context, it is also relevant to note that the Hon'ble Supreme Court in the case of Suraj Lamps has held that an Agreement to Sell does not create any interest or charge on the subject property and would not amount to conveyance of property. 4.7 Reliance was placed on the decision in the case of Lahiri Promoters rendered by the Hon'ble ITAT, Vizag, and it was argued that the assessee was under obligation to sell under the Agreement to Sell which only was fulfilled with the execution of sale deed; and that the Agreement was binding on him. I do not find merit in the said plea. As per the terms of the Agreement to

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Sell dated 17th July, 2010, the agreement stands cancelled if the sale was not executed before 30th September, 2010, or the balance consideration was not paid by that time. The facts on record clearly show that the balance consideration was not paid before 30th September, 2010 and as could be seen from the registered sale deed the balance consideration was paid as follows Rs.99 lakhs on 4.10.2010, Rs.1 lakh on 4.10.2010 and Rs.10 lakhs on 8.10.2010. As a result whatever personal obligation assumed under the said Agreement comes to an end with the breach contemplated subject to provision for damages of retention of Rs.10 lakhs out of the advance consideration. With the breach of the conditions stipulated in the Agreement, it stands cancelled and would not be binding on the parties. The assessee would not have any obligation under the Agreement after its cancellation, and there would be no such obligation that the assessee was bound to sell to the same vendor for the same price. Therefore the pleas raised in this regard are rejected, and the AO is justified in taking the view that the decision in the case of Lahiri Promoters is distinguishable.‖ 6. On being aggrieved, assessee carried the matter in appeal before the Tribunal. 7. Ld. counsel for the assessee has submitted that the assessee has entered into an agreement on 17/07/2010 to sell the property for a consideration of Rs. 1.90 crores and received advance of Rs.80.00 lakhs through bankers cheque No. 756358, dated 14/07/2010 of ING Vysya Bank, Visakhapatnam and submitted that as per the proviso to section 50C, the SRO value as on the date of agreement has to be considered. He further submitted that purchaser has paid the entire remaining balance through banking channels, therefore, the amount received by the assessee as per agreement dated 17/07/2010 has to be considered as the sale price for the purpose of calculation of capital gains and not the amount as on the date of sale deed. He further submitted

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that there are some lapses committed by the purchaser in respect of payment, but ultimately payment is made as per the agreement and property is registered, therefore, the date of agreement has to be considered for the purpose of valuation of the property and not the date of registration. He relied on the decision of the ITAT, Ahmadabad “B" Bench in the case of Rahul G. Patel vs. DCIT in ITA No. 2767/Ahd/2016, dated 29/06/2018 and submitted that even though the agreement is not registered, the same has to be considered as a valid document for the purpose of determining the value of the property. He also submitted that a provision has been introduced to section 50C is curative in nature, therefore, it applied retrospectively. He also relied on the decision of the ITAT, Visakhapatnam Bench in the case of M/s. Lahiri (supra) and also the decision in the case of Smt. Chalasani Naga Ratna Kumari vs ITO in ITA No. 639/VIZ/2013, dated 23/12/2016. 8. Ld. Departmental Representative has relied on the orders of the authorities below. 9. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. 10. The only issue involved in this appeal is whether to ascertain the value of the property as per section 50C it has to be

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taken on the date of sale agreement dated 17/07/2010 or on the date of sale deed dated 08/10/2010. The assessee has entered into a sale agreement dated 17/07/2010 to sell the property admeasuring 1941.51 sq.yrds. for sale a consideration of Rs. 1.90 crores and received advance of Rs. 80.00 lakhs through bankers cheque No.756358, dated 14/07/2010. The assessee has to receive the remaining balance of Rs. 1.10 crores on or before 30/08/2010. However, the assessee has received 99.00 lakhs on 04/10/2010, 1.00 lakh on 04/10/2010 and Rs.10.00 lakhs on 08/10/2010 i.e. on the date of registration of sale deed. Now the question is for the purpose of ascertaining the value as per section 50C, whether the date of agreement has to be considered or date of sale deed has to be considered. According to the assessee on the date of agreement dated 17/07/2010, the SRO value is much lesser than the sale price agreed by the assessee of Rs.1.90 crores, therefore, the amount agreed on the date of agreement has to be considered and not on subsequent date i.e. date of registration of the sale deed. The case of the Assessing Officer is that the agreement entered by the assessee with the purchaser is unregistered agreement, therefore, there is no validity in the eye of law, hence, as per section 50C the value has to be determined on the date of sale deed. Accordingly, the Assessing Officer

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adopted SRO value of Rs. 2,95,02,500/-. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer. The ld. CIT(A) further observed that purchaser has not fulfilled the conditions laid down in the unregistered sale agreement, therefore, the value of the property has to be considered as on the date of sale deed and not on the sale agreement. We find that the assessee by entering into agreement, he has received substantial amount i.e. Rs. 80 lakhs through banking channels and both the parties bound by the agreement and the purchase have interest on the property i.e. as sale agreement dated 17/07/2010. The assessee has to sell the property to the purchaser as per the sale agreement even though the sale agreement is not a registered. The ld. CIT(A) is not correct in saying that the unregistered sale agreement not valid in the eye of law. So far as lapses committed by the purchaser are concerned, once the assessee accepted the remaining amount subsequent to the date of 30/08/2010, it implies the assessee has acted in accordance with the terms of agreement dated 17/07/2010. Therefore, ld. CIT(A) is not correct in saying that the purchaser failed to fulfil the conditions laid down in the agreement, therefore, the assessee need not sell the property for the same price. The coordinate bench of the Ahmadabad tribunal, ‘B' Bench in the case of Rahul G. Patel (supra) has considered the

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issue in respect of unregistered sale agreement vis-a-vis application of proviso to section 50C held as under:-

―8. We have duly considered rival contentions and gone through the record carefully. Section 48 of the Income Tax Act provides mode of computation of capital gain. It contemplates that income arising under the head "capital gains" shall be computed by deducting from the full value of the consideration received or accruing, as a result of the transfer of the capital assets the following amounts, viz. (a) expenditure incurred wholly and exclusively in connection with such transfer; and (b) the cost of acquisition of the asset and the cost of any improvement thereto. 9. Section 50C further provides that where the consideration received or accruing as a result of 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 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. In other words, full consideration mentioned in section 48 is to be replaced by the consideration on which value of the property was adopted for the purpose of payment of stamp duty. 10. Sub-Section (2) of section 50C further contemplates that in case assessee alleges that stamp duty valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then, the AO may refer the valuation of the capital asset to the Valuation Officer. Sub-clause (v) of Section 2(47) has a direct bearing on the controversy. Therefore, it is pertinent to taken note of this clause. It reads as under: 'Section 2 . . . . . . . . . . . . . . . . (47) "transfer", in relation to a capital asset, includes,— (i) to (iva) (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or'

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and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 13. A perusal of section 53A of the TPA would indicate that it provides a protection to transferee to retain his possession which was taken in part performance of the contract. He was able to protect his possession even after expiry of limitation to bring a suit for specific performance. But after the amendment effected in the Registration and Other Related Laws Amendment Act, 2001, it has been provided that though a contract accompanied by either of possession or executed in favour of a person in possession is compulsorily registerable under section 17(1A) of the Registration Act, 1908, if he failed to register such contract, then, he would not be able to protect his possession or any benefit conferred by section 53A of the TPA. Proviso appended to section 49 of the Indian Registration Act only postulates that such agreement could be tendered in evidence in a suit for specific performance. In other words, validity of unregistered agreement has not been denied for the purpose of adducing it as evidence for obtaining the benefit flowing from such contract. But for the purpose of protecting the possession, un-registered contract could not be enforced. The "transfer" within the meaning of section 2(47) of the Income Tax Act would complete, if possession is protected. Thus on execution of an agreement, if it was not registered then transfer within the meaning of section 2(47) will not happen. Like in the present case, agreement was executed on 8.2.2010 but not registered. Therefore, it is to be construed that transfer did not take place on 8.2.2010 rather took place on 5.6.2012 when sale deed was executed and

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registered. This may be the reason for the assessee to offer capital gain in the Asstt.Year 2013-14 only. 14. It is pertinent to observe that an agreement to sale was executed by the assessee on 8.2.2010 which is followed by payment through account payee cheque. Details of payments have been duly noticed by the ld.AO as well as by the ld.CIT(A). First cheque was received on 1.4.2011 for a consideration of Rs.10 lakhs; then Rs.30 lakhs on 23.7.2011; Rs.15 lakhs on 28.12.2011 and Rs.50 lakhs on 26.3.2012. Similarly on 1.5.2012 Rs.45 lakhs was received through account payee cheque. It means that sale consideration were received by the assessee before the registration of sale deed regularly on different intervals. As observed earlier, section 50C provides that where the consideration received or accruing as a result of 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 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. The question before us is, what could be the full value of sale consideration i.e. whether the value on which stamp duty was paid at the time of sale deed or the value declared in the sale agreement ? In such a situation where the assessee is not satisfied with adoption of sale value on which stamp duty was paid, then scheme of the Act prescribes a mechanism under sub- section (2) of section 50C for making a reference to the DVO to determine fair market value of the property. The reasons for such a mechanism is that stamp duty fee is only 4.95% (herein Gujarat) on the total sale consideration, which is a small amount and can be borne by any vendor/vendee. But for the purpose of Income Tax Act, the liability would enhance multi fold, and due to this reason, mechanism has been provided in the Act for the assessee to demonstrate that the value received by him was far less than one adopted for the purpose of stamp duty valuation. For this, he can make a request to the AO under section 50C(2) for making a reference to the DVO. It is pertinent to observe that the assessee entered into an agreement to sell on 8.2.2010. The AO has not disputed this agreement. The assessee has received payment in pursuance of this agreement through account payee cheque. Let us take a situation where a vendee fails to get the sale deed executed. The assessee being vendor has a remedy for filing a suit for specific performance under the Specific Relief Act. The time limit to file a suit for specific performance has been provided in Indian Limitation Act, which is three years. In such situation, when the vendor files a suit for

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specific performance to force the vendee to purchase the property. In that situation, he will not pay anything over and above, the amount stated in the sale agreement. In that situation, the assessee would not get anything more than the amount mentioned in the agreement, though such situation may arise after three-four years on execution of the decree passed in a suit for specific performance. In between there may an appreciation or depreciation in the said property. Circle rate may rise or reduce. In other words, at the time of an agreement in respect of an immovable property, a right in persona is created in favour of the transferee/vendee. When such right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because vendee in whose favour right in persona is created has legitimate right to enforce such specific performance of the agreement, if the vendor for some reason is not executing the sale deed. Thus, by virtue of agreement to sell, some right is given to the vendee by the vendor. It is encumbrance on the property. At this stage, we would like to make reference to new proviso appended to section 50C by way of Finance Act, 2016 and the background, under which such provision has been incorporated. In 2015, Government of India has set up Income Tax Simplication Committee headed by Justice R.V.Easwar, former judge of Delhi High Court. The Committee in its reported observed as under: ―6.1 RATIONALISATION OF SECTION 50C TO PROVIDE RELIEF WHERE SALE CONSIDERATION FIXED UNDER AGREEMENT TO SELL Section 50C makes a special provision for determining the full value of consideration in cases of transfer of immovable property. It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (i.e. "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 be deemed to be the full value of the consideration, and capital gains shall be computed on the basis of such consideration under section 48 of the Income-tax Act. The scope of section 50C was extended w.e.f. A.Y. 2010- 11 to the transaction which were executed through agreement to sell or power of attorney by inserting the word "assessable" alongwith words "the value so adopted

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or assessed". Hence, section 50C is now also applicable in case of such transfers. The present provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement. A later similar provision inserted by way of section 43CA does take care of such a situation. 6.2 It is therefore proposed to insert the following provisions in section 50C: (4) Where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement. (5) The provisions of sub-section (4) shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before a date of agreement for transfer of the asset. ……‖ 15. Taking a clue from the report, a proviso has been appended by way of Finance Act, 2016 to section 50C and such proviso reads as under: "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: 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, on or before the date of the agreement for transfer." 16. This amendment was explained in the Memorandum

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explaining the provisions of Finance Bill 2016. It reads as under: Rationalization of Section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property Under the existing provisions contained in Section 50C, in case of transfer of a capital asset being land or building on both, the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation of capital gains. The Income Tax Simplification Committee (Easwar Committee) has in its first report, pointed out that this provision does not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Act i.e. when an immovable property is sold as a stock-in-trade. It is proposed to amend the provisions of section 50C so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration. It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property. 30 These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years." 17. If we take all these aspects in their settings as a whole, then it would indicate that earlier whenever an assessee disputed adoption of sale equivalent to the amount on which stamp duty is paid, then reference to the DVO is made under section 50C(2). Normally, as observed earlier, when a sale agreement was executed, payment was received in part performance of the agreement, then vendor would not get anything more than the amount agreed in the sale agreement. There may be a time gap between execution of agreement to sell and execution of sale deed. In between if circle rate is being

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enhanced, then he would like to challenge adoption of higher sale value on the strength of sale agreement. In that situation, unnecessary energy would be devoted in ascertaining fair market value of the property on the date of sale. The encumbrance on the property by virtue of sale agreement would also goad the DVO to determine the fair market value of the property on the date of sale at a lesser amount than the value adopted for the purpose of payment of stamp duty. We have already made a reference to Specific Relief Act and how a vendor or vendee could enforce the sale agreement under Specific Relief Act. Under such enforcement, they would settle their right on the basis of agreed terms in the sale agreement. This proviso would only simplify this exercise i.e. instead remitting the matter to the DVO under section 50C(2), he would conduct an inquiry as to what could be value of the property on the date of execution of the agreement, and whether such agreement has created any encumbrance or not. There could be a difference in the actual sale consideration than the amount on which stamp duty was paid. This proviso has simplified this thing. It contemplates that stamp duty valuation of the property for the purpose of stamp duty payment on the date of agreement can be deemed as full consideration of the capital asset. Thus, in this way, the proviso can be construed as clarificatory in nature, and can be applied on pending matters as already held by the ITAT in the case of Dharamshibhai Sonani (supra). 18. In the present case, we find that the assessee has contended that consideration of Rs.3,00,11,000/- is more than the valuation for the purpose of stamp duty as on 8.2.2010. Nowhere the assessee has pointed out specific rate on the date of agreement. Therefore, we allow these two grounds of appeal for the statistical purpose. We set aside this issue to the file of the AO. The ld.AO shall call for circle rate for the purpose of stamp duty valuation of this property as on 8.2.2010. He shall determine the sale value of the property on the basis of circle rate applicable on this property on 8.2.2010, and thereafter compute long term capital gain assessable in the assessment year 2013-14. In other words, transfer of this property would be construed on 5.6.2012, but the full value of consideration is to be equivalent to the amount on which stamp duty was payable on 8.2.2010.‖

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Supreme Court in the case of Shri K.P. Varghese vs. ITO (131 ITR 597) has held as under:- ―12. Thus, by executing the sale deed in June, 2005, the assessee has only completed the contractual obligation imposed upon it by virtue of the sale agreement. Since the process of sale has been initiated from the date of sale agreements, in our opinion, the character of the transaction vis-a-vis Income Tax Act should be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into. Accordingly, the applicability of the provisions of section 50C should be looked at only on the date of sale agreement. The assessee has filed a certificate obtained from the Joint Sub- Registrar, Visakhapatnam, regarding market value of the impugned property as on the date of the sale agreements. The said certificate was not produced before the tax authorities. We have already held that the provisions of section 50C should be applied to the impugned sale transactions as on the date on which sale agreements were entered into. Since the applicability of section 50C as on the date of sale agreements is required to be examined by the AO , we set aside the issue to the file of the AO with a direction to compute the capital gains on sale of impugned properties after applying the provisions of section 50C as on the date of sale agreements. Accordingly, the order of ld. CIT(A) is reversed.‖ 12. The coordinate bench of the Visakhapatnam tribunal in the case of Smt. Chalasani Naga Ratna Kumari (supra) has considered the same issue and held as under:- “13. In the present case, on perusal of the facts available on record, we find that the assessee has entered into a sale agreement in the year 2007 and as on that date, the stamp duty value of the property was less than sale consideration agreed to be paid between the parties. Although, stamp duty value of the property has been changed as on the date of sale deed, for the purpose of determination of deemed consideration u/s 50C of the Act, stamp duty value of the property as on the date of execution of agreement to sale should be adopted, instead of value on the date of execution of sale deed. Therefore, we are of the view that the A.O. was erred in adopting value of the property as on the date of sale deed to determine deemed consideration u/s 50C of

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the Act. Hence, we direct the A.O. to adopt value of the property as on the date of agreement to sale for the purpose of computation of capital gain u/s 50C of the Act.‖ 13. We find that to decide this appeal we need to quote the relevant portion of section 50C, which reads as under:- ―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 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 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 : [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: 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, on or before the date of the agreement for transfer.] Following third proviso shall be inserted after the second proviso to sub-section (1) of section 50C by the Finance Act, 2018, w.e.f. 1-4-2019 : From the reading of the above, it is clear that the date of agreement of sale and the date of execution of sale deed is different, where the amount of consideration or part thereof has been received by way of account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer, the

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date of agreement has to be considered for the purpose of section 50C. In the present case, the assessee has received an amount of Rs. 80.00 lakhs through banking channels on 14/07/2010 i.e before the date of agreement. Therefore, in our opinion, proviso to section 50C has been fulfilled by the assessee therefore proviso to section 50C applies to the assessee’s case. The ITAT, Ahmadabad ‘B" Bench in the case of Rahul G. Patel (supra) has considered the same issue and held that the proviso to section 50C inserted by the Finance Act, 2016 w.e.f. 01/04/2017 is curative in nature, therefore it operates retrospectively. The coordinate bench of the Visakhapatnam tribunal in the case of Smt. Chalasani Naga Ratna Kumari (supra) has also considered the issue to determine the deemed consideration as per section50C, the date of agreement has to be considered not date of sale. No material has been brought to our notice to show that the above said order has been modified or reversed by the Hon'ble High Court. Further, ld. Departmental Representative could point out any contrary decision. We therefore respectfully following the decision of the coordinate bench of the tribunal in above referred to case, this ground of appeal raised by the assessee is allowed. 14. Insofar as SRO value as on the date of agreement i.e. 17/07/2010, the counsel for the assessee has submitted that

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which is more than the sale consideration agreed by the assessee. This fact is not examined by the Assessing Officer. Therefore, we remit the issue back to the Assessing Officer for the limited purpose to ascertain the SRO value as on the date of agreement i.e. 17/07/2010 and the same is adopted as a sale consideration as per section 50C and complete the assessment as per law. 15. In the result, appeal filed by the assessee is allowed for statistical purposes. Order Pronounced in open Court on this 06th day of Feb., 2019.

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 06th Feb., 2019. vr/- Copy to: 1. The Assessee-Appana Hari Naga Venkat Rao, D.No. 15-32-7, Gokul Road, Maharanipeta, Visakhapatnam. 2. The Revenue – ITO, Ward-1(4), Visakhapatnam. 3. The Pr.CIT-1, Visakhapatnam. 4. The CIT(A)-1, Visakhapatnam. 5. The D.R., Visakhapatnam. 6. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.