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Income Tax Appellate Tribunal, “E” Bench, Mumbai
O R D E R Per Shamim Yahya (AM) :-
This is an appeal by the assessee directed against the order of learned CIT(A) dated 21.5.2019 and pertains to assessment year 2016-17.
Grounds of appeal
read as under :-
1. The order dated 30.11.2018 passed by the Assessing Officer is excessive, unlawful, against the provisions of Income Tax Act, 1961.
2. Assessee had purchased a residential flat for a consideration of Rs 9,00,00,000/-where as the stamp duty value of the property was Rs 9,04,55,000/-. The payment was directly made by the Sumer group to the builder on behalf of assessee. Assessee being a layman agreed with the consideration amount without knowing the implications of provisions of sec 50C of the Income Tax Act, 1961.
3. Assessing Officer failed to consider the fact that the difference margin between the agreement value and stamp duty value is less than 5% and that the purpose of insertion of amendment is to avoid the undue hardships faced by the assessee.
4. In the recent amendment made by Honorable Finance Minister presented on 1st February, 2018 where in it was stated that "to minimise hardship in case of such transactions, it is now provided that where the stamp duty
2 Shaista Irphan Mogul value does not exceed the consideration received or accruing by more than 5% of such consideration, the consideration received or accruing shall be deemed to be the full value of consideration." 5. In the given case the difference between the agreement value and stamp duty value is hardly 0.5%. 6. We request Your Honor to consider the sec 50C retrospectively.
Brief facts are that in the assessment proceedings it was noticed by the Assessing Officer that the assessee had sold an immovable property during the year and had purchased another immovable property and had claimed exemption u/s 54 of the Act. It was noted that the assessee was residing in flat No. 16B at S V Road, Santacruz (W), Mumbai, where tenancy rights were in dispute and suit was filed in the High Court of Bombay. The assessee succeeded before the High Court. Later on the tenancy rights were transferred by assessee to M/s. Sumer Builder for a consideration of Rs. 10,54,30,000/-. The builder directly paid Rs. 9,00,00,000/- for the new flat in the name of the assessee and the builder also paid stamp duty and registration fees in respect of this new property to AB Earth Pvt. Ltd. The assessee claimed that she had inadvertently claimed deduction u/s 54 and claim should be allowed u/s. 54F. The AO noted that while purchase agreement for Flat at Khar was at a consideration of Rs. 9,00,00,000/-, the value as per stamp duty was Rs. 9,04,55,000/-. Thus, the stated consideration for the purchase was lower than the ready reckoner rate. The difference exceeded by fifty thousand rupees and, therefore, the AO show caused the assessee as to why difference should not be brought to tax as per section 56(vii)(b) of the Act. The assessee claimed that there was an amendment as per the Finance Act, 2018, as per which relaxation was provided in as much as it was stipulated that where the date of agreement fixing the amount of consideration for transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purpose of section 56(vii)(b). However Assessing Officer did not accept this. The AO noted that the 3 Shaista Irphan Mogul amendment referred to by the assessee does not cover the case of the assessee and, therefore, addition of Rs. 4,55,000/- was made.
Upon assessee’s appeal learned CIT(A) noted that in the appellate proceedings, the submissions filed before the AO was reiterated. That reference was made to the speech of Hon'ble Finance Minister in respect of the budget presented on 01.02.2018. That it was stated that where the stamp duty value does not exceed the consideration received by more than 5% of the consideration received or accruing should be deemed to be the full value of consideration. It was contended that the difference between agreement value and the stamp duty is hardly 0.5%, therefore, no addition should be made.
However learned CIT(A) was not convinced. He confirmed the Assessing Officer’s decision without properly addressing the assessee’s submission. He held as under :
I have considered the submissions carefully. The appellant was asked to file copy of purchase agreements and Index II. The Ld AR was asked to file any specific case law that covers the specific facts of its case regarding 56(vii)(b). No details or reply was furnished. It is noted that the appellant's case does not fall within section 56(vii)(b). The appellant also could not cite any specific decision in which the facts were identical to the case of the appellant. The appellant referred to section 50C, which is not the case here. In these facts, the Ground of Appeal is dismissed.
Against this the assessee is in appeal before us.
We have heard both the parties and perused the records. Learned Counsel of the assessee has summarized the submission as under :- “1. We would like to bring Your Honor's attention to the fact that assessee had filed her return of income on 26.12.2016. During the year under review the assessee had purchased a residential flat at Khar West on 01.10.2015 for a consideration of Rs 9,00,00,000/- whereas the market value of the property was Rs 9,04,55,000/-. 2. However, we would like to inform Your Honor that variation can occur in respect of similar properties in the same area because of variety of factors, including shape of the plot or location of property, nearby public amenities, size of land and building, nearby public highway or rail facilities, etc. Further, the nearby localities the transaction is of similar cost.
4 Shaista Irphan Mogul The same has been agreed and stated in the Memorandum of Finance Bill, 2018 as follows:
It has been pointed out that this variation can occur in respect of similar properties in the same area because of a variety of factors, including shape of the plot or location. In order to minimize hardship in case of genuine transactions in the real estate sector, It is proposed to provide that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration.
We would like to bring Your Honor's attention to section 50C of the Income Tax Act, 1961.Sec 50C of the Income Tax Act, 1961 states that 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 also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. As per sec 50C of the Income Tax Act explanation it has been clearly stated that where there is a difference between the market value and agreement value and the difference is below ten percent of the market value then in such cases sec 50C of the Income Tax Act, 1961 does not get attracted.
Further, we would like to bring Your Honor's attention to the fact that assessee had entered into an agreement in the year FY 2015-2016 and since the value of the property in the adjoining areas was below the market value assessee had also registered the agreement at Rs 9,00,00,000/- whereas the market value of the property was Rs 9,04,55,000/-.
Considering the hardships faced by the honest tax payers the Honorable Finance Minister recognized the same and amended the provisions of sec 50C of the Income Tax Act, 1961. Wherein the Honorable Finance Minister had agreed that the stringent provisions of sec 50C creates hardships to the honest tax payers. Thus, an amendment being curative in nature was introduced in the Finance Bill, 2018.
Also, legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that 5 Shaista Irphan Mogul a curative amendment to avoid unintended consequences is to be treated as retrospective in nature. Hence, the insertion of third proviso to section 50C must be given retrospective effect from the point of time when the related legal provision was introduced, as this amendment is procedural one to compute the value of property.
Same has been upheld in the Honorable Supreme Court in the case of Allied Moters (P) Ltd, 91 Taxman 205 (SC) as follows:
"A proviso which is inserted to remedy unintended consequences and to make the proviso workable, a proviso which supplies an obvious omission in the section and is require to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole"
In case of Agra Bench in Rajeev Kumar Agarwal, New Delhi Vs Assessee AY 2007-08 has stated that when legislature is reasonable and compassionate enough to undo the undue hardship caused by the statue "such an amendment in law, in view of well settled legal position to the effect that a curative amendment to avoid unintended consequence is to be treated as retrospective in nature even though it may not state so specifically.
We thus, humbly request your honor to consider the amendment in sec 50C of the Income Tax Act, 1961 as an amendment having retrospective effect Further, in the case law of Smt. Cheryl Maria Fernandes, Vs. ITO (It)-2(3)(l), Mumbai 'I' Bench, AY 2011-2012 the Honorable ITAT -Mumbai has held that the legislature has been compassionate enough to cure these shortcomings of provisions, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced.
In our humble understanding, it is a case of a curative amendment to take care of unintended consequences of the scheme of sec 50C.
This, insertion of the third proviso to sec 5OC(1) is in the nature of remedial measure to address a bonafide situation where there is a little justification for invoking an anti-avoidance proviso.
Further, in case of M/s John Flower (India) Pvt. Ltd. In for AY 2010-11 the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%. Therefore respectfully following the decision of the Honorable
6 Shaista Irphan Mogul Coordinate Bench, we hereby direct the AO to adopt the value as declared by the assessee.
Also, in case of Chandra Prakash Jhunjunwala Vs. DCIT, CC-3(4), Kolkata it was held that we hold that the insertion of third proviso to sec 50C of the Act is declaratory and curative in nature. That is, the third proviso to sec 50C of the Act relates to computation of value of property as explained by us above, hence it is not a substantive amendment, it is only a procedural amendment therefore the co ordinate Benches of ITAT used to ignore the variation up to 10%, therefore the said amendment should be retrospective. Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the third proviso to sec 50C should be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the sate effective from which section 50C was introduced.
Further, sec 43CA of the Income Tax Act, 1961 state that Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than 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 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 computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer:
Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and 84 [five] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration.
(2) The provisions of sub-section (2) and sub-section (3) of section 5OC shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).
Thus, sec 43CA clearly states that there is a nexus between sec 50C r/w section 43CA Further, sec 56 (vii)(b) of the Income Tax Act, 1961 states that (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017— (b) any immovable property,—
7 Shaista Irphan Mogul
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: (c) any property, other than immovable property,—
(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :
Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property.
Thus, we request Your Honor to consider the direct nexus between sec 50C, 43CA and sec 56(vii)(b) of the Income Tax Act, 1961. We thus humbly request Your Honor to consider the amendment in sec 50C of the income tax Act, 1961 to be curative in nature and thus, to have a retrospective effect. Further, request Your Honor to disallow the addition made by the Assessing Officer of Rs 4,55,000/-. There is a minimal difference of 0.51% between the Market Value and Agreement Value which is below the permissible limit as per sec 50C of the Income Tax Act, 1961.”
Per contra learned Departmental Representative relied upon the orders of the authority below.
Upon careful consideration we note that the difference between value declared and value as per stamp value authority is less than 10%. This is within the tolerance limit specified in section 50C. The authorities below have rejected it on the premise that the tolerance limit was introduced by the Finance Act, 2018; hence it is not applicable for the year under consideration. We note the plea that the amendment was intended to cure a hardship and hence retrospective has been duly accepted in the ITAT decision referred in the 8 Shaista Irphan Mogul assessee’s submission above. Moreover, the speech of Hon'ble Finance Minister while introducing the provisions duly support this premise. Moreover, in such situation curative provision to remove hardship should be retrospective is duly supported by Hon'ble Supreme Court decision in the case of Allied Moters (P) Ltd. (91 Taxman 205) by the following exposition. "A proviso which is inserted to remedy unintended consequences and to make the proviso workable, a proviso which supplies an obvious omission in the section and is require to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole"
Undoubtedly this amendment was done to obviate hardships arising out of minor variation in value of transaction qua 50C valuation. In this view of the matter assessee’s plea succeeds. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee.
In the result, appeal is allowed.