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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order passed by the Commissioner of Income Tax (Appeals)–6, Chennai dated 25.07.2019 and pertains to the assessment year 2014-15. The notice of hearing was served on the assessee by RPAD. The Registry has placed on record, the proof of service of notice to the assessee. Inspite of notice by RPAD, the assessee chose to remain absent when the appeal was taken up for hearing. Therefore, we heard the Ld. Departmental Representative and proceeded to dispose the appeal on merit.
The Ld.Representative for the Revenue submitted that the assessee entered into an agreement for sale of his property on 04.08.2012 for a total consideration of Rs.19 crores. On the date of agreement, the assessee has received Rs.6 crores. However, the sale deed was executed and registered on 02.05.2013. The assessee adopted the guideline value as on 04.08.2012 for computing the capital gain. The CIT(A) by placing reliance on the proviso to Section 50C of the Income Tax Act, 1961 (in short ‘the Act’), directed the Assessing Officer to adopt the guideline value on the date of entering into sale agreement and not based on the execution of sale deed. Referring to first proviso to Section 50C of the Act, the Ld.DR submitted that first proviso to Section 50C came into effect on 01.04.2017. Therefore first proviso is not applicable to the facts of the case. Referring to the judgment of the Apex Court in CIT vs. Vatika Township (P.) Ltd., (2014) 49 taxmann.com 249 (SC), submitted that the retrospective legislation is contrary to general principle that the legislation by way of conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transaction carried on upon the faith of the then law. The Ld.DR further submitted that law looks forward and does not look backward. Therefore first proviso to Section 50C introduced with effect from 01.04.2017 is retrospective in operation. Therefore, the CIT(A) committed an error in directing the Assessing Officer to adopt the guideline value as on the date of the agreement for sale.
We have considered the submission of the Ld.DR and perused the material available on record. It is not in dispute that the assessee entered into an agreement for sale of his property to the extent of 44,462 sq.ft., of land at East Coast Road, Neelankarai Village on 04.08.2012 for a total sale consideration of Rs.19 crores. It is not in dispute that the guideline value on 04.08.2012 being the date of agreement for sale is not more than Rs.19 crores. The claim of the Revenue appears to that is on 02.05.2013 when the assessee executed the sale deed for registration, the guideline value was more than Rs.19 crores. Therefore, the Assessing Officer adopted the guideline value by applying Section 50C of the Act.
3.1 The object of introduction of Section 50C is to tax a deeming income of capital gain when the assessee executed a registered sale deed below the guideline value prescribed by the respective State Government. The question arises for consideration is when there was an agreement for sale of the property before execution of the sale deed and registration thereof whether the agreed price between the parties on the date of agreement is to be adopted or the guideline value on the date of execution of the sale deed is to be adopted. It is well settled principles of law that guideline value is only to guide the Sub-Registrar to find out the correct market value for the purpose of collecting stamp duty. Market value is not a constant figure. It may vary depending upon the various factors. Therefore, the guideline value may not always represent the market value of the property. However because of deeming provision, Section 50C of the Act, the guideline value has to be adopted in case the market value or the agreed price between the parties was less than the guideline value fixed by the Government. When there was a difference between the dates of agreement for sale and the actual execution of registrated sale deed another question may arise, whether the guideline value as on the date of agreement has to be adopted or on the date of execution of sale deed has to be adopted. Once the assessee entered into an agreement of sale of the property, the purchaser has the right to enforce the agreement specifically through a competent civil court. Therefore, the assessee being the vendor cannot claim any more money over and above the agreed sale price merely because there was an obvious revision in the guideline value. Keeping this situation in mind, the Parliament in their wisdom incorporated first proviso to Section 50C of the Act by Finance Act, 2016 with effect from 01.04.2017. This is to clarify the existing position of law and to avoid further litigation. Therefore, this Tribunal is of the considered opinion that first proviso to Section 50C of the Act, is applicable retrospectively. It does not create any new right between the parties. It simply clarifies the existing position of law. Therefore, the judgment of the Apex court in M/s. Vatika Township (P) Ltd., supra may not be applicable to the facts of this case. The CIT(A) after referring to first proviso to Section 50C of the Act, directed the Assessing Officer to adopt the guideline value as on 04.08.2012, being the date of agreement and there after compute the assessee’s capital gain. Therefore the Revenue cannot have any grievance in the decision of the CIT(A). Accordingly the order of the CIT(A) is confirmed.
In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the court on 27th February, 2020 at Chennai.