Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-2, Pune [in short CIT(A)], Order No. ITBA/APL/S/250/2017-18/1006657239(1) vide order dated ITAs No. 6813/Mum/2017 05.10.2017. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle-3, Thane (in short ‘DCIT/ITO/ AO’) for the A.Y. 2013- 14 vide order dated 17.03.2016 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making addition of long term capital gain by adopting the fair market value as per section 50C of the Act as on the date of registration of sale deed on 10.05.2012 as against the assessee executed sale agreement on 02.10.2009. For this assessee has raised following two grounds: - “1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal and that too without appreciating the facts fully and properly. Full facts of the case have been set out in the Statement of facts annexed hereto.
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal and approving the action of the AO in determining the income at ₹ 88,66,895/- as against the returned income of ₹ 42,69,395/-."
Briefly stated facts are that the assessee has sold industrial land situated at Village Lahe, Taluka Shahpur, Thane to WAM (India) Pvt. Ltd. for a sum of ₹ 4,92,00,000/-. The assessee before AO submitted the copy of purchase and sale agreement of the said land. The assessee worked out the short term capital gain at ₹ 31,67,756/-. The AO noticed from the ITAs No. 6813/Mum/2017 copy of index No 2 i.e. agreement of sale dated 10.05.2012 that the fair market value of the property i.e. land sold by assessee was ₹ 5,37,97,500/- as per stamp duty valuation as against the sale consideration disclosed in the sale deed at ₹ 4.92 crores. The AO required the assessee to explain as to why the fair market value of the property sold was not to be taken at ₹ 5,37,95,500/- as on 10.05.2012 as against the agreement value of ₹ 4.92 crores as on 02.10.2009. The assessee replied that the agreement between the assessee and purchaser came to be finally executed between the parties vide registered agreement dated 10.05.2012. Accordingly, it was urged that the sale consideration recorded in the agreement dated 02.10.2009 should be considered for the purpose of section 50C of the Act and the stamp valuation as on that date i.e. 02.10.2009 can be taken for the purpose of computation of short term capital gain. But the AO treated the differential i.e. difference between the sale consideration as per stamp duty valuation as on 10.05.2012 at ₹ 5,37,95,500/- and agreement value on 02.10.2009 at ₹ 4.92 crores and further treated the difference as short term capital gain at ₹ 45,97,500/-. Aggrieved assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the action of the Assessing Officer. Aggrieved assessee came in appeal before Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We have noted the facts of the case that the understanding arrived at between the parties as contained in the agreement dated 02.10.2009 which came to be finally executed between the parties vide agreement dated 10.05.2012. The terms of agreement between the parties in both the agreements dated 02.10.2009 and 10.05.2012 are same and have to be read in conjunction with each other.
ITAs No. 6813/Mum/2017 We noted that on account of the Total Consideration of Rs 4,92,00,000/-, the assessee received substantial payments which are as under: - Cheque No. Date Amount 977570 08.10.2009 10,00,000 978071 06.12.2008 15,00,000 998251 20.08.2009 10,00,000 998350 31.08.2009 2,00,00,000 998383 02.09.2009 1,00,00,000 998480 25.09.2009 50,60,000 996298 28.10.2009 30,00,000 818082 05.12.2009 19,00,000 917954 14.01.2010 30,00,000 800279 04.09.2010 17,00,000 Total consideration 4,81,60,000 received in advance 5. All the part payments towards the consideration have been paid by Account Payee cheques only. The balance consideration of Rs.10,40,000/- has been received by the assessee upon execution of the conveyance deed dated 10.05.2012. In view of the above facts, we have gone through the amended section 50C of the Act as brought out by Finance Act 2016, which is reproduced as under:
In section 50C of the Income-tax Act, in sub- section (1). the following provisos shall be inserted with effect from the 1st day of April, 2017, namely: — "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 valve adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be ITAs No. 6813/Mum/2017 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 bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.”
Admittedly, the provisions of section 50C of the Act have been amended as to apply from AY 2017-18. However, since the amendment is clarificatory in nature, ought to be considered since the inception of Section 50C of the Act, which is AY 2003-04. The assessee is in compliance of the amended provisions of section 50C of the Act, in as much as:
• 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 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 ITAs No. 6813/Mum/2017
We find that this issue is squarely covered by the decision of ITAT, SMC Bench, Ahmedabad dated 30.09.2016 in the case of Dharamshibhai Sonani Vs ACIT wherein it is held as under:
“[9] So far as the amendment to Section 50C being retrospective in effect is concerned, there is no doubt about the legal position. I hold the provisos to Section 50C being effective from 1st April 2003. This is precisely what the learned counsel has prayed for. In his detailed written submissions, he has made out of a strong case for the amendment to Section 50C being treated as retrospective and with effect from 1st April 2003. The plea of the assessee is indeed well taken and deserves acceptance. What follows is this. The matter will now go back to the Assessing Officer. In case he finds that a registered agreement to sell, as claimed by the assessee, was actually executed on 29.6.2005 and the partial sale consideration was received through banking channels, the Assessing Officer, so far as computation of capital gains is concerned, will adopt stamp duty valuation, as on 29.6.2005, of the property sold as it existed at that point of time. In case the assessee is not content with this value being adopted under section 50C, he will be at liberty to seek the matter being referred to the DVO for valuation, ITAs No. 6813/Mum/2017 again as on 29.6.2005, of the said property. As a corollary thereto, the subsequent developments in respect of the property sold (e.g. the conversion of use of land) are to be ignored. It is on this basis that the capital gains will be recomputed. With these directions, the matter stands restored to the file of the Assessing Officer for adjudication de novo, after giving an opportunity of hearing to the assessee and by way of a speaking order. I order so.
[10] As I part with the matter, I may make one more observation. The amendment in Section 50C was brought in to provide relief to the assessee in a situation in which the stamp duty valuation of a property has risen between the date of execution of agreement to sell and execution of sale deed, as is the norm rather than exception, but the real estate market is now traversing through a difficult phase and there can be situations in which there is a fall in the stamp duty valuation rates with the passage of time. Such a situation has actually arisen in many places in the country, such as in Gurgaon and some other places. It is therefore possible that, at first sight, first proviso to Section 50C may seem to work to the disadvantage of the assessee in certain situation in the event of the word ‘may’ being construed as mandatory in ITAs No. 6813/Mum/2017 application, but then one cannot be oblivious to the fact that this proviso states that “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 (emphasis supplied)” making it clearly optional to the assessee, and that, in any event, what has been brought by the lawmakers as a measure of relief to the taxpayers cannot be construed as resulting in a higher tax burden on the taxpayers. Of course, assuming that my understanding of this statutory provision is in harmony with the legislative intention, insertion of words “at the option of the assessee” between “stamp valuation authority on the date of agreement may” and “be taken for the purposes of computing full value of consideration for such transfer”, in first provisio to Section 50C(1), could have made the legal provision even more unambiguous.”
We find from the facts of the case that the AO has adopted stamp duty value of the property as on the date of sale deed. The facts relating to the market value as on the date of agreement to sale and as on the date of sale deed is not disputed. The only dispute is whether the stamp duty value as on the date of agreement to sale or sale deed to be considered for the purpose of computation of capital gain. The purpose of introducing section 50C of the Act was to counter suppression of sale 9 ITAs No. 6813/Mum/2017 consideration of sale of immovable properties. Before insertion of section 50C of the Act to the statute, there are lot of litigations as to consideration shown in document conveying title and payment of stamp duty. To overcome the litigations, the provision of section 50C of the Act has been inserted to the statute w. e. f. 01.06.2003 wherein it is made mandatory to adopt value u/s 50C of the Act for the purpose of determination of consideration. A proviso to section 50C of the Act has been inserted by the Finance Act. 2016 w.e.f. 01.04.2007 to resolve the genuine and intended hardship, in the case in which the date of agreement to sale is prior to the date of sale and market value of the property as on the date of agreement to sale and date of sale deed is different. In view of the above position, we are of the view that the assessee is bound by the value of sales consideration of ₹ 4,92,00,000/- in terms of the agreement dated 02.10.2009 and if provisions of section 50C of the Act are invoked, then the valuation as may be arrived at by the stamp duty authorities as on 02.10.2009 will be required to be considered for the comparison of the adequateness. Hence, we delete the addition made by AO and allow this issue of assessee’s appeal.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 19-03-2019. (मनोज कुमार अग्रवाल / MANOJ KUMAR AGGARWAL) (महावीर स िंह /MAHAVIR SINGH) (लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददनािंक/ Mumbai, Dated:19-03-2019. स दीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS