ITO, WARD - 6(2), KOLKATA, KOLKATA vs. M/S. INDIA INFRANIRMAN LTD., KOLKATA

The Revenue’s sole substantive grievance challenges correctness of CIT(A)’s action deleting the sec. 50C(1) addition of ₹59.25 lac vide following detailed discussion:- “I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials ITO Wd-6(2), Kol. Vs. M/s India Infranirman Ltd. Page 2 available on record before the :lss~'ssil1g officer during the assessment proceedings. The ground of appeal

relates to single issue of addition of Rs. 59,25,000/- denying the benefit or proviso to Section 50C( 1) to the assessee holding that the said provisions would apply with effect from 0 1.14.2017 and would not apply retrospectively. The facts of the case are that the during the financial year 2013-14 relevant to assessment year 2(114-15 the assessee had sold Land to Mzs. Urmila Rep Projects Pvt Ltd. The agreement for s:lk pr land was made at Rs. 45.00.000/- on 03.03.2011. The Government value of the land was Rs 41,84,279/- as on 03.03.2011. The assessee company offered Long Term Capital Gain of Rs.2,69,977/- (Rs. 45,00,000 - Rs, 42,30,023) for tax, considering the index cost of the Land at Rs. 42,30.023/-. However, at the time of execution of sale conveyance on 07.03.2014, the stamp valuation authorities had assessed the value at Rs. 1,04,25,000/-. Accordingly, the AO made the addition of Rs 59,25.000/-. The AR of the appellate has submitted that as per the proviso to Section 50CCI), the Stamp Value or the property as on the date of Agreement, which was Rs. 41,84,279/-, will be taken as full consideration for computing the Capital Gains and not the value as on the subsequent date of conveyance. The proviso to section 50C (l) states that: "Provided that where the date of the agreement fixing the amount or 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. The said proviso was inserted by the Finance Bill 2016 effective from 1st April, 2017. Since the said provisions are curative in nature, they would apply retrospectively from 01.04.2003 i.e., the date on which the related legal provisions was introduced. The A.O, rejected the claim of the appellant on the sole ground that the claim of the assessee cannot be accepted as the proviso to section 50(C)(i) has been introduced by the Finance Bill 2016 w.e.f. 01-04-2017. Hence, the said proviso is not applicable for the year under consideration. So the only issue under consideration is whether the proviso to Section 50C (l) inserted by the Finance Bill 2016 with effect from pi April, 2017 are curative in nature, and whether it would apply retrospectively from 01.04.2003 i.e., the date on which the related legal provisions was introduced or not. The AR further placed his reliance on the Hori'ble ITAT in the case of Dharamshibhai Sonani Vs. AC1T in reported in 75. Taxmann.com 41 for Assessment Year 2UOg-09 has held that "the proviso to section 50C(i) inserted by the Finance Act 2016 w.e.f. 01 .04.2017 to provide that the stamp duty valuation of property on date of execution of the agreement to sell should be adopted instead of valuation on date of execution of the sale deed is curative and intended to remove undue hardship to the ITO Wd-6(2), Kol. Vs. M/s India Infranirman Ltd. Page 3 assessee & an apparent incongruity. It should accordingly he given retrospective effect from 01.04.2013 i.e. the effective date of when section 50C (i) was introduced. This amendment was explained, in the Memorandum Explaining the Provisions of finance Bill 2016. 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" along with words "the value so adopted 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. 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 00he 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. (1) 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. So far as Section 50C is concerned, the Finance Act 2016, with effect from 1st April 2017, inserted the following provisos to Section 50C: "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 ITO Wd-6(2), Kol. Vs. M/s India Infranirman Ltd. Page 4 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." This amendment was explained. in the Memorandum Explaining the Provisions of Finance Bill 2016 as follows: "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 SOC 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. These amendments are proposed to be made effective from the 1 st day of April, 2017 and shall accordingly apply in relation to assessment year 2017 -18 and subsequent years." The Government has thus recognized the genuine and intended hardship in the cases in which the date of agreement to sell is prior to the date of sale, and introduced amendments to the statue take the remedial measures, this brings no relief to the assessee as the amendment is introduced only with prospective effect from 1st April 2017, There cannot be any dispute that this amendment in the scheme of Section 50C has been made to remove an incongruity, resulting in undue hardship to the assessee, as is evident from the observation in Easwar Committee report to the effect that "The (then prevailing) 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" recognizing the incongruity that the date agreement of sell has been ignored in the statute even though it was crucial as it was at this point of time that the sale ITO Wd-6(2), Kol. Vs. M/s India Infranirman Ltd. Page 5 consideration is finalized. The incongruity in the statute was glaring and undue hardship not in dispute. Once it is not in dispute that a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as effective from the date on which the law, containing such an undue hardship or incongruity, was introduced. In support of this proposition, I find support from Hon'ble Delhi High Court's judgment in the case of CIT v. Ansal Landmark Township (P.) Ltd. [2015] 377 ITR 635/234 Taxman 825/61 taxmann.com 45, and Rajeev Kumar Agarwal v. Add!. CIT [2014] 149 ITD 363/45 taxmanl1.com 555 (Agra - Trib. which centred on the principle that when legislature is reasonable and compassionate enough to undo the undue hardship caused by t11e statute "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". In this case, it was specifically observed. In addition to the reasoning given earlier in this order, I may also refer to the observations of Hon'ble Supreme Court, the case of ClT v. Alom Extrusion Ltd. [2009] 319 ITR 3061185 Taxman 416. The same principle, when applied in the present context, leads to the conclusion that the present amendment being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect. 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 proviso to Section 50C should also be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the date effective from which Section 50C was introduced. 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 proviso to Section 50C being effective from 1st April 2003. In view of above, The AO is directed to delete the addition. This ground of appeal is allowed.”