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Facts
The assessee entered into a development agreement for two plots of land in August 2006 and a conveyance deed in December 2010. The Assessing Officer applied Section 50C based on the higher stamp duty valuation at the time of the conveyance deed (2010) for computing capital gains. The CIT(A), however, directed the AO to recompute capital gains considering the stamp duty value as of the agreement date (2006), holding the amendment to Section 50C by the Finance Act, 2016, to be retrospective.
Held
The Income Tax Appellate Tribunal (ITAT) confirmed the CIT(A)'s decision, ruling that the amendment to Section 50C of the Act, introduced by Finance Act, 2016, is retrospective in nature. Citing the Madras High Court judgment in CIT v. Vummudi Amarendran, the Tribunal held that the stamp duty value as on the date of the agreement (August 2006) should be considered for computing capital gains.
Key Issues
Whether the amendment to Section 50C of the Income-tax Act by the Finance Act, 2016, with effect from A.Y. 2017-18, applies retrospectively to the Assessment Year 2010-11 for the purpose of considering the stamp duty value as on the date of agreement.
Sections Cited
Section 143(3), Section 50C, Section 50C(1), Section 40(a)(ia), Section 43CA, Section 2(47)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
PER PRASHANT MAHARISHI, AM:
ITA No.4430/Mum/2023 is filed by the Income Tax Officer, Ward 25(2)(1), Mumbai [the learned Assessing Officer] against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 12th October, 2023, wherein the appeal filed by the assessee against the assessment order dated 20th March, 2014, passed under Section 143(3) of the Income-tax Act, 1961 (the Act) by the learned Assessing Officer was partly allowed.
“1. Whether, on the facts and in circumstance of the case and in law, the Ld. CIT (A) has erred in appreciating that the amended provision of Section 50C of the Act, was introduced with effect from A.Y. 2017-18 prospectively and is not applicable retrospectively for the A.Y. 2010-11.
Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT(A) erred in not appreciating that unless explicitly stated a piece of legislation is presumed not be intended to have retrospective operation based on the principle “lex prospicit non respicit” meaning that the law look forwards and not backwards?"
The fact clearly shows that the assessee is an individual deriving income from salaries and earned Long Term Capital Gain during the year. The assessee jointly holds two plots of land at Bhandup East, Mumbai. These lands were inherited and were acquired in the year 1965, by the grandfather of the assessee and his brothers. Therefore, the assessee was in a receipt of his share through inheritance. The assessee entered into a development agreement with a Developer M/s Horizon Enterprises on 19th August, 2006, for the transfer of above two plots for a consideration of ₹2,57,77,000/- and ₹8,70,000/- but the possession of the same plot was not handed over to the developer. The assessee contended this consideration fixed in the year 2006 and received the sum of ₹1,00,000/- on entering into an agreement. As on the
The assessee preferred an appeal before the learned CIT (A), who passed an order on 12th October, 2023, wherein after obtaining the remand report of the learned Assessing Officer upholding the applicability of Section 50C of the Act but holding that due to the amendment in the provision of Section 50C of the Act by Finance Act, 2016, the deemed full value of consideration should be taken as on the date of agreement executed i.e. in 2006. He relied upon several judicial precedents. Further, as during the course of assessment proceedings, itself the valuation was referred to the District Valuation Officer, who held that the Stamp Duty Value of the respective plots as on 25th August, 2006 is ₹2,79,86,000/- and ₹11,40,000/- respectively , wherein the consideration is ₹2,57,77,000/- and ₹8,70,000/- respectively for both the plots. Accordingly, he held that amendment to Section 50C is retrospective in nature and therefore, for the consideration of capital gain the stamp duty value as on 19th August, 2006, shall be considered. He directed the learned Assessing Officer to recompute the
The only grievance of the learned Assessing Officer is that amended provisions of Section 50C of the Act were introduced with effect from A.Y. 2017-18, prospectively and is not applicable retrospectively for the A.Y. 2010-11 and therefore, such amended provision could not have been applied in the case of the assessee.
The ld DR reiterated the contentions of the ld AO and held that such amendment cannot be applied retrospectively.
The learned Authorized Representative submitted that the decision of the SMC in ITA No.1237/Ahd/2013, dated 26th July, 2016, for A.Y. 2008-09 has categorically held that such provisions applied retrospectively. This decision has been followed by the learned Commissioner of Income-tax (Appeals). He further stated that the Hon'ble Madrass High Court in (2020) 429 ITR 97(Mad.)(HC) in case of CIT v. Vummudi Amarendran, has also held that amendment to Section 50C made with effect from 1st April, 2017 retrospective in nature and therefore, in that case it was applied to the A.Y. 2014-15. Therefore, now the issue is squarely covered in favour of the assessee.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The only dispute in this appeal is that whether the amendment made to the provisions of Section 50C of the Act with effect from A.Y. 2017-18 would apply retrospectively for
“7. Before we proceed to consider as to whether proviso inserted in Section 50C of the Act has to be read retrospective or prospective, we need to point out that the Assessing Officer did not doubt the bona fides of the transaction done by the assessee, since the Assessing Officer accepted the fact that the assessee had entered into an Agreement for Sale of the property in question vide Agreement for Sale dated 4-8-2012, wherein agreed sale consideration was Rs. 19 Crores and the assessee had received Rs. 6 Crores by way of account payee cheque on the date of signing the Agreement. This fact was noted by the CIT(A) and held that the Agreement cannot be treated to be ante- dated as the assessee had received Rs. 6 crores as advance on the date of Agreement through banking channel. The only reason for the Assessing Officer to adopt higher value is based upon the guideline value fixed by the State Government. The question would be as to what is the effect of the guideline value fixed by the Government and the purpose behind fixing the same. This aspect was clearly explained in the case of J. Jayalalitha. It has been pointed out that the guideline value has relevance only in the context of section 47A of the Indian Stamp Act (as amended by Tamil Nadu Act 24 of 1967) which provides for dealing with instruments of conveyance which are undervalued. The guideline value is a rate fixed by the authorities under the Stamp Act for the purpose of determining the true market value of the property disclosed in an instrument requiring payment of stamp duty. Thus the guideline value fixed is not final but only a prima facie rate prevailing in an area to ascertain the true or correct market value. It is open to the Registering Authority as well as the person seeking registration to prove the actual market value of the property. The authorities cannot regard the guideline valuation as the last word on the subject of market value but only a factor to be taken note of, if at all available in respect of an area in which the property transferred lies. It was further pointed out that this position is made clear in the explanation to Rule 3 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968; this explanation also will have to be read in conjunction with explanation to section 47(A) of the Indian Stamp Act (as amended by the Tamil Nadu Act 24/1967). It was further pointed out that undue emphasis on the guideline value without referred to the setting in which it is to be viewed will obscure the issue for consideration. Further it was held that in any event, if for the purpose of the Stamp Act, guideline value alone is not a factor to determine the value of the property, its worth will not be any higher in the context of assessing the true market value of the properties in question to ascertain whether the transaction has resulted in any offense so as to give a pecuniary advantage to one party or other. 8. Thus, the Assessing Officer could not have based his conclusion solely based on the guideline value which has been held to be only a prima facie rate prevailing in the area to ascertain the true or correct
Further, the learned CIT (A) has set aside the issue back to the file of the learned Assessing Officer for re- calculation of the capital gain considering the date of agreement for the purpose of applicability of Section 50C of the Act, based on the above two decisions. In absence of any other contrary decision of the Hon'ble Jurisdictional High Court, we are also duty bound to follow the decision of the Hon'ble Madras High Court. Accordingly, we find no infirmity in the order of the learned CIT (A). Accordingly, both the grounds of appeal of the learned Assessing Officer are dismissed.
In the result, ITA No.4430/Mum/2023 is dismissed.
Order pronounced in the open court on 28.05.2024.
Sd/- Sd/- (SUNIL KUMAR SINGH) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 28.05.2024
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai