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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI PRAKASH CHAND YADAV
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal was originally decided by this Tribunal vide order dated 20.11.2014. Against the order of the Tribunal, the assessee carried the appeal before Hon’ble jurisdictional High Court wherein the following questions are framed vide dated 2.2.2021: i. Whether on the facts and in the circumstances of the case, finding of the Hon’ble ITAT that the subject land sold is held by the appellant as investment and not as stock in trade is perverse? ii. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in holding that the loss arising from sale of subject land is chargeable to tax under the head ‘income from capital gains’ and not under the head ‘profit and gains from business or profession?
V.S. Chandrashekhar, Bangalore Page 2 of 6 iii. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in holding that provisions of Section 50C are applicable to the instant case of sale of subject land by the appellant? iv. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in not allowing business loss of Rs.60,43,859/- for the impugned assessment year 2010-11?
1.1 The Hon’ble High Court answered these questions in para 10 & 11 as follows: “10. We have considered the submissions made by learned counsel for the parties and have perused the record. Admittedly, the assessee has entered into an unregistered agreement viz., an agreement for sale on 23.12.2005 with M/S Namaste Exports Ltd. For purchase of land measuring 3639.60 square meters for a consideration of Rs.4.25 Crores. Before proceeding further, it is apposite to take note of relevant extract of Section 2(47) as well as Section 50C of the Act, which read as under:
2(47)"transfer", in relation to a capital asset, includes, — (i) the sale63, exchange63 or relinquishment63 of the asset; or (ii) the extinguishment of any rights therein63; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A67 of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
Section 50C (1) 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 (hereinafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp V.S. Chandrashekhar, Bangalore Page 3 of 6 duty in respect of such transfer , the value so adopted or assessed or assessable shall, for the purposes of Section48 be deemed to be the full value of the consideration received or accruing as a result of such transfer. Provided that where the date o: the agreement fixing the amount of consideration and the date of registration for the transfer of the capita/ asset are 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 fu// value of consideration for such transfer. Provided further that the first proviso shall apply only in a case where the amount of consideration, or apart 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 or through such other electronic mode as may be prescribed on or before the date of the agreement for transfer.
Thus, from. perusal of the aforesaid provisions, it is axiomatic that explanation 1 to Section 2(47) uses the term 'immovable property whereas, Section 50C uses the expression 'land' instead of immovable property. It is also pertinent to mention that wherever the legislature intended to expand the meaning of the land to include rights or interests in land, it has said so specifically viz., Section 35(1)(a), Section 54G(1), Section 54GA(1) and Section 269UA(d) and Explanation to Section 155(5A). Thus, Section 50C applies only in case of a transferor of land which in the instant case is M/S Namaste Exports and not the assessee who was only a consenting party and not a transferor / co-owner of the property. Undoubtedly, the assessee had certain rights under the agreement, however, from the clear plain and unambiguous language employed in Section 50C, it is evident that the same does not apply to a case of rights in land. It is equally well settled rule of statutory interpretation with regard to taxing statute that an assessee cannot be taxed without clear words for that purpose and every Act of the Parliament has to be read as per its natural construction of words. For the aforementioned reasons, in our considered opinion, the provisions of Section 50(c) are not applicable to the case of the assessee. In the result, the first substantial question of law is answered in the negative and in favour of the assessee.”
Later, the assessee filed petition for review of order in RP No.281/2022, wherein, the Hon’ble High Court vide order dated 31.3.2023 observed as under: “In view of the modification of the judgement dated 02.02.2021 passed in this review petition is disposed of.”
V.S. Chandrashekhar, Bangalore Page 4 of 6 2.1 Further, vide order dated 10.4.2024, Hon’ble High Court observed as under: “M.V. Seshachala, the learned Counsel for the petitioner, submits that this Court has answered Substantial Question No.3 on the applicability of Section 50C of the Income Tax Act, 1961 in favour of the petitioner- assessee, and consequent thereto, the dispute about the business loss as claimed by the petitioner and disallowed by the assessing officer will have to be reconsidered by the Income Tax Appellate Tribunal and therefore there must clarification in this regard. Sri Y.V. Raviraj, a learned Standing Counsel for the respondent, does not contest assertion.
Further, it is also pointed out that this Court vide order dated 31.03.2023 permitted correction in the earlier order dated 02.02.2021 insofar as the questions that were remanded back to the Tribunal for reconsideration, and that at this stage, by inadvertence, appropriate relief is not sought insofar as the Substantial Question No.4.
In the light of the afore, the application [IA. 1/2024] is allowed and the Tribunal, consequent to this Court's order dated 02.02.2021 and the order of correction dated 31.03.2023, is called upon to reconsider. Substantial Question No.4 for complete and effective adjudication.”
2.2 Thereafter, the assessee also filed an additional ground with an application for admission of this additional ground as follows vide application dated 11.7.2023: Additional ground: a. Whether the Assessing Officer was correct in disallowing the loss claimed by the assessee on giving up his right under the agreement to sale dated 23.12.2005 in respect of Sy.No.9/1A, Arakere Village, Begur Hobli, Bangalore which was under acquisition by the Bangalore Development Authority under notifications dated 8.9.1987 and 28.07.1990 by adopting the guidance value prescribed for registration over that area by the State Government which is held not justified by the Hon’ble High Court in on 2.2.2021.”
We have heard the both the parties on admission of additional ground. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional ground for the purpose of adjudication as there was no V.S. Chandrashekhar, Bangalore Page 5 of 6 investigation of any fresh facts otherwise on record and the action of the assessee is bonafide. 3.1 However, at the time of hearing, no argument was made with regard to this additional ground. Accordingly, this additional ground is not adjudicated and dismissed. 3.2 Now the main contention of the ld. A.R. is that the question No.3 already decided by the Hon’ble High Court holding that the provisions of section 50C of the Act not applicable to the assessee’s case as the assessee only consenting party and not a transferor or a co-owner of the property and section 50C of the Act is not applicable to his rights in land. Accordingly, the provisions of section 50C of the Act cannot be applied to the assessee’s case. 3.3 As seen from the above, the Hon’ble High Court, i.e. in para 10 & 11 of its order, High Court observed that provisions of section 50C of the Act is not applicable to the assessee’s case as the assessee is not a transferor of property/co-owner of the property and was only consenting party. Thus, it is clear that provisions of section 50C of the Act is not applicable. However, capital gain arose to the assessee to be computed on the basis of valuation mentioned in the sale deed as applicable to the assessee and not on the basis of valuation determined u/s 50C of the Act. Thus, this issue is decided in favour of the assessee. 3.4 Regarding other issues raised by the assessee, we are of the opinion that Hon’ble High Court only held that section 50C of the Act is not applicable and it was not given any finding that assessee’s income to be assessed under the head “Business or profession” and thus, it means that the assessee’s income or loss arising from the impugned transaction to be assessed as a capital gain or capital loss only. Accordingly, other grounds of appeal raised by the assessee, which are not answered by the Hon’ble High Court are decided against the assessee subject to determining the capital gain or capital loss on the basis of value mentioned in sale
V.S. Chandrashekhar, Bangalore Page 6 of 6 deed and not on the basis of valuation as per section 50C of the Act. 4. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 25th June, 2024