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Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM
आदेश / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the assessee against the order of CIT(A)- 3, Thane dated 25/07/2016 for the A.Y.2012-13 in the matter of order passed u/s.143(3) of the IT Act.
In this appeal, assessee is aggrieved for addition of Rs.16,88,010/- u/s.50C of the IT Act, 1961.
Rival contentions have been heard and record perused. Facts in brief are that assessee is an individual and deriving income from partnership firm, M/s.Shivam Builders & Jyoti Developers, capital gains & income from other sources. The Assessee has shown STCG of Rs.5,21,710/- and after deduction of Rs.50,000/-, the net STCG was Rs.4,71,710/. On verification of sale agreement deed, the stamp duty valuation was found at Rs. Mahendra Natvarlal Patel 44,00,000. Therefore, the AO issued show case as to why the stamp duty valuation should not be taken as sale value for computing STCG. Accordingly, the AO added the differential capital gain of Rs.16,73,000/- to the total income of the assessee.
By the impugned order CIT(A) confirmed the addition by observing that even though the sale agreement was executed on 09/10/2011 but it was registered on 11/01/2012, on the date of registration the market value of property for stamp duty purposes was Rs.44,00,000/-, accordingly AO was justified in taking the value of property as on 11/01/2012 for computing capital gains.
Against this order of CIT(A), assessee is in further appeal before us.
It was contended by learned AR that not only agreement was executed on 09/10/2011 but also entire payment of the property was received by the assessee before the end of the year i.e., 31/03/2012. Our attention was also invited to the Bank statement wherein sale consideration was credited by assessee in the bank account. He also relied on the decision of Allahabad High Court in case of Shimbhu Mehra 65 taxmann.com 142 in support of the proposition that the moment an agreement to sell is executed between the parties and part consideration is received, the transfer for the purpose of section 50C takes place and computation under section 48 will start accordingly, for the purpose of calculating the capital gains under section 45.
6. On the other hand learned DR relied on the findings recorded by CIT(A) to the effect that because the sale agreement dated 09.10.2011 was not Mahendra Natvarlal Patel registered and also the ready recknor relied upon by the appellant is also not reliable, therefore, the Stamp duty valuation of the property on the date of registration is the correct valuation to arrive the sale consideration. In this regard, the purchase of the aforesaid land was valued on the basis of stamp duty valuation by the assessee; therefore, the assessee cannot deny the sale consideration on the basis of stamp duty valuation.
I have considered rival contentions and carefully gone through the orders of the authorities below. From the record I found that addition was made by AO replacing the full value of consideration by invoking the provisions of Sec.50C of the Act on the date on registration. The assessee has agreed to sale a plot of land situated at Tembhode, S.No.74/1B, Palghar district for a total consideration amounting to Rs.27,27,000/- on 11th june 2011. At that time, the market value of the said plot was Rs.22,00,000/- .Subsequently, the assessee entered into agreement for sale on 9th October 2011. As per the said agreement, the assessee has already received Rs.11,00,000/- and remaining Rs.16,27,000/- was to be received on or before 09th December 2011. Thereafter the assessee received the entire sales consideration by 21st December '2011. These facts are duly supported by the following documentary evidences placed on record.
Copy of agreement for sale deed 09th Oct.2011 (PB Pg.No.21- 23) 2. Copy of ledger accounts indicating details of receipt of Rs.27,27,000/- entirely by cheque entries duly reflected in the bank statements on or before 21st Dec. 2011 (PB Pg.No.27-32) 3. Copy of extract of ready reckonor (PB Pg. No. 24-26)
In view of the above documentary evidence, it is clear that the assessee has sold the property for a consideration which is substantially higher (Rs.27,27,000) than the prevailing market value for the purpose of stamp duty(Rs.22,00,000) vide agreement for sale dated 09.10.2011. Further, the entire consideration was received on or before 21.12.2011. However, due to some unforeseen circumstances the conveyance deed of the' said property has been registered on 11th jan 2012 i.e. in next calendar year 2012. In the year 2012, the market value for the stamp duty purpose had doubled to Rs.44,00,000/- from Rs.22,00,000/- As a consequence thereof, there is disparity between the new market value vis-a-vis old market value for stamp duty purposes. However, since the transfer took place on 09.10.2011 (in the year,2011), the market value for the purpose 'of sec 5OC should/be taken at Rs.22,00,000/- and on comparison of the same with the agreement value, no additions are warranted u/s 50C of the Act. It is pertinent to note that the agreement for sale states that the entire payment is received by the assessee by 21.12.2011 which is in the year 2011. Further, the agreement for sale is a contract binding the parties who have executed the same and on the date its execution, substantial amount of Rs.11,00,000/- out of the total sale consideration of Rs.27,27,000/- was received. Further, possession of the property is also parted on 09.11.2011.The facts and circumstances clearly demonstrate that the transfer has already been done on 09.10.2011. The case of the assessee is covered in sub-clause (i) and (v) of Clause 47 of Mahendra Natvarlal Patel sec 2 of the Act as in sum and substance there is a sale on 09.10.2011. The registration of a conveyance deed is merely a legal 'formality and the date' of the same cannot be considered as the date of transfer. The case of assessee is fully supported by the decision of the Hon’ble Allahabad High Court in the case of CIT v Shimbhu Mehra 65 taxmann.com 142. ITAT Hyderabad in the case of DCIT v S.Venkat Reddy (2013) 32 taxmann.com 324, ITAT Delhi Bench ITO v. Modipon Ltd., (2015) 57 taxmann.com 360.
Hon’ble Allahabad High Court in case of Shimbhu Mehra (supra) held as under:- 12. Sub-clause (ii) of Section 2(47) of the Act states that the transfer, in relation to a capital asset, includes the extinguishment of any rights therein. In Sanjeev Lal v. CIT [2014] 365 ITR 389/225 Taxman 239/46 taxmann.com 300 (SC), the Supreme Court considered the question as to whether the date on which the agreement for sale was executed could be considered the date on which the property was transferred. The Supreme Court held that when an agreement to sell in respect of immovable property is executed, a right in personam is created in favour of the vendee and when such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee gets a legitimate right to enforce a specific performance of the agreement. The Supreme Court, while considering the provisions of Section 2 (47) (ii) of the Act held that if a right in respect of any capital asset is extinguished and that right is transferred to someone else, it would amount to transfer of a capital asset. The Supreme Court held that once an agreement to sell is executed in favour of some person, the said person gets a right to get the property transferred in his favour and, consequently, some right of the vendor is extinguished.