UPENDRA MAHESHWARI,CHENNAI vs. ITO, CHENNAI

Shri G. Baskar, the Ld. Counsel for the assessee submitted that the only issue arises for consideration is computation of capital gain. According to the Ld. Counsel, the assessee entered into an agreement for sale of land on 10.02.2007. The sale consideration fixed in the agreement was ₹80,15,000/-. Since, there was a mistake in the parent document, the proposed buyer refused to go ahead thereafter. The assessee gave an undertaking that he will rectify the parent document by a registered deed. Therefore the assessee persuaded the original vendor to rectify the error in the sale deed. In fact, a rectification deed was executed by the original buyer of the property and a sale deed dated 06.05.2008 was also registered. In the mean time, the State Government revised the guideline value of the land w.e.f. 01.08.2007. Infact, the guideline value of the land at the time of registration of property was ₹1,20,00,000/-. The purchaser though paid the stamp duty on the revised guideline value, the sale consideration remains to be ₹80,15,000/- . According to the Ld. Counsel, the assessee has invested a sum of ₹78,06,426/- in a flat from amount out of sale consideration. The Assessing Officer referred the valuation of the land to the Valuation Officer. The Valuation Officer fixed the value of the land at ₹91,50,000/- as against the sale consideration of ₹80,15,000/-. The Assessing Officer adopted the entire value estimated by the valuation officer as consideration of the property and allowed exemption only to the extent of ₹37,90,879/- being the amount paid by the assessee till 30.09.2009 being the due date for filing the return of income.

According to the Ld. Counsel, the agreement for sale of property was executed on 10.02.2007 and the sale could not be completed immediately because there was a defect in the parent document which needs to be rectified. In fact, the sale deed was executed on 06.05.2008 after great persuasion. According to the Ld. Counsel, the guideline value or market value which exists on the date of agreement alone could be taken and not the value as on date of execution of sale deed.

Referring to Section 54/54F of the Income Tax Act, 1961, (in short ‘the Act’) the Ld. Counsel submitted that the actual consideration received alone can be considered and not the notional value. Placing reliance on the order of this Tribunal in dated 29.05.2015, the Ld. Counsel for the assessee submitted that the notional value cannot be considered for the purpose of determining the capital gain. Referring to Section 54F of the Act, the Ld. Counsel submitted that the Assessing Officer has taken the payment made up to the date of filing of the return of income under Section 139 (1) of the Act. According to the Ld. Counsel, the due date for filing of return of income under Section 139(4) of the Act ought to have been considered by the Assessing Officer. The Ld. counsel further submitted that the amount invested up to due date for filing return of income under Section 139(4) has to be considered for allowing deduction.

On the contrary, Shri Murali Mohan, the Ld. Departmental Representative submitted that for the purpose of computing capital gain, the date on which the sale deed was registered has to be taken in to consideration and not the date of agreement. The assessee may enter in to an agreement for sale of the property.

Referring to the claim under Section 54F of the Act, the Departmental Representative submitted that the assessee was expected to utilize the sale proceeding before the due date for filing the return of income under Section 139 (1) of the Act. According to the Ld. D.R. due date means the date prescribed under Section 139(1) and not under 139 (4). Therefore the Assessing Officer has rightly allowed the claim of the assessee to the extent of the investment made till the due date of filing the return of income under Section 139 (1) of the Act.

We have considered the rival submissions on either side and perused the material available on record. Admittedly, the assessee entered into an agreement for sale of land on 10.02.2007. When the assessee entered into an agreement for sale of property, even though it may not always go to its logical conclusion of execution of sale deed, the parties to the agreement has a right to enforce the agreement before the court of law. In the case before us, consequent to the agreement dated 10.02.2007, the sale deed was executed on 06.05.2008. Delay for execution of sale deed was admittedly there was an error in the parent document which needs to be rectified. Therefore, this Tribunal is of considered opinion that when the assessee agreed to sell a property and entered into an agreement for sale, he cannot go back from the sale consideration referred in the agreement for sale. Subsequent revision of guideline value or increase in market value may not affect the agreement entered in to between the parties. The fair market value is not a constant figure. Sub-registrar of the Registration Department was expected to determine the market value of the property by taking in to consideration of various factors including the guideline value. The guideline value is only to guide the Sub- Registrar to determine the market value of the property for the purpose of levying stamp duty. Guideline value may not reflect the market value in all cases.

In this case as on 10.02.2007, the guideline value of the property was not more than ₹80,15,000/-, the price agreed between the parties. On 01.08.2007 the guideline value was revised to ₹1,20,00,000/-. Since the assessee agreed to sell the property for ₹80,15,000/- on 10.02.2007 which is much more than the guideline value which existed on 10.02.2007, this Tribunal is of considered opinion that the Assessing Officer has to accept the sale consideration of ₹80,15,000/- under Section 50C of the Act. In other words, the guideline value which exists on the date of agreement for sale, has to be taken in to consideration for the purpose of determining the fair market value under Section 50C of the Act. Therefore this Tribunal is unable to uphold the orders of the lower authorities.

Now coming to the claim of exemption under Section 54F of the Act. The Parliament in their wisdom thought it fit to grant exemption in respect of the capital gain which was used for construction or purchase of property till the due date for filing of return of income under Section 139 (1) of the Act. The assessee could not use the sale consideration within the due date under Section 139 (1) of the Act, the same shall be deposited in any one of the capital gain account. The Apex court while considering the “due date” held that the due date means, the date prescribed under Section 139 (1) of the Act. The Apex Court in the case of Prakash Nath Khanna and Another v CIT (2004), 266 ITR 1 (SC) has examined these issue and found that the due date means the date under Section 139 (1) of the Act and not the date under Section 139 (4) of the Act.

In view of the above, this Tribunal is of considered opinion that the Assessing Officer has rightly allowed the claim of the assessee with regard to the capital gain utilized for purchasing the flat till the due date for filing the return of income under Section 139 (1) of the Act. Therefore this Tribunal did not find any reason to interfere with the orders of the lower authorities.

In the result, the appeal of the assessee is partly allowed.