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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI RAMIT KOCHAR
सुनवाई क� तार�ख /Date of Hearing : 27-4-2016 घोषणा क� तार�ख /Date of Pronouncement : 13-07-2016 आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the assessee, being 6th February, 2013 passed by learned Commissioner of Income Tax (Appeals)- 29 Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2009-10, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 5th December, 2011 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called “the Act”).
ITA 3442/Mum/2013 2
2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-
“(1) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in taxing Long Term Capital Gains of Rs. 16,44,413/- computed without claiming indexation @ 20% as against 10% as provided in proviso to sec. 112 of the LT. Act and directing the Assessing Officer to allow indexation of the cost of acquisition of the capital asset. This ground is taken notwithstanding the fact that a rectification application has been filed before the Hon’ble CIT (Appeals).
2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the computation of long term capital gains on sale of inherited property viz. Roshan Villa at Rs. 15,74,215/- by making his own valuation u/s 50C without referring the matter to the valuation officer and without deducting the cost of acquisition and thereby upholding the Protective Assessment made by the Assessing Officer failing to appreciate that such a course of action is not backed by any of the provisions of the law.
2.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in failing to appreciate that the capital gains arises only after cost of acquisition is deducted from sale consideration.
2.2 On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in invoking the provisions of sec. 50C of the Income Tax Act failing to appreciate that the sale agreement could not be registered as the said property was in the name of the deceased mother of the appellant and has not been transferred in the names of the legal heirs.
2.3 On the facts and in the 'circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in failing to appreciate that the provisions of Sec.50C as it stood before its amendment by Finance (No.2) Act, 2009 is operational only in a case where the agreement for transfer has been registered.
2.4 On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in failing to appreciate that the amended provisions of sec. 50C is operational only with effect from 1.10.2009 and hence not applicable for A.Y. 2009-10.
ITA 3442/Mum/2013 3
2.5 On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in rejecting the claim of your appellant for exemption u/s 54 EC amounting to Rs. 8,00,000/- claimed in e return of income. This ground of appeal is taken notwithstanding the fact that a rectification application has been filed before the CIT(Appeals).
2.6 On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in not granting set off for long term capital loss of Rs. 40,138/- (on redemption of Mutual Fund) and short term capital loss of Rs. 210/- on sale of shares claimed in the return of income without assigning any reason for the same. This ground of appeal is taken notwithstanding the fact that a rectification application has been filed before the CIT (Appeals).”
3. The assessee has also raised the following additional grounds vide letter dated 3rd September, 2014.
“a. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that, for the purpose of arriving at the full value of consideration as contemplated under section 50C of the Income Tax Act, 1961, the property should be valued by any authority of the state government, referred to as "stamp valuation authority" and that the valuation opinion of a registered valuer cannot be adopted. b. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that, for the purpose of arriving at the full value of consideration, the valuation as given by the "stamp valuation authority", i. e. Rs 26,83,044/- has to be adopted.
3. Withdrawal of Grounds We have to further state that we would like to withdraw the following grounds of appeal since the Assessing officer has given relief on the below mentioned grounds in his order u/s 154 subsequent to filing of this appeal.
1. Ground No. 1 - Taxing long term capital gains of Rs 16,44,413/- computed without claiming indexation @20% as against 10%, as provided in proviso to section 112 of the Income Tax Act, 1961.
ITA 3442/Mum/2013 4
Ground No. 2.5 - Rejection of claim for exemption u/s 54 EC of the Income Tax Act, 1961 amounting to Rs 8,00,000/-.
Ground No. 2.6 - Not granting set off for long term capital loss of Rs 40,138/- (on redemption of mutual fund) and short term loss of Rs 210/- on sale of shares - as claimed in the return of income.”
The brief facts of the case are that assessee is a partner in M/s Dadar Motor Works and M/s Dadar Auto Spares. During the year the assessee has declared income from share, interest and remuneration from these partnership firms. The assessee has also disclosed income from house property, capital gains on sale of shares and sale of inherited property, dividend from shares and mutual funds.
At the outset, the learned Counsel for the assessee submitted that the assessee is not pressing ground No. 1, 2.5 & 2.6 and the same may be dismissed as being not pressed. The learned CIT DR did not raised objection to the assessee withdrawing the afore-stated grounds of appeal to be dismissed as being not pressed. Hence the afore-stated grounds no 1,2.5 and 2.6 are dismissed as not being pressed. We order accordingly.
The assessee has also raised additional grounds as set-out above. It is the say of the learned counsel for the assessee that the said additional grounds raised before the Tribunal are legal grounds which are very important for adjudication of the instant appeal and also does not require investigation into fresh facts and all the facts are available on record from the orders of the authorities below and prayed that the said additional grounds of appeal may be admitted being legal grounds of appeal . The learned DR objected to the admission of the said additional grounds of appeal at this stage of proceedings. We have considered the rival contentions and have also gone through the additional grounds of appeal raised by the assessee and have observed that both the additional grounds of appeal raised vide letter dated ITA 3442/Mum/2013 5 03-09-2014 are legal grounds and the same need to be admitted in the interest of justice as also in view of decision of Hon’ble Supreme Court in NTPC Limited v. CIT(1998) 229 ITR 383(SC) which is binding on us.
In grounds of appeal before us, the solitary issue is with respect to the computation of long term capital gain on sale of inherited property viz. ‘Roshan Villa’ at Rs. 15,74,215/-. During the course of assessment proceedings u/s. 143(3) read with Section 143(2) of the Act, the A.O. noticed that the assessee has sold one property ‘Roshan Villa’ at Matheran which belonged to the late mother of the assessee. After the death of assessee’s mother i.e. on 3rd October, 2005 the property was inherited by the assessee as well as his brothers and sisters. Subsequently , the said property was sold to one Sabir Y. Nirban and Mrs. Naseem S. Nirben for a consideration of Rs. 25 lacs on 16th January, 2009. However, no registered document has been entered into and the property has been sold , on as is where basis. The A.O. observed that apparently the property was sold at a lower rate than the market price and the assessee has made the transaction by selling the property only on a piece of paper without registering the same. The assessee submitted that since no formal registered document has been executed, the provisions of section 50C of the Act are not attracted to this transaction. The assessee was show-caused as to why the said property may not be valued as per market rate and the difference amount be added to income and taxed u/s 50C of the Act.
In reply thereof, the assessee submitted that since no agreement has been executed on stamp paper and the property has not been registered, the provisions of section 50C of the Act are not applicable. In support, the assessee relied on the decision of the Tribunal, Mumbai Bench in the case of Shingar India Pvt. Ltd. v. ITO in dated 6th May, 2009 and also circular no 5 of 2010 dated 03-06-2010 to contend that ITA 3442/Mum/2013 6 applicability of Section 50C of the Act to the properties which are not registered is applicable for transactions entered into on or after 01-10-2009. Thus, the assessee relying on provisions of Section 50C of the Act contended that the same are not applicable to the transaction of sale of inherited property carried on by the assessee in the instant case whereby property ‘Roshan Villa’ was sold on 16-01-2009 i.e. prior to 1-10-2009.
The A.O. observed that the decision of the Tribunal is distinguishable as in that case the Tribunal has decided the case based on the fact that the asset was transferred to the person who was its supplier against huge debts whereas in the present case the property has been sold for a consideration. The assessee has also cited CBDT Circular No. 5 of 2010 dated 3rd May, 2010 wherein the applicability of section 50C of the Act has been taken to be applicable for transactions entered into on or after 1st October, 2009, thus, whereby the assessee contended that applicability of section 50C of the Act is not attracted in the instant case. The AO took note of the said circular which as per AO has been taken care of while framing the impugned assessment . The A.O. observed that the sale consideration has been apparently on a lower rate because the property is a huge villa situated in Hill station of Matheran admeasuring 7800 sq. ft. constructed on a plot of 3439.8 sq. ft. and the same has been sold for a paltry sum of Rs. 25 lacs. The AO observed that the assessee has deliberately sold the property on a piece of paper to avoid applicability of Section 50C of the Act. The assessee has already taken the sale consideration and physically handed over the property to the purchaser and thus as per the AO as per the Sales of Goods Act the transaction is completed. The AO observed that the assessee will take plea when the property will be registered that the property has already been sold and physical possession handed over and the transaction was over, therefore, it could not be taxed in the year of registration and now he is taking the plea that since the property is not registered , there-fore, the same cannot be ITA 3442/Mum/2013 7 brought to tax within ambit of Section 50C of the Act. The A.O., however, considering the afore-stated instructions of CBDT and applicability of the section, made the addition on protective basis in the year under consideration and held that in the year of registration of the property, the assessment made in the instant assessment year will be considered.
The A.O. referred the matter to stamp duty valuing authority to ascertain stamp duty value of ‘Roshan Villa’ on relevant date of sale and made the addition based upon the value as submitted by stamp valuing authority on the basis of value as per ready reckoner during the relevant period of sale. However, since the property was not registered , the stamp valuing authorities expressed their inability to value the cost of the building constructed on the property. Since, the whole property could not be valued by the Stamp valuing authorities , the valuation report submitted by the assesse of a Government registered valuer namely M/s Anmol Sekhri Consultants Pvt. Ltd. vide their valuation report dated 15-10-2011 whereby the said registered valuer valued the land at Rs.80 per square meters and the building at Rs.100 per square feet as on 01-04-1981 was also considered by the AO. The stamp valuing authorities valued the land @ Rs.780 per square meters on the basis of ready reckoner rates in the relevant period of sale which was considered by AO for computing full value of consideration of land , while for computing full value of consideration of Building/structure on the land, the AO adopted the value of building of Rs.100 per square feet as on 01-04-1981 as per assessee’s valuer report and multiplied the same with cost inflation index to arrive at the full value of consideration of the building as on the relevant date of sale. The AO arrived at the full value of consideration of land and building/structure on land as under, vide assessment order dated 05-12-2011 passed by the AO u/s 143(3) of the Act:-
Vale of the land as per stamp duty ITA 3442/Mum/2013 8 Valuation Authority Rs. 26,83,044/- (Rs. 780/- per sq. mtr x 3439.8 sq mtrs)
Value of building as per Regd. Valuer Rs. 45,39,600/- (Rs. 100/- base price in 1981 x cost inflation index) i.e. 582/100 = Rs. 582 per sq. ft. x 7800 sq. ft.
Total value of the property as on the date of sale For the purpose of section 50C Rs. 72,22,644/-
Aggrieved by the assessment order dated 05-12-2011 passed by the AO u/s. 143(3) of the Act, the assessee filed first appeal before the learned CIT(A) and submitted that the assessee had inherited 1/3rd share in the house property situated in Matheran after the death of his mother Mrs. Shabana Siddick Sulaiman on 3rd October, 2005. The property namely ‘Roshan Villa’ was purchased by the mother of the assessee on 29th December, 1937. The copy of the purchase document had already been submitted before the A.O. which is not disputed by the A.O. . The property was sold for a total sale consideration of Rs. 25 lacs by the assessee and other co-owners(i.e. other legal heirs of his late mother) . The agreement was neither executed on paper nor registered with the Registrar. The possession of the property was handed over to the purchaser during the relevant previous year. Since there was part performance of the contract, the transaction was considered as transfer of the property and the capital gains on such transfer was inadvertently declared at Rs. 8,33,333/- (i.e. the assessee’s share of sale consideration) in the return of income filed with the Revenue, while during the assessment proceedings before the AO u/s 143(3) read with Section 143(2) of the Act, the assessee claimed 1/3rd share of capital gain at Rs. (-)12,13,602/- which is detailed as under:-
Sale consideration (Total) Rs. 25,00,000 Less: Cost of acquisition Rs. 10,55,184 as per Valuation report which was indexed to Rs.61,41,171/- ITA 3442/Mum/2013 9 (i.e. Rs.10,55,184 x 582/100 Rs. 61,41,171/- Rs.(-)36,41,171/- ============== Assessee’s share is 1/3rd Rs.(-) 12,13,602/- ============== The A.O. arrived at capital gain of Rs. 15,74,215/- by taking recourse to Section 50C of the Act whereby the AO calculated the land value at Rs. 26,83,044/-, and value of the superstructure at Rs. 45,39,600/- based on the value as on 1st April, 1981 as per the assessee valuer’s report and adjusted with cost inflation index to arrive at the total value of the property as on date of transfer at Rs. 72,22,644/- which was considered as full value of the sale consideration for arriving at the capital gains by invoking the provisions of section 50C of the Act. Hence, it was submitted that the A.O. erred in adopting the full value of the sale consideration as Rs. 72,22,644/- without referring the property for valuation to the Valuation Officer which was mandatorily required u/s 50C(2) of the Act. It was submitted that the value of the property as per the land rate given by stamp duty office comes to Rs. 26,83,044/- and against this sale consideration is Rs.25,00,000/- and there is minor difference of Rs.1,83,044/- . The AO enhanced the valuation by appreciating the building value which was constructed prior to 1937, while building always depreciates. It was stated by the assessee before the learned CIT(A) that the A.O. erred in appreciating the various facts such as purchaser was to pay unpaid municipal taxes for more than 10 years , the purchaser will get the property transferred in the name of legal heirs of mother of the assessee at his own cost, the purchaser will also pay premium for transfer of the said leasehold property in his name to the Collector of Raigad district and also purchaser will bear the stamp duty for the transaction of the sale of property. It was submitted that the A.O. is not competent to value the property whereas he should have referred the matter to the valuation officer ITA 3442/Mum/2013 10 which is the mandate of Section 50C(2) of the Act. It was further submitted that the addition cannot be made on protective basis. Without prejudice, it was submitted that the AO has wrongly computed the capital gains even if the value as adopted by the AO is accepted because the AO has computed difference between the full value of consideration of Rs.72,22,644 less the actual sale consideration of Rs.25,00,000/- as long term capital gain which is distributed between the three co-owners of the property.
The learned CIT(A) rejected the contention of the assessee and observed that the A.O. has made the addition on protective basis. The assessee sold the property for sale consideration of Rs. 25 lacs and the sale deed has not been registered . The consideration is much lower compared to the situation of the property. The A.O. has not made a substantive addition and the same has been mentioned in the assessment order. The ld. CIT(A), hence, observed that no interference is required with the findings of the A.O. in the assessment order specially because the assessment was made on protective basis, vide appellate orders of the learned CIT(A) dated 06-02-2013.
Aggrieved by the appellate order dated 06-02-2013 of the learned CIT(A), the assessee is in further appeal before the Tribunal.
The ld. Counsel for the assessee submitted that the property, ‘Roshan Villa’ was owned by the assessee’s mother which was purchased on 29th December, 1937. The mother of the assessee expired on 3rd October, 2005 and after her death, the property was inherited by the assessee as well as his brothers and sisters as co-owners. The property was sold on 16th January, 2009, however, no formal registered document had taken place, hence, section 50C of the Act is not applicable. The A.O. has made protective addition in the hands of the assessee and the learned CIT(A) has confirmed the same. No substantive addition is made in the hands of the assessee .
ITA 3442/Mum/2013 11 The ld. Counsel further submitted that the A.O. has referred the matter to the Stamp Duty Valuation Authority who valued the land at Rs. 26,83,044/- , while they have expressed their inability to value the building as the said property was not registered. The assessee has given the valuation as per the Government approved valuer to work out the cost of acquisition as on 1-4- 1981. Addition has been made by taking the value of land as per the stamp duty officer and the building has been valued as on 1-4-1981 and then indexation was applied to determine full value of consideration which is not permissible under the Act. It is further submitted that no deduction has been given for the cost of the building while indexed cost has been taken for the purpose of value of the building on the date of sale. The ld. Counsel relied on the order of the Tribunal in the case of Shingar India Pvt. Ltd. v. ITO in ITA No. 1785/Mum/2007.It was submitted that Section 50C of the Act prior to 1- 10-2009, was applicable only to the properties , sale of whom are registered with stamp duly valuation authorities and since the assessee sold the property on 16-01-2009, the provisions of Section 50C of the Act are not applicable. The learned counsel for the assessee relied upon CBDT circular no. 05/2010 dated 03-06-2010 being explanatory notes to the provisions of the Finance(No. 2 ) Act ,2009 , which stipulates as under :
“ 23. Provisions for deemed valuation in certain cases of transfer 23.1 The existing provisions of section 50C provide that where the consideration received or accruing as a result of the transfer of a capital asset, being land or building or both, is less than the value adopted or assessed by an authority of a State Government (stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain. However, the present scope of the provisions ITA 3442/Mum/2013 12 does not include transactions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney.
23.2 With a view to preventing the leakage of revenue, section 50C is amended, so as to provide that where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both is less than the value adopted or assessed or assessable by an authority of State Government 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 consideration received or accruing as a result of such transfer for computing capital gain.
23.3 Further, Explanation 2 has been inserted in the sub-section (2) of the section 50C, so as to clarify the meaning of the term "assessable".
23.4 Applicability - These amendments have been made applicable with effect from 1st October, 2009 and will accordingly, apply in relation to transactions undertaken on or after such date.”
11 The ld. D.R. relied on the orders of the authorities below and submitted that the A.O. has made the addition on protective basis and no substantive addition has been made.
We have considered the rival contentions and also perused the material available on record. We have observed that the assessee has sold the property namely ‘Roshan Villa’ , which is situated at Matheran. The said ITA 3442/Mum/2013 13 property was owned by the assessee’s mother since 1937. The property consist of land and an building/ structure thereon. The mother of the assessee expired on 03-10-2005 and the property devolved on the assessee and his brothers and sister under inheritance in line of succession whereby the assessee has 1/3rd share in the said property ‘Roshan Villa’ . The said property was not transferred /mutated to the legal heirs i.e. the assessee and his brothers and sisters after the death of their mother on 03-10-2005. The property was sold by the assessee and co-owners for total sale consideration of Rs.25,00,000/- on 16-01-2009 on as is where basis. The property’s possession was immediately handed over to the buyer by the sellers i.e. the assessee and other co-owners while no document for sale of the said property has been registered in favour of the buyer by the assessee and the co-owners. The property was also saddled with unpaid and outstanding liabilities on the date of sale i.e. 16-01-2009 such as municipal taxes for more than 10 years , non-transfer and mutation in the name of legal heirs i.e the assessee and other co-owners after death of their mother on 03-10-2005 etc. . The buyer has assumed and agreed to discharge all the un-paid and outstanding obligations / liabilities against the said property ‘Roshan Villa’ which the said property ‘Roshan Villa’ was saddled with on the date of sale on 16-01-2009. The A.O. has invoked the provisions of section 50C of the Act whereby he referred the case to the stamp duty valuing authority for valuation of ‘Roshan Villa’ , who valued the land on the basis of ready recknor value as prevailing on the relevant period of sale, while the stamp duty valuing authorities have expressed in-ability to value the building/structure because the sale of the property was not registered. The A.O. determined the land value on the basis of valuation submitted by stamp duty valuing authorities , while for valuing the building/structure thereon , the AO applied the value of the building as on 1-4-1981 as declared by the registered valuer of the assessee and then multiplied the same with cost inflation index which in our considered view is not the correct method of valuing the building as provided under the ITA 3442/Mum/2013 14 provisions of the Act. It is not a permissible method as per the scheme of the Act. We have noticed that no substantive assessment has been made and no substantive additions have been made by the AO as confirmed by learned CIT(A) and only protective additions are made. The AO also cannot adopt the stamp duty valuation of land as on date of sale on 16-01-2009 as Section 50C of the Act as prevailing on the date of sale i.e. 16-01-2009 is only applicable to properties which are registered where the value is assessed by the stamp duty valuation authorities, while in the instant case the property ‘Roshan Villa’ is sold under an unregistered document. However, later on Section 50C of the Act was amended by Finance Act , 2009 w.e.f 1-10-2009 whereby the word ‘assessable’ is added to Section 50C(2) of the Act and explanation 2 to Section 50C(2) was inserted by Finance Act, 2009 w.e.f. 1-10-2009 . Section 50C of the Act as amended by Finance Act , 2009 is reproduced hereunder :
“ [Special provision for full value of consideration in certain cases.
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 (hereafter in this section referred to as the “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, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
(2) Without prejudice to the provisions of sub-section (1), where— ITA 3442/Mum/2013 15
(a) the assessee claims before any Assessing Officer that the value adopted or assessed 20a[or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed 20a[or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub- section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifica-tions, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. [Explanation 1].—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
[Explanation 2.—For the purposes of this section, the expression “assessable” means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.]
(3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed ITA 3442/Mum/2013 16
[or assessable] by the stamp valuation authority referred to in sub- section (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]”
The CBDT circular no. 05/2010 dated 03-06-2010 being explanatory notes to the provisions of the Finance(No. 2 ) Act ,2009 , which stipulates as under:
“ 23. Provisions for deemed valuation in certain cases of transfer 23.1 The existing provisions of section 50C provide that where the consideration received or accruing as a result of the transfer of a capital asset, being land or building or both, is less than the value adopted or assessed by an authority of a State Government (stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain. However, the present scope of the provisions does not include transactions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney.
23.2 With a view to preventing the leakage of revenue, section 50C is amended, so as to provide that where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both is less than the value adopted or assessed or assessable by an authority of State Government 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 consideration received or accruing as a result of such transfer for computing capital gain.
ITA 3442/Mum/2013 17
23.3 Further, Explanation 2 has been inserted in the sub-section (2) of the section 50C, so as to clarify the meaning of the term "assessable".
23.4 Applicability - These amendments have been made applicable with effect from 1st October, 2009 and will accordingly, apply in relation to transactions undertaken on or after such date.”
Thus, with effect from 1-10-2009, even if the property is not registered , the same was brought within the ambit of provisions of Section 50C of the Act. The AO could not adopt the stamp duty value as determined by stamp duty valuation authorities as Section 50C of the Act is not applicable in the instant case as the property is not registered and the sale undertook prior to 1-10- 2009 i.e. on 16-01-2009 . The above view is supported by decision of Hon’ble Madras High Court in the case of CIT v. R. Sugantha Ravindran (2013) 32 taxmann.com 274(Madras);(2013) 352 ITR 488(Madras) whereby Hon’ble Madars High Court held: “that the insertion of words "or assessable" by amending Section 50C with effect from 01.10.2009 is neither a clarification nor an explanation to the already existing provision and it is only an inclusion of new class of transactions namely the transfers of properties without or before registration. Before introducing the said amendment, only the transfers of properties where the value adopted or assessed by the stamp valuation authority were subjected to Section 50C application. However after introduction of the words "or assessable" after the words "adopted or assessed", such transfers where the value assessable by the stamp valuation authority are also brought into the ambit of Section 50C. Thus such introduction of new set of class of transfer would certainly have the prospective application only and not otherwise. Hence the assessee's transfer ITA 3442/Mum/2013 18 admittedly made earlier to such amendment cannot be brought under Section 50C.”
Nor the AO could have indexed the cost of acquisition of the building/structure as on 01-04-1981 by applying cost inflation index to arrive at full value of consideration of the property on the date of sale i.e. 16-01- 2009 of the building/structure, which is not a permissible method to arrive at full value of consideration of building/structure under the provisions of the Act for computing long term capital gains.
It is now the admitted position that the property was saddled with several liabilities such as the municipal taxes were not paid for 10 years, the property was not transferred, registered and mutated in the name of assessee and other co-owners after death of their mother etc. . The property was sold by the assessee and co-owners on as is where basis for total consideration of Rs.25 lacs whereby the buyer agreed to assume all such unpaid and outstanding liabilities which the property was saddled with on the date of sale i.e. 16-01- 2009 and agreed to discharge the same after its acquisition at his cost. In our considered view all such un-paid and outstanding liabilities such as outstanding municipal taxes , transfer, registration and mutation charges and costs with respect to the said property ‘Roshan Villa’ in favour of the assessee and co-owners , with which the property was saddled with on the date of sale on 16-01-2009, and which the buyer agreed to assume and discharge the same as his liabilities after acquisition of property ‘Roshan Villa’ needs to be added to the sale consideration value of Rs.25,00,000/- to arrive at full value of consideration to determine long term capital gains arising from the sale of the property. We would like to give an example to explain the same say for example , one property is worth Rs 100 lacs and there is a loan outstanding of Rs. 40 lacs against the said property. The buyer agrees to pay Rs. 60 lacs to the seller for acquiring the said property and agrees to ITA 3442/Mum/2013 19 discharge loan against the said property directly after acquisition . Then, the full value of the consideration of the property will be Rs 100 lacs being Rs 60 lacs paid by the buyer to the seller and Rs 40 lacs will be added being loan outstanding against the said property which the buyer agreed to discharge directly to the lender and not Rs 60 lacs which the buyer agrees to pay to the seller as sale consideration as Rs 40 lacs is an additional burden with which property was saddled with at the time of sale which the buyer has agreed to discharge on behalf of the seller and is infact part and parcel of full value of consideration as contemplated u/s 48 of the Act. In our considered view, addition as such and in the manner made by the AO cannot be sustained under law and matter needs to be restored to the file of the AO for computing full value of consideration in the manner as outlined by us and then granting relief on account of deductions of indexed cost of acquisition of land and building/structure which in the instant case is not disputed by the AO as per assessee’s valuer report and such other deductions/reliefs which the assessee is legally entitled to under the provisions of the Act on merits such as Section 54EC of the Act as claimed by the assessee , which shall be granted by the AO on merits after examination of the relevant claims/relief’s. Thus, we set aside the orders of the learned CIT(A) and restore the issue back to the file of the AO for de-novo determination of the issue on merits in the manner as outlined by us as above. Needless to say proper and adequate opportunity of being heard shall be provided to the assessee in accordance with principles of natural justice in accordance with law. The assessee shall be allowed to produce relevant evidences , material and explanation in support of his contentions in his defense which shall be admitted by the AO and adjudicated on merits. This disposes of all the grounds raised by the assessee on solitary issue of computation of long term capital gains on sale of inherited property ‘Roshan Villa’. We order accordingly.
ITA 3442/Mum/2013 20
In the result, the appeal filed by the assessee in ITA N0. 3442/Mum/2013 for the assessment year 2009-10 is allowed for statistical purposes.
Order pronounced in the open court on 13th July , 2016. आदेश क� घोषणा खुले �यायालय म� �दनांकः 13-07-2016 को क� गई ।