2013 (3) TMI 271 - HC - Income Tax

Provision of Section 50C invoked - sale of the property has not been registered - AO computed the long term capital gains, adopting the guideline value as the sale consideration, instead of the consideration admitted by the assessee - whether the AO is entitled to take the value of the property assessable by the authority of the State Government for the purpose of payment of stamp duty in respect of said transfer or not? - Held that - If the Board has issued a circular clarifying the applicability of Section 50C in pursuance of the amendment made by Amendment Act 2 of 2009 that the scope of the provisions does not include transaction which are not registered with stamp duty valuation authority and executed through agreement to sell or power of attorney is only prospective in nature and cannot be applied retrospectively, failure to understand as to how the Revenue can canvass the same issue in this case which in effect is against the circular issued by the Board. The Revenue is bound by the circular issued by the Board. See State of Tamil Nadu and another Vs. India Cements Ltd. and another reported in (2011 (4) TMI 1080 - SUPREME COURT OF INDIA) wherein held that the circulars issued by the Revenue are binding on the Department and therefore, they cannot repudiate that they are inconsistent with the statutory provisions. Thus 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. 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. Hence the assessee s transfer admittedly made earlier to such amendment cannot be brought under Section 50C. Revenue is not entitled to canvass the correctness of the order passed by the Tribunal, more particularly in the light of the circular issued by the Board - substantial question of law answered against the Revenue.

Summary

Issues involved:
Interpretation of Section 50C of the Income Tax Act regarding the applicability in cases where the property sale is not registered.

Analysis:
The case involves an appeal by the Revenue for the assessment year 2005-2006, questioning the invoking of Section 50C by the Income Tax Appellate Tribunal. The key issue is whether Section 50C can be applied when the property sale is not registered, but the assessing officer uses guideline value for computation. The assessee transferred property without a registered sale deed, leading to a dispute over the long term capital gains calculation. The assessing officer relied on the stamp valuation authority's guideline value, triggering Section 50C application. The Commissioner (Appeals) and Tribunal differed on the interpretation, with the Tribunal citing a precedent from Jodhpur. The Revenue argued for the retrospective application of the term "assessable" introduced in 2009, while the assessee contended it should apply only prospectively.

The central question is whether Section 50C can be enforced when the property transfer is not registered. The circular issued by the Board clarified that the 2009 amendment applies prospectively, not retrospectively. The Court emphasized the binding nature of circulars on Revenue, citing a Supreme Court decision. The insertion of "or assessable" expanded Section 50C's scope to include unregistered property transfers post-2009. The Court held that this amendment created a new category of transactions, limiting its application to post-amendment cases. Consequently, the pre-amendment transfer in this case cannot fall under Section 50C.

In conclusion, the Court dismissed the Tax Case Appeal, upholding the Tribunal's decision and answering the substantial question of law against the Revenue. The judgment underscores the prospective application of the 2009 amendment to Section 50C, emphasizing adherence to circulars issued by the Board in tax matters.