2013 (11) TMI 816 - AT - Income Tax

Addition made u/s 50C of the Income tax act on sale of land - Assessee has entered two agreements for sale of property on 31-03-2006 - Consideration was received substantially in FY 2006-07 Held that - These two agreements of sale entered on 31-03-2006 were not registered. Once the documents were not registered, invocation of provisions of section 50C for adopting the same stamp value does not arise. This issue was already crystallized by various orders of ITAT wherein it was held that when sale agreement was not registered, provisions of section 50C of the Act, would not apply Reliance has been placed on the judgment in the case of ITO Vs. Kumudini Venugopal 2011 (4) TMI 940 - ITAT, CHENNAI Decided in favor of Assessee. Year of chargeability of capital gains - Held that - If we go by the provisions of section 2(47) of transfer, as per the revised agreement, even the condition of transfer was not completed till the balance consideration was received even as per the revised agreement dated 07-01-2008, therefore, provisions of section 2(47) on deeming the transfer under the Transfer property Act, does not arise in AY 2007-08. - Since the amount is not taxable as such in AY 2007-08 and Assessee s counsel fairly admitted that Assessee is willing to get the same taxed in AY 2008-09 as the document was registered in that year, accordingly directed the AO to bring capital gains on the sale of property in AY 2008-09 and if required invoke provisions of section 50C in that year. Therefore, the capital gains to that extent offered by Assessee in this assessment year has to be excluded - The AO is directed to exclude in AY 2007-08 and include the capital gain in AY 2008-09, for which necessary proceedings can be initiated, if not done.

Summary

Issues:
1. Disallowance of capital expenditure.
2. Taxability of capital gain arising from the sale of land and applicability of section 50C.

Issue 1: The Assessee raised four grounds in the appeal, including the disallowance of Rs. 2,26,54,471 as capital expenditure. However, during the hearing, Ground No. 1 was withdrawn by the Assessee. Ground Nos. 2 and 3 pertained to the capital gain arising from the sale of land and the invocation of section 50C of the IT Act. The Assessee contended that the capital gain should not be taxed in AY 2007-08 and requested its assessment in AY 2008-09.

Issue 2: The Assessee entered into agreements for the sale of land on 31-03-2006 but received substantial amounts in FY 2006-07. The agreements were not registered initially, and fresh agreements were made on 07-01-2008, which were registered on the same day. The Assessing Officer (AO) invoked section 50C and re-determined the sale price based on stamp valuation. The Assessee argued that section 50C should not apply as the initial agreements were not registered. The ITAT held that since the agreements were not registered, section 50C could not be invoked. The ITAT also noted that the amendment to the Act from 01-10-2009 clarified that unregistered transactions were not covered under section 50C. Therefore, the addition under section 50C was deleted.

Furthermore, the ITAT considered the assessability of capital gains. The Assessee initially offered the capital gain in AY 2007-08 based on the earlier agreements. However, revised agreements were made on 07-01-2008, and the Assessee contended that the capital gains should be taxed in AY 2008-09. The ITAT agreed with the Assessee, stating that just because the Assessee admitted income in AY 2007-08 does not mean it should be assessed in that year if legally not assessable. The ITAT directed the AO to exclude the capital gains from AY 2007-08 and include them in AY 2008-09, as per the Assessee's request. The appeal was partly allowed with these directions.