2017 (5) TMI 1725 - AT - Income Tax

Capital gain computation - valuation of the property - assessee was one third owner of agriculture land - application of provisions of section 50C - HELD THAT - Co-ordinate Bench Ahmedabad in the case of Shri Dharamshibhai Sonani Vs. ACIT 2016 (9) TMI 1259 - ITAT AHMEDABAD wherein it was held that the proviso inserted u/s.50C of the Act by the Finance Act 2016 with effect from 01/04/2017 is curative in nature and the assessee should not be denied the benefit for the issues prior to the date of amendment. Assessee entered into the agreement to sale on 10/12/2007 and received advance of 12, 00, 000/- out of which 7, 00, 000/- was by account payee cheque of Vijaya Bank as appearing in the copy of agreement to sale at page 4 and 5 of the paper books. It is also not disputed by the Revenue that value of the property as per the provision of section 50C by applying Jantri rate as on 10/12/2007 is 64, 73, 250/- which is less than the agreed sale consideration of 80, 00, 000/-. We are therefore of the view that Ld.AO erred in making addition by applying the provisions of section 50C of the Act taking the basis of date of sale deed rather than date of agreement to sale. We accordingly set aside the order of Ld.CIT(A) and allow the assessee s appeal.

Summary

Issues Involved:
1. Application of Section 50C of the Income Tax Act.
2. Determination of the date for valuation under Section 50C.
3. Retrospective application of the amendment to Section 50C.

Issue-wise Detailed Analysis:

1. Application of Section 50C of the Income Tax Act:
The central issue in both appeals was the addition made by the Assessing Officer (AO) under Section 50C of the Income Tax Act, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO calculated the short-term capital gain by applying the Jantri rate as on the date of execution of the sale deed, which resulted in a higher valuation compared to the sale consideration declared by the assessee. The assessee contended that the sale consideration should be based on the date of the agreement to sell, not the execution date of the sale deed.

2. Determination of the date for valuation under Section 50C:
The Tribunal examined whether the value for Section 50C purposes should be taken on the date of the agreement to sell or the date of the sale deed execution. The assessee had entered into an agreement for sale on 10/12/2007 and received part consideration, with the sale deed executed on 20/08/2008. The AO used the Jantri rate as on the sale deed date, which was higher due to a revision in rates. The Tribunal noted that the amendment brought by the Finance Act 2016, effective from 01/04/2017, allowed for the value on the date of the agreement to be considered if part of the consideration was received by account payee cheque or draft before the agreement date. This amendment was held to be retrospective in nature by the Co-ordinate Bench, thus applicable to the assessee's case.

3. Retrospective application of the amendment to Section 50C:
The Tribunal relied on the precedent set by the Co-ordinate Bench in the case of Shri Dharamshibhai Sonani Vs. ACIT, which held that the amendment to Section 50C is curative and should be applied retrospectively. The Tribunal observed that the assessee had received part consideration by account payee cheque, and the Jantri value on the agreement date was less than the sale consideration. Therefore, the AO erred in making the addition based on the sale deed date rather than the agreement date.

Conclusion:
The Tribunal set aside the orders of the CIT(A) and deleted the additions made by the AO under Section 50C for both assessees. It concluded that the valuation for Section 50C purposes should be based on the date of the agreement to sell, provided part consideration was received by account payee cheque or draft before the agreement date. The appeals of both assessees were allowed.

Order Pronounced:
The order was pronounced in the court on 23/05/2017 at Ahmedabad.