2019 (3) TMI 1915 - AT - Income Tax

Long term capital gain - AO has adopted stamp duty value of the property as on the date of sale deed - adopting the fair market value as per section 50C as on the date of registration of sale deed on 10.05.2012 as against the assessee executed sale agreement on 02.10.2009 - whether the stamp duty value as on the date of agreement to sale or sale deed to be considered for the purpose of computation of capital gain.? - HELD THAT - The purpose of introducing section 50C of the Act was to counter suppression of sale consideration of sale of immovable properties. Before insertion of section 50C of the Act to the statute, there are lot of litigations as to consideration shown in document conveying title and payment of stamp duty. To overcome the litigations, the provision of section 50C of the Act has been inserted to the statute w. e. f. 01.06.2003 wherein it is made mandatory to adopt value u/s 50C of the Act for the purpose of determination of consideration. A proviso to section 50C of the Act has been inserted by the Finance Act. 2016 w.e.f. 01.04.2007 to resolve the genuine and intended hardship, in the case in which the date of agreement to sale is prior to the date of sale and market value of the property as on the date of agreement to sale and date of sale deed is different. Assessee is bound by the value of sales consideration of ₹ 4,92,00,000/- in terms of the agreement dated 02.10.2009 and if provisions of section 50C of the Act are invoked, then the valuation as may be arrived at by the stamp duty authorities as on 02.10.2009 will be required to be considered for the comparison of the adequateness. Hence, we delete the addition made by AO and allow this issue of assessee s appeal.

Summary

Issues:
1. Dispute over addition of long term capital gain based on fair market value.

Analysis:

Issue 1: Dispute over addition of long term capital gain based on fair market value

The appeal concerns the Commissioner of Income Tax (Appeals)-2, Pune's order confirming the Assessing Officer's decision to add long term capital gain by using the fair market value as per section 50C of the Income Tax Act. The assessee sold industrial land, and the AO noted a variance between the sale consideration and stamp duty valuation. The AO treated this difference as short term capital gain, which the CIT(A) upheld. However, the Tribunal found that the agreement between the parties in 2009 and 2012 contained the same terms and should be read together. The Tribunal also noted that the amended section 50C, effective from AY 2017-18, should be considered since the inception of Section 50C in AY 2003-04. The Tribunal referred to a previous decision to support the retrospective effect of the amendment. It concluded that the assessee complied with the amended provisions, and the stamp duty value as of the agreement date in 2009 should be considered for capital gain computation. As a result, the Tribunal allowed the appeal, deleting the addition made by the AO.

This detailed analysis of the judgment showcases the Tribunal's thorough examination of the issues involved and the legal principles applied to reach a decision in favor of the assessee regarding the addition of long term capital gain based on fair market value.