2021 (1) TMI 1218 - AT - Income Tax

Capital gain computation - date of transfer of asset - execution of the JDA - amount assessed for the purposes of stamp duty be considered as Sale Consideration for the purposes of computation of capital gains - scope of amendment to section 50C - whether the CIT(Appeals) was right in holding that amendment to section 50C of the Income-tax Act, 1961 the Act which was introduced w.e.f. AY 2007-08 was applicable retrospectively for AY 2014-15 when the language used in the proviso does not indicate that it was inserted as a clarification? - HELD THAT - JDA was executed on 1.3.2013. MoU was entered on 8.4.2013. The guidelines value was revised on 12.8.2013. According to the assessee, transfer took place on the date of JDA on 1.3.2013 and the relevant value as on the date of JDA or the date of MoU to be applied, instead of applying guidelines value on 12.8.2013 in view of the proviso to section 50C(1) of the Act. There was payment of ₹ 2,50,00,000 on 23.11.2011 by cheque No.259865 drawn on Vijaya Bank, Sarakki Branch, Bangalore. Being so, the argument of the ld. DR is that MoU is not suggesting any payment so as to apply the proviso to section 50C, thus it is deemed retrospective in nature. In our opinion, as held by the Madras High Court in the case of Vummudi Amarendran 2020 (10) TMI 517 - MADRAS HIGH COURT , proviso to section 50C(1) is retrospective in nature applicable from AY 2014-15. Further part of the consideration has already been passed through MoU as enumerated above. It cannot be said that no consideration is paid on the date of MoU. This finding of the lower authorities is not proper. Accordingly, we hold that proviso to section 50C(1) by the Finance Act, 2016 is retrospective and also the assessee proved that the 2nd proviso to section 50C(1) is satisfied since the assessee has paid a part of sale consideration on the date of such MoU dated 8.4.2013. In view of this, we hold that the guidance value has to be computed as prevailing on the date of MoU dated 8.4.2013. Appeal of assessee allowed.

Summary

Issues Involved:
1. Assessment of capital gains in the relevant year.
2. Applicability of Section 2(47)(v) of the IT Act.
3. Determination of registerable value for computation of capital gains.
4. Applicability of amendment to Section 50C by Finance Act, 2016.
5. Inclusion of cost of improvement in computing capital gains.
6. Levy of interest under Sections 234B and 234D of the Act.

Issue-wise Detailed Analysis:

1. Assessment of Capital Gains in the Relevant Year:
The assessee contested the assessment of capital gains for the year 2014-15, arguing that the transfer occurred in the financial year 2012-13, related to assessment year 2013-14, when the Joint Development Agreement (JDA) was executed and registered on 01.03.2013. The Commissioner of Income-tax (Appeals) upheld the assessment for the year 2014-15, which was challenged by the assessee.

2. Applicability of Section 2(47)(v) of the IT Act:
The assessee argued that the provisions of Section 2(47)(v) of the IT Act, read with Section 53A of the Transfer of Property Act, were applicable when the JDA was executed, and thus the transfer for capital gains purposes occurred in the financial year 2012-13. The Tribunal noted that the developer was put in possession of the property, satisfying the conditions of Section 2(47)(v) and Section 53A, and thus, the transfer should be considered for the assessment year 2013-14.

3. Determination of Registerable Value for Computation of Capital Gains:
The assessee contended that the value as on the date of the Memorandum of Understanding (MOU) on 08.04.2013 should be considered for computation of capital gains, rather than the value as on the date of the registered Deed of Exchange on 24.02.2014. The Tribunal agreed with the assessee, stating that the guidance value as on the date of the MOU should be used for determining the capital gains.

4. Applicability of Amendment to Section 50C by Finance Act, 2016:
The assessee argued that the amendment to Section 50C by the Finance Act, 2016, which allows the value on the date of the agreement to be considered if part of the consideration is paid by cheque or electronic means, is clarificatory and should apply retrospectively. The Tribunal agreed, citing the Madras High Court decision in CIT v. Vummudi Amarendran, which held that the proviso to Section 50C(1) is retrospective and applicable from the date of insertion of the main section.

5. Inclusion of Cost of Improvement in Computing Capital Gains:
The assessee claimed that the cost of improvement should be allowed while computing capital gains. The Tribunal did not specifically address this issue in the judgment, focusing primarily on the determination of the date of transfer and the applicable value for computation.

6. Levy of Interest under Sections 234B and 234D of the Act:
The assessee contested the levy of interest under Sections 234B and 234D. The Tribunal did not provide a specific ruling on this issue, as the primary focus was on the determination of the date of transfer and the applicable value for computing capital gains.

Conclusion:
The Tribunal concluded that the date of transfer should be considered as the date of the MOU (08.04.2013) and the guidance value on that date should be used for computing capital gains. The amendment to Section 50C by the Finance Act, 2016, was deemed retrospective, and the proviso was applicable to the assessee's case. The appeal of the assessee was allowed, and the assessment was directed to be revised accordingly.