2016 (12) TMI 611 - AT - Income Tax

Capital gain computation - transfer - computation of value of the plot - addition made with aid of section 50C - Held that - Validity of unregistered agreement has not been denied for the purpose of adducing it as evidence for obtaining the benefit flowing from such contract. But for the purpose of protecting the possession, un-registered contract could not be enforced. The transfer within the meaning of section 2(47) of the Income Tax Act would complete, if possession is protected. Therefore,no merit in the first fold of submissions raised by the ld.counsel for the assessee. Right to obtain sale deed executed was accrued in favour of the vendee. The rates applicable on 7.5.2007 ought to be applied for determining the value of the property for the purpose of computing capital gain. It has been brought to my notice that ld.DVO has adopted rates as applicable on 20.10.2010. I accepted this fold of contentions and directed the AO to compute the value of the property by adopting the rate at ₹ 75/- per sq.meter. If this value exceeds the value declared by the assessee in the sale deed, and adopted for computing the capital gain, then, the AO would take this value, otherwise, capital gain would be computed on sale consideration disclosed by the assessee in his computation. The ld.AO shall carry out this exercise after providing opportunity of hearing to the assessee.

Summary

Issues Involved:
1. Challenge to reopening of assessment.
2. Challenge to addition of ?31.00 lakhs under section 50C of the Income Tax Act, 1961.

Issue 1: Challenge to Reopening of Assessment:
The assessee appealed against the order of the ld.CIT(A)-3, Ahmedabad, for the Asstt.Year 2011-12. The ground related to the challenge of reopening the assessment was not pressed by the assessee and was rejected.

Issue 2: Addition of ?31.00 Lakhs under Section 50C:
The assessee owned a plot purchased in 2006 and sold in 2010. The AO computed long-term capital gain under section 50C, using stamp duty valuation. The assessee objected to this valuation, leading to a reference to the DVO. The DVO valued the plot at ?42.50 lakhs. The assessee's appeal to the CIT(A) was unsuccessful.

In the appeal before the Tribunal, the assessee raised three submissions. Firstly, the assessee argued that the transaction took place in 2007 when possession was handed over, making the gain taxable in 2008-09. Secondly, the assessee contended that the DVO erred in not considering objections and using 2010 rates instead of 2007 rates. Lastly, the assessee referred to a 2016 amendment to section 50C, which could be applied to pending matters.

The Tribunal analyzed the provisions of the Income Tax Act, specifically sections 48 and 50C. Section 48 outlines the computation of capital gain, while section 50C deems the value assessed for stamp duty as the full consideration. Subsection (2) of section 50C allows for a reference to the Valuation Officer if the stamp duty valuation exceeds the fair market value.

Regarding the first submission, the Tribunal examined section 2(47)(v) concerning possession in part performance of a contract. The Tribunal discussed the Registration and Other Related Laws Amendment Act, 2001, which impacts rights based on agreements under section 53A of the Transfer of Property Act, 1882. The Tribunal concluded that possession alone does not complete the transfer for tax purposes.

Addressing the second submission, the Tribunal agreed with the assessee that the rates applicable in 2007 should be used for valuation. The AO was directed to recompute the property value using the 2007 rates, providing an opportunity for the assessee to be heard.

As the Tribunal accepted the second submission, it did not delve into the third contention. Consequently, the appeal of the assessee was partially allowed for statistical purposes.

This detailed analysis of the legal judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each matter.