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2017 (5) TMI 298 - AT - Income TaxAddition with the aid of section 50C(1) - Held that - The alleged agreement/MOU was executed on 5.7.2007. This memorandum contains that sale consideration would be calculated at the rate of ₹ 1195/- per sq.meter. The vendee has paid an amount of ₹ 20 lakhs by cheque bearing no.366815 dated 12.4.2007 and amount of ₹ 12 lakhs through account payee cheque on 23.5.2007. Thereafter schedule of payment has been given in para-2 of the memorandum. This schedule of payment is subsequent to alleged execution of the sale deed. But one thing is clear from this memorandum, a right in persona has been created in favour of the vendee as well as in favour of the vendor, which he can be enforced with the help of suit for specific performance. In such situation, we are of the view that fair market value of this property ought to have been determined by the AO as provided in section 50C(2). We, therefore, set aside this issue to the file of the AO for re-adjudication. The ld.AO shall call for a report from the DVO as contemplated in section 50C(2) and the ld.DVO shall keep in mind any encumbrance created on the property by virtue of the alleged execution of the agreement. In this way, first grievance of the assessee is allowed for statistical purpose. Disallowance out of cost of transfer while computing capital gain - Held that - CIT(A) has remitted this issue for re-verification and reconsideration. No interference is called for in such finding of the ld.CIT(A), because the ld.AO shall verify whether any expenditure is incurred by the assessee for transfer of this capital asset and if some expenditure was incurred then he will allow this expenditure. This ground of appeal is also allowed for statistical purpose.
Issues Involved:
1. Addition under Section 50C(1) of the Income Tax Act. 2. Disallowance of expenses incurred for the transfer of capital assets while computing capital gains. Detailed Analysis: 1. Addition under Section 50C(1) of the Income Tax Act: The primary issue revolves around the addition of ?57,85,829 made by the Assessing Officer (AO) under Section 50C(1) of the Income Tax Act. The AO observed that the sale value of the non-agricultural land declared by the assessee was ?1,81,92,371, whereas the stamp duty valuation was ?2,39,78,200. Consequently, the AO deemed the sale consideration equivalent to the stamp duty valuation, resulting in an addition of ?57,85,829. The assessee contended that the transfer took place on 6.7.2007, based on a Memorandum of Understanding (MOU) executed on 5.7.2007 with M/s. Rajni Builders, and the sale consideration was ?1,81,92,371. The assessee argued that the provisos to Section 50C, introduced by the Finance Act, 2016, applicable retrospectively, should be considered, and the stamp duty valuation on the date of the agreement should be used. The assessee also argued that the AO should have referred the matter to the District Valuation Officer (DVO) under Section 50C(2). The Tribunal noted that in similar cases, such as Shri Devendra J. Mehta Vs. ACIT, the law and facts were identical. The Tribunal highlighted that Section 48 provides the mode of computation of capital gain, and Section 50C stipulates that the value adopted for stamp duty purposes shall be deemed as the full value of consideration for capital gains computation. Moreover, if the assessee claims that the stamp duty valuation exceeds the fair market value, the AO may refer the valuation to the DVO. The Tribunal observed that the agreement was not registered, and no consideration was paid at the time of the agreement. The Tribunal emphasized that an unregistered agreement could not protect possession under Section 53A of the Transfer of Property Act, 1882, post the amendments brought by the Registration and Other Related Laws Amendment Act, 2001. Consequently, the Tribunal found no merit in the assessee's argument that the transfer was complete in 2008-09. However, the Tribunal acknowledged that the AO should have referred the matter to the DVO to determine the fair market value, considering any encumbrance on the property by virtue of the agreement. Thus, the Tribunal set aside the issue to the AO for re-adjudication, directing the AO to refer the matter to the DVO as per Section 50C(2). 2. Disallowance of Expenses Incurred for the Transfer of Capital Assets: The second issue pertains to the disallowance of ?2,01,389 out of the cost of transfer while computing capital gains. The Tribunal noted that the Commissioner of Income Tax (Appeals) [CIT(A)] had remitted this issue for re-verification and reconsideration. The Tribunal found no reason to interfere with the CIT(A)'s finding, directing the AO to verify whether any expenditure was incurred by the assessee for the transfer of the capital asset and allow it if substantiated. Conclusion: The Tribunal allowed the appeal of the assessee for statistical purposes, directing the AO to re-adjudicate the matter by referring it to the DVO for determining the fair market value of the property and verifying the expenses incurred for the transfer of the capital asset. The order was pronounced on 5th May 2017 at Ahmedabad.
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