2017 (8) TMI 335 - AT - Income Tax

Addition u/s.50C - Replacing the full value of consideration by invoking the provisions of Sec.50C on the date on registration - assessee received the entire sales consideration by 21st December 2011 - Held that - The transfer of the property was completed in terms of section 2(47) on date of agreement for sale. The registration of conveyance deed later was only a legal formality. Therefore no additions are warranted u/s.50C by substituting the full value of consideration on the date of the registration of conveyance deed.

Summary

Issues:
1. Addition of &8377; 16,88,010/- u/s.50C of the IT Act, 1961 for A.Y.2012-13.

Detailed Analysis:
1. The appeal was filed against the order of CIT(A)-3, Thane dated 25/07/2016 regarding the addition under section 50C of the IT Act. The assessee, an individual deriving income from various sources, was aggrieved by the addition of &8377; 16,88,010/- to the total income based on stamp duty valuation of a property for computing Short Term Capital Gains (STCG).

2. The CIT(A) confirmed the addition, stating that the stamp duty valuation of the property on the date of registration should be considered for computing capital gains. The sale agreement was executed in 2011 but registered in 2012, with a market value of &8377; 44,00,000 on the registration date, justifying the AO's decision to use this valuation.

3. The assessee argued that the transfer occurred in 2011 when the agreement was executed and part consideration was received, citing legal precedents. The documentary evidence presented included the agreement for sale deed, bank statements reflecting the entire consideration received by December 2011, and an extract of a ready reckoner.

4. The ITAT Mumbai analyzed the facts and evidence, noting that the entire consideration was received by the assessee in 2011, well before the registration in 2012. The market value for stamp duty purposes doubled in 2012, leading to a disparity. However, the ITAT held that the transfer took place in 2011, and the market value for section 50C purposes should be &8377; 22,00,000, aligning with the agreement value. The registration was deemed a formality, and no additions under section 50C were warranted.

5. Citing legal principles from the Allahabad High Court and Supreme Court, the ITAT concluded that the transfer was completed on the date of the agreement for sale, making the registration a mere formality. Therefore, the appeal of the assessee was allowed, and no additions were justified under section 50C.

6. The judgment was delivered on 26/04/2017 by the ITAT Mumbai, with detailed reasoning provided to support the decision in favor of the assessee.