2017 (12) TMI 55 - HC - Income Tax

Applicability of provisions of section 50C - ITAT held that the provisions of Section 50C are applicable only in those cases of sale of property where the deed of sale had been got registered? Held that - Before proceeding with the matter, it will not be out of place to mention here that those transactions which are shown as transaction under Section 50C Explanation-2 , even if taken into consideration, the transaction which take place as short term capital gain was in total consideration of the payment after sale and it cannot be assessed. Therefore, both the authorities have committed no error in reaching the conclusion. In that view of the matter, the issue is answered in favour of the assessee and against the department

Summary

Issues:
1. Interpretation of Section 50C of the Income Tax Act.
2. Applicability of Section 50C in cases of property sale without registration.
3. Consideration of circulars issued by the Board in tax assessments.

Interpretation of Section 50C:
The appellant challenged the Tribunal's decision regarding Section 50C of the Income Tax Act. The court framed a substantial question of law regarding the applicability of Section 50C only to registered property sales. The appellant argued that the word 'transaction' in the section is covered under the amended provisions of Section 50C.

Applicability of Section 50C without Registration:
The respondent, relying on a decision of the Madras High Court, argued that the Tribunal correctly applied Section 50C in the case of the assessee. The Madras High Court's decision highlighted the circular issued by the Board, stating that the amendments to Section 50C are prospective and do not apply to transactions not registered with the stamp duty valuation authority. The circular clarified that the amendments are effective from a specific date and apply only to transactions undertaken after that date. The court held that the Revenue is bound by the circular issued by the Board, citing a Supreme Court decision emphasizing the binding nature of revenue circulars on tax authorities.

Consideration of Circulars in Tax Assessments:
The court noted that transactions falling under Section 50C, even if considered, cannot be assessed as short-term capital gains based on the total consideration received after the sale. Consequently, both authorities were deemed to have made no error in their conclusions. The court ruled in favor of the assessee and against the department, ultimately dismissing the appeal.

In summary, the High Court of Rajasthan analyzed the interpretation of Section 50C of the Income Tax Act, the applicability of the section in cases of property sales without registration, and the significance of circulars issued by the Board in tax assessments. The court upheld the Tribunal's decision, emphasizing the binding nature of revenue circulars and the correct application of Section 50C in the case at hand.