2018 (9) TMI 1696 - AT - Income Tax

Additions u/s 50C - Computation of capital gain assessable in the hands of the assessee on transfer of a capital asset - Held that - In the present case, we find that the assessee has contended that consideration of ₹ 3,00,11,000/- is more than the valuation for the purpose of stamp duty as on 8.2.2010. No where the assessee has pointed out specific rate on the date of agreement. Therefore, we allow these two grounds of appeal for the statistical purpose. This issue to the file of the AO. AO shall call for circle rate for the purpose of stamp duty valuation of this property as on 8.2.2010. He shall determine the sale value of the property on the basis of circle rate applicable on this property on 8.2.2010, and thereafter compute long term capital gain assessable in the assessment year 2013-14. Transfer of this property would be construed on 5.6.2012, but the full value of consideration is to be equivalent to the amount on which stamp duty was payable on 8.2.2010. Denial of deduction/exemption under section 54EC - advance received in specified assets before the date of transfer of asset - Held that - Board has issued a circular whereby it has laid down that such assessee would be entitled for exemption. Circular bearing no.359 dated 10.5.1983 says As the section contemplates investment of the net consideration in specified assets for a minimum period and as earnest money or advance is a part of the sale consideration, the Board have decided that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset, the amount so invested will qualify for exemption under section 54E. We allow this ground of appeal and direct the AO to grant exemption under section 54EC

Summary

Issues Involved:
1. Whether the appeal is time-barred.
2. Computation of capital gain on transfer of a capital asset.
3. Applicability of Section 50C and its proviso.
4. Entitlement to deduction/exemption under Section 54EC.

Issue-Wise Detailed Analysis:

1. Whether the appeal is time-barred:
The Registry raised an objection that the appeal was barred by 184 days. However, the assessee's counsel clarified that the Registry incorrectly calculated the limitation period by taking the date of the assessment order (24/02/2016) instead of the CIT(A)'s order (24/08/2016). The assessee filed a fresh form rectifying this defect. Hence, the appeal was deemed to be within the limitation period.

2. Computation of capital gain on transfer of a capital asset:
The assessee filed a return declaring a total income of ?28,37,710/-. The property in question was sold for ?3,00,11,000/-, but the stamp duty valuation was ?3,94,48,890/-. The AO deemed the full sale consideration to be the stamp duty valuation as per Section 50C, leading to a higher computation of long-term capital gain. The assessee argued that the sale agreement was executed on 8.12.2010, and payments were received in advance, suggesting that the jantri value applicable on 8.2.2010 should be considered. However, the AO and CIT(A) rejected this argument, stating that the transfer of property completes upon the execution and registration of the sale deed, which occurred on 5.6.2012.

3. Applicability of Section 50C and its proviso:
The assessee contended that the proviso to Section 50C, introduced by the Finance Act, 2016, should apply retrospectively, allowing the jantri rate as of 8.2.2010 to be used for computing the capital gain. The Tribunal noted that Section 50C provides that if the consideration received is less than the stamp duty value, the latter shall be deemed as the full value of consideration. The Tribunal also referenced the amendments to the Registration Act and Section 53A of the Transfer of Property Act, which require registration of agreements for them to be effective. Since the agreement dated 8.2.2010 was not registered, the transfer was considered to have occurred on 5.6.2012. The Tribunal directed the AO to determine the sale value based on the circle rate applicable on 8.2.2010 and compute the long-term capital gain accordingly.

4. Entitlement to deduction/exemption under Section 54EC:
The assessee claimed exemption under Section 54EC, having invested in NHAI bonds before the registration of the sale deed. The AO denied the exemption, arguing that the investments were made before the sale deed was registered. The Tribunal referenced a CBDT circular (No. 359 dated 10.5.1983), which allows exemption for investments made from advance payments received before the transfer date. Consequently, the Tribunal directed the AO to grant the exemption under Section 54EC.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes. The AO was instructed to re-compute the capital gain considering the circle rate as of 8.2.2010 and grant the exemption under Section 54EC. The appeal was pronounced in open court on 26th September 2018.