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2019 (1) TMI 1523 - AT - Income TaxDetermination of the full value of consideration in computation of long term capital gain - sale consideration adoption - transfer of flat - occupancy rights settled by allotting new flat in new building - litigation between the assessee and Sh, Shinde - Section 50C applicability - Held that - Assessee received a sum of ₹ 11,000/- through cheque no. 99308 on 09-04-2001, which is prior to the date of agreement to sell, that is, 31.5.2002. This evidences that the assessee genuinely entered into an agreement to sell with the Developer on 31-05-2002 and received a sum of ₹ 11,000/-, which constitutes receipt of a part of consideration before the date of agreement. Not only that, the assessee received further sums of ₹ 2 lakh on 23-10-2002; ₹ 5 lakh on 16-04-2003 and ₹ 7 lakh before 11-01-2007. All these receipts were through banking channel. A factual finding recorded by the ld. CIT(A) in the impugned order to this extent has not been controverted on behalf of the Revenue. When we conjointly read the two provisos to section 50C(1), it emerges that the assessee entered into an agreement to sell on 31-05-2002; received part payments; and finally executed registered conveyance deed on 28-07-2010. Having satisfied the mandate of second proviso and further going by the first proviso to section 50C(1), the stamp value for the purpose of computation of capital gain at the time of sale in the year 2010 should be considered with reference to the date of agreement, namely, 31- 05-2002 The sale consideration is one 495 sq.ft. flat in the new building plus monetary consideration of ₹ 51 lakh, the Revenue has considered the value of two flats of 405 sq. ft. and 495 sq ft. plus ₹ 51.00 lac as the full value of consideration. We have seen the entire gamut of the factual panorama above, from which it transpired that Shri Shinde was having some occupancy rights in flat no. 5A of Sai Chhaya and eventually his claim was settled by allotting him a 405 sq. ft. flat in the new building. It is in this light of the facts that we need to decide whether the assessee transferred flat no. 5 and 5A in Sai Chhaya or only flat no. 5. Whereas the assessee is contending that he transferred only one flat, the Department has opined that he transferred both the flats. We find from the nature of litigation between the assessee and Sh, Shinde that the latter was having only occupancy right in respect of flat no. 5A. The ownership right in it vested only in the assessee. No material has been brought on record to establish the ownership right of Sh, Shinde in flat no.5A. As such, it is held that as the assessee was legal owner of both the flats, 5 and 5A, in Sai Chhaya , it was he alone who transferred both the flats admeasuring 898.48 sq.ft. area to the Developer. Thus the stamp value as well as the actual sale consideration has to be worked out accordingly. Allowing deduction to the assessee on account of the value of one flat of 405 sq.ft. to be allotted to Sh. Shinde in the new developed building - Held that - When we conjointly read the two provisos to section 50C(1), it emerges that the assessee entered into an agreement to sell on 31-05-2002; received part payments; and finally executed registered conveyance deed on 28-07-2010. Having satisfied the mandate of second proviso and further going by the first proviso to section 50C(1), the stamp value for the purpose of computation of capital gain at the time of sale in the year 2010 should be considered with reference to the date of agreement, namely, 31- 05-2002. We order accordingly. The Hon ble Bombay High Court in CIT Vs. Abrar Alvi 2000 (3) TMI 20 - BOMBAY HIGH COURT has held that a payment for removal of encumbrances is deductible u/s.48(1) as expenses incurred wholly and exclusively in connection with transfer. Where this is not possible, without discharge of liability, payment towards such liability should be considered as in connection with transfer , which expression is wide than that of the transfer . Also in CIT Vs. M/s. Bradford Trading Company (P) Ltd. 2002 (9) TMI 33 - MADRAS HIGH COURT holding that the amount paid for removing encumbrances and settlement of claim is expenditure incurred in connection with transfer of a capital asset deductible u/s.48(1) of the Act. In the light of the above, it is held that the value of flat of 405 sq.ft. to be allotted in the new building should be accordingly reduced from the full value of consideration u/s 48(i).
Issues Involved:
1. Determination of the date of transfer for capital gains tax purposes. 2. Determination of the full value of consideration in computation of long-term capital gain. 3. Application of section 50C of the Income-tax Act, 1961. 4. Retrospective application of amendments to section 50C. 5. Deduction for expenses incurred in connection with the transfer. Issue-wise Detailed Analysis: 1. Determination of the date of transfer for capital gains tax purposes: The assessee argued that the transfer of property occurred on 31-05-2002 upon the execution of the Development Agreement, thus no capital gain should be charged in the year under consideration. However, the authorities determined that the transfer should be considered on the execution of the Registered Conveyance Deed on 28-07-2010. The assessee conceded this point before the Tribunal, and thus the impugned order was upheld to this extent. 2. Determination of the full value of consideration in computation of long-term capital gain: The AO adopted the stamp value of the property on the date of the Registered Conveyance Deed (28-07-2010) as the full value of consideration. The assessee contended that the stamp value should be considered with reference to the date of the Development Agreement (31-05-2002). The Tribunal noted that section 50C of the Income-tax Act, 1961, provides for the adoption of stamp value as the full value of consideration if the actual sale consideration is less than the stamp value. 3. Application of section 50C of the Income-tax Act, 1961: Section 50C(1) stipulates that if the consideration received from the transfer of a capital asset is less than the value adopted by the stamp valuation authority, the latter value shall be deemed as the full value of consideration. The Tribunal analyzed the provisos to section 50C(1), which allow for the consideration of the stamp value on the date of the agreement if the agreement date and registration date are different and part of the consideration was received through banking channels on or before the agreement date. 4. Retrospective application of amendments to section 50C: The Tribunal held that the provisos to section 50C(1), inserted by the Finance Act, 2016, w.e.f. 01-04-2017, are retrospective. This conclusion was based on the principle that amendments conferring benefits without inflicting detriment should be treated as retrospective. The Tribunal referred to the Supreme Court's judgment in CIT Vs. Vatika Township Pvt. Ltd., which established that beneficial provisions should be applied retrospectively. 5. Deduction for expenses incurred in connection with the transfer: The Tribunal allowed the deduction of the value of a 405 sq.ft. flat to be allotted to Shri Shinde in the new building as an expense incurred in connection with the transfer. This decision was based on precedents from the Hon’ble Bombay High Court and Hon’ble Madras High Court, which held that payments for removing encumbrances and settling claims are deductible under section 48(1) as expenses incurred wholly and exclusively in connection with the transfer. Conclusion: The Tribunal set aside the impugned order and remitted the matter to the AO for computing the capital gain afresh in line with the observations and directions provided. The appeal was allowed for statistical purposes.
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