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2022 (11) TMI 991 - AT - Income TaxCapital gain computation - addition on account of cost of improvement - actual consideration of the property - applicability of section 50C - indexed value of taxes paid to the MCD - assessee has not submitted any documentary evidence regarding cost of improvement relating to the expenses on boundary wall and gate and claimed index value - HELD THAT - We note that there is no decision of Hon ble jurisdictional High Court on this subject but the decision of Hon ble Madras High Court 2020 (10) TMI 517 - MADRAS HIGH COURT is there which is in favour of the assessee which does provide that the said amendment should be read as clarificatory. The view is followed by the ITAT decisions. There is no dispute that agreement was entered much prior to the date of registration and the part payment has also duly been done at the time of agreement. Hence, the view of the authorities below that circle rate on the date of registration should be applicable is not correct. We hold that in accordance with the ratio of aforesaid case laws, the rate as on the date of agreement should be taken for the purpose of computation. As regards other two aspects of the cost of improvement, no cogent submissions have been made before us. Hence we do not find any infirmity in the order of the ld. CIT (A) where he has upheld the addition on account of cost of improvement. Appeal of the assessee is partly allowed.
Issues:
1. Dismissal of appeal by CIT (A) 2. Applicability of proviso to section 50C 3. Treatment of long term capital as liable to tax 4. Disallowance of cost of improvement 5. Disallowance under section 50C Analysis: 1. The appeal was filed against the order of the ld. CIT (Appeals)-19, New Delhi dated 30.11.2018 for the assessment year 2015-16. The grounds of appeal raised by the assessee challenged the correctness and justification of the CIT (A) in dismissing the appeal. The brief facts revealed that the assessee had sold a property during the year, and the AO questioned the genuineness of the transaction. The AO noted discrepancies in the consideration amount and the stamp value, leading to the initiation of inquiries. Consequently, the AO made additions in the hands of the assessee, which led to the appeal. 2. The CIT (A) held that the first proviso to section 50C was not applicable to the assessee as it was prospective from 01.04.2017. The CIT (A) rejected the assessee's claim to apply the proviso retroactively based on the date of the agreement fixing the consideration amount. The CIT (A) emphasized the legislative intent and the circular clarifying the applicability of the amendment. Consequently, the CIT (A) upheld the AO's decision to treat the property sale below the stamp duty valuation, invoking section 50C. 3. The assessee contended that the first proviso to section 50C should be applied retroactively to their case. The counsel highlighted that the agreement was entered into before the registration, and part of the consideration was paid as per the proviso requirements. The counsel relied on the decision of the Hon'ble Madras High Court and various ITAT decisions supporting the retrospective applicability of the amendment. The ITAT, after considering the arguments and precedents, held in favor of the assessee, stating that the circle rate on the date of the agreement should be considered for computation purposes. 4. The ITAT found no jurisdictional High Court decision on the matter but relied on the Madras High Court decision and ITAT precedents to support the assessee's position. The ITAT concluded that the amendment to section 50C should be read as clarificatory and applied retrospectively. Therefore, the rate as on the date of the agreement was deemed appropriate for computation. However, regarding the cost of improvement, no substantial submissions were made, leading to the confirmation of the addition by the CIT (A). 5. Ultimately, the ITAT partly allowed the appeal, ruling in favor of the assessee concerning the applicability of the first proviso to section 50C retroactively. The decision was based on the legislative intent, precedents, and the specifics of the transaction. The ITAT upheld the addition related to the cost of improvement due to the lack of substantial evidence or arguments presented.
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