2024 (1) TMI 692 - AT - Income Tax

Capital gain computation - applicability of the provisions of section 50C for the impugned assessment year - AR pleaded that as on the date of agreement, wherein a substantial amount of sale consideration has been partly received by the assessee, the SRO value, as per the provisions of section 50C of the Act, on the date of registration of the sale deed cannot be applied in the instant case - DR argued that the limited scrutiny includes the value to be adopted for the purpose of the provisions of section 50C of the Act and it is required to re-compute the capital gains - HELD THAT - From the bare reading of the section 50C(1) of the Act, and the first and second provisos, in the instant case, the date of agreement fixing the amount of consideration and the date of registration for transfer of the capital asset are not the same. The value adopted for the stamp duty valuation purposes as on the date of agreement shall be taken for the purpose of computing the full value of consideration for such transfer. Further, the second proviso also stipulates that where the amount of sale consideration, or a part thereof has been received by an account payee cheque or through banking channels, the first proviso to section 50C(1) shall be applied in those cases. In the instant case, we find that the agreement has been entered into on 30/12/2015 and the part consideration has been received on 14/8/2014. Therefore, we find merit in the argument of the Ld. AR that the provisions of section 50C of the Act adopting the value for stamp duty purposes as on the date of sale deed could not be applied but the value as on the date of the agreement / date of receipt of advance has to be applied. We are therefore of the considered view that the provisions of section 50C(2) 50C(3) of the Act cannot be applied in the instant case. Therefore, we direct the Ld. AO to adopt the actual sale consideration declared and accepted on the date of agreement entered into by the assessee to compute the capital gains. Grounds No.2 3 raised by the assessee are partly allowed.

Summary

Issues involved:
The judgment involves issues related to the computation of capital gains under section 50C of the Income Tax Act, 1961 for the assessment year 2016-17.

Facts of the case:
The assessee, an individual and Director in a company, filed his original return of income for the AY 2016-17 admitting total income. The case was selected for scrutiny to verify deduction/exemption from capital gains and investment in immovable property. The Assessing Officer (AO) found discrepancies in the capital gains declared by the assessee and proceeded to tax the difference. The assessee appealed to the Ld. CIT(A)-NFAC, who directed the AO to refer the matter to the District Valuation Officer (DVO) under section 50C(2) and 50C(3) of the Act. The DVO determined the property value, leading to a revised assessment order by the AO. The assessee appealed to the Tribunal challenging the additions made by the AO.

Arguments presented:
The assessee argued that the provisions of section 50C were wrongly applied as the sale consideration was determined before the date of registration of the sale deed. The assessee contended that the value as on the date of the agreement should be considered for computing capital gains. On the other hand, the Departmental Representative asserted that the AO was correct in applying section 50C for re-computing capital gains.

Judgment:
The Tribunal analyzed the provisions of section 50C(1) of the Act and observed that in this case, the date of agreement and the date of registration were not the same. As per the Act, the value adopted for stamp duty purposes on the date of agreement should be used for computing the full value of consideration. Since part of the sale consideration was received before the agreement date, the Tribunal held that the provisions of section 50C(2) & 50C(3) could not be applied as the value as on the date of agreement had to be considered. Therefore, the Tribunal directed the AO to adopt the actual sale consideration declared on the date of the agreement for computing capital gains. Consequently, the Tribunal partly allowed the appeal of the assessee.

Conclusion:
The Tribunal's decision clarified the application of section 50C in determining capital gains, emphasizing the importance of considering the value as on the date of agreement for property transactions. The judgment provided relief to the assessee by directing the AO to compute capital gains based on the sale consideration accepted at the time of the agreement, rather than the stamp duty value at the time of registration.