2024 (6) TMI 1271 - AT - Income Tax

Benefit of section 50C - Retrospective application of safe harbor limit of 5% - difference of the sale consideration and the market value as per the ready reckoner rates - Whether safe harbour limit of 5% as introduced by 3rd proviso to sub section (1) of section 50C is retrospective in operation being curative of the unintended consequence ? - HELD THAT - A co-ordinate Bench of this Tribunal in Maria Fernandes Cheryl 2021 (1) TMI 620 - ITAT MUMBAI while negating the contention on behalf of the Revenue found that the amendment was essentially brought about to cure unintended consequences of section 50(1) even in a bonafide situation as sub section (1) of section 50 was essentially an anti-avoidance provision. While holding so the Bench had noted Circular 8 of 2018 by the Central Board of Direct Taxes (CBDT) viz. explanatory notes to the Finance Act 2018 which intended the rationalization of section 43CA section 50C and section 56 of the said Act. It can thus be seen that the CBDT had acknowledged that there can be genuine cases where there would be a variance between the stamp duty value and the actual consideration received in respect of similar properties depending upon variety of factors . It can be seen that such variance indeed occurs on the basis of location dimension access and other facilities which a particular property may enjoy. It is necessary to note that the stamp duty value or the ready reckoner value is essentially an estimate. Section 50C(1) is an anti-avoidance provision to prevent evasion of tax by showing lesser consideration in the transactions. However after acknowledging the fact of variance between the stamp duty value and the actual consideration the proviso was initially introduced by Finance Act 2018 from A.Y. 2019-20 introducing the safe harbour limit of 5% which has been enhanced to 10% by Finance Act 2020. A co-ordinate Bench of the Tribunal has held that the subsequent amendment by Finance Act 2020 would apply retrospectively. It is trite that the same principle would apply even in respect of the initial introduction of the proviso by Finance Act 2018. It is necessary to emphasize that this Tribunal after holding that it was a curative amendment has held that it was retrospective in operation. While doing so this Tribunal has placed reliance on its earlier decision of Agra Bench in Rajeev Kumar Agarwal 2014 (6) TMI 79 - ITAT AGRA held in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was intended. In that view of the matter the appellant-assessee would be entitled to the benefit of section 50C of the Act. Consequently the appeal succeeds. The impugned addition stands set aside.

Summary

Issues:
Whether the "safe harbour limit of 5%" under section 50C of the Income Tax Act is retrospective in operation.

Analysis:
The case involves an appeal by the assessee challenging an order passed by the CIT (A) regarding the application of section 50C of the Income Tax Act for A.Y. 2016-17. The appellant, engaged in property management, had sold a property in Mumbai, and the Assessing Officer added the valuation difference to the income. The appellant contended that the benefit of the proviso introduced in 2019 should be extended to A.Y. 2016-17. The CIT (A) denied the benefit, stating it applied from A.Y. 2019-20 onwards.

The Tribunal considered the circumstances and submissions. The property was sold for Rs. 90 crores, with a valuation of Rs. 91,05,55,000, resulting in a difference of Rs. 1,05,55,000, less than 5% of the consideration. Section 50C deems the stamp valuation as full consideration. The proviso introduced in 2019 allows a 5% deviation from the stamp valuation. The Tribunal referred to a previous case where a 6.55% difference prompted an addition, and the subsequent amendment in 2020 increased the safe harbor limit to 10%.

The Tribunal emphasized that the proviso aimed to address genuine variances due to property factors and acknowledged the retrospective application of curative amendments. Referring to Circular 8 of 2018, the Tribunal highlighted the rationale behind the amendments to sections 43CA, 50C, and 56 of the Act to prevent unintended hardships. Citing precedents, the Tribunal held that curative amendments are retrospective in nature, even if not explicitly stated, and must be given effect from the intended point in time.

In conclusion, the Tribunal held that the appellant was entitled to the benefit of section 50C, setting aside the addition made by the Assessing Officer.