2013 (2) TMI 237 - HC - Income Tax

Applicability of Section 50C - Assessee contended that Tribunal erred in applying section 50C to the case of the assessee because the valuation of the land for the purpose of stamp duty was yet to be assessed - as going by the definition of word Transfer from s.2(47)(v) the sale was completed when the consideration was received in the financial year 2005-06 and the possession had already been given in the year 1996 pursuant to an agreement for sale - Held that - Not been impressed by this submission as it is true that Transfer has been defined in Section 2(47) but the aforesaid definition was made before Section 50C was introduced to the Income Tax Act. After section 50C was introduced in the year 2003, the value of the land or building or both sold or otherwise transferred has to be the value assessed by the authority of the State Government for the purpose of stamp valuation. The submission that in the financial year 2005-06 when the consideration was received, the Deed of Conveyance had not even been executed has not found favour for the simple reason that the intention of the Parliament is that in a case where the land or building or both are sold or otherwise transferred, such transfer shall be deemed to have taken place only after the stamp duty has been assessed by the State Government, because it is on the valuation made for the purpose of stamp duty that the tax is payable under the Income Tax Act. By adopting devices to defeat the provision, the assessee cannot be heard to contend that section 50C would not be applicable merely because the Deed of Conveyance had not at that time been executed or registered. The contention that the property stood transferred in the financial year 2005-06 when the sale proceeds were received on the basis of the definition appearing from s.2(47)(v)is without any substance. Designs to evade tax cannot be permitted. The appeal raises no substantial question of law and is, therefore, dismissed.

Summary

Issues:
Application of Section 50C of the Income Tax Act to a property transaction involving the sale of land, timing of receipt of sale proceeds in relation to execution and registration of deed of conveyance, interpretation of the term "transfer" under Section 2(47) of the Income Tax Act, relevance of stamp duty valuation in determining taxable value, impact of legislative amendments on tax liability.

Analysis:
The case involved a dispute regarding the application of Section 50C of the Income Tax Act to a property transaction where the assessee claimed to have received sale proceeds before executing the deed of conveyance. The assessee contended that since the consideration was received in the financial year 2005-06, before the deed was executed and registered in subsequent years, Section 50C should not apply. However, the Revenue argued that the value for tax purposes should be based on the stamp duty valuation assessed by the State Government, as mandated by Section 50C.

The appellate authorities differed in their interpretation of the law, with the CIT(A) ruling in favor of the assessee, while the Tribunal sided with the Revenue. The High Court analyzed the provisions of Section 50C and the definition of "transfer" under Section 2(47) of the Income Tax Act. The Court emphasized that post the introduction of Section 50C in 2003, the taxable value of land or building transfers must align with the valuation assessed by the State Government for stamp duty purposes.

The Court rejected the assessee's argument that the property had transferred in the financial year 2005-06 based on possession granted earlier, as it did not align with the legislative intent behind Section 50C. The Court emphasized that attempts to circumvent tax liabilities by timing transactions were not permissible. The Assessing Officer rightfully considered the stamp duty valuation for tax assessment, as required by law. The Court dismissed the appeal, concluding that no substantial question of law was raised.

In summary, the judgment clarified the application of Section 50C to property transactions, emphasizing the importance of stamp duty valuation in determining taxable value. The Court upheld the legislative intent behind Section 50C, emphasizing that attempts to evade tax obligations through timing maneuvers were not acceptable. The decision reinforced the alignment of tax valuation with stamp duty assessments, dismissing the appeal and affirming the Assessing Officer's approach in the case.