2018 (10) TMI 740 - AT - Income Tax

Computation of Capital Gains - sale of property - stamp valuation u/s 50C - relevant date for determination of market value of property - Held that - There is proof that the assessee has entered into agreement on 09/07/2005 and the documents submitted are found to be genuine. Therefore, in our view, the fair market value for the purpose of section 50C should be the value as existed on the date of agreement of sale. - Decided in favor of assessee.

Summary

Issues:
1. Determination of deemed sale consideration under Section 50C of the Income Tax Act based on the market value.
2. Interpretation of the contractual obligation in relation to the sale agreement and registration of the sale deed.

Issue 1: Determination of Deemed Sale Consideration under Section 50C:
The appeal pertains to the valuation of an immovable property for the assessment year 2007-08. The Assessing Officer (AO) invoked Section 50C of the Income Tax Act to tax the sale consideration at the Stamp Duty Value, which was higher than the declared sale price by the assessee. The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal. The Tribunal initially dismissed the appeal, noting the non-argued grounds and the failure to challenge the valuation method. However, upon the assessee's application for rectification, the Tribunal recalled the order for further adjudication. The assessee contended that the market value for Section 50C purposes should be based on the value at the date of the sale agreement, not the registration date. The Tribunal, citing precedent, agreed with the assessee's argument, emphasizing that the transaction's nature should be determined based on the conditions at the agreement date. The Tribunal reversed the CIT(A)'s decision, allowing the assessee's appeal.

Issue 2: Interpretation of Contractual Obligation in Sale Agreement and Registration:
The key contention revolved around whether the deemed sale consideration under Section 50C should be based on the market value at the date of the sale agreement or the registration date. The assessee argued that the agreement date should dictate the valuation, as the sale deed registration merely fulfilled the contractual obligation established earlier. The Tribunal, referencing a similar case, emphasized that the transaction's character should align with the conditions at the agreement date. The Tribunal found the agreement genuine and upheld the assessee's position that the market value for Section 50C purposes should reflect the agreement date. Consequently, the Tribunal allowed the appeal, emphasizing the importance of considering the agreement date for valuation under Section 50C.

In conclusion, the Tribunal's judgment favored the assessee's position, emphasizing that the market value for Section 50C purposes should align with the date of the sale agreement rather than the registration date. The decision underscored the significance of assessing the transaction's nature based on the conditions prevailing at the agreement date, ultimately resulting in the allowance of the assessee's appeal.