2019 (12) TMI 307 - AT - Income Tax

Capital gains - relevant date for determination of stamp duty value - At the time of transfer of ownership of property (i.e. sale deed) or date of agreement to sale - A.O rejected assessee s proposal to adopt stamp value authority value of F.Y 2009-10, on the ground that property was transferred in the A.Y 2010-11 and capital gain was taxable in A.Y 2010-11 - HELD THAT - The provision of new sec. 43CA under the Act introducing the provisions for taxability of transfer of immovable property (land or building or both) held in the nature of stock in trade, is also applicable on the similar lines which are applicable for immovable property held in the nature of capital asset under section 50C of the Act - Thus, the stamp duty value as on date of initial agreement in the year 2010 can be adopted for the purpose of Sale consideration. A.O is directed to compute capital gain by taking stamp duty value as on date entering agreement in the year 2010, in so far as in the year of entering into agreement assessee had received part payment of ₹ 7,07,000/- by account payee cheque - A.O is liberty to verify the fact of payment received by account payee cheque. The appeal of the assessee is allowed.

Issues Involved:
1. Consideration of shop sold for capital gains calculation.
2. Cost of acquisition of the shop.
3. Applicability of Sec. 43CA of IT Act on property transfer.

Analysis:

Issue 1: Consideration of shop sold for capital gains calculation
The appellant contested the AO's decision to consider the full value of consideration of the shop sold based on stamp duty valuation as on 05.02.2011, instead of the value as on 07.12.2010 as claimed by the appellant. The AO relied on section 50C of the Act for this valuation. The appellant argued that the final agreement between the parties was made on 07.12.2010, and part payments were received on specific dates in December 2010. The appellant provided documentary evidence to support these claims, including the sale agreement, stamp duty valuations, and payment receipts. The ITAT Mumbai found merit in the appellant's arguments and directed the AO to compute capital gains using the stamp duty value as on the date of entering the agreement in 2010, considering the payments received in December 2010.

Issue 2: Cost of acquisition of the shop
The appellant challenged the AO's decision to consider the cost of acquisition of the shop as NIL, as it was acquired by surrendering tenancy rights. The AO questioned this treatment and insisted on using the stamp duty valuation for working out the capital gains. The ITAT Mumbai noted the appellant's investment in REC Bonds and a residential flat, along with the surrender of tenancy rights. The tribunal directed the AO to reevaluate the cost of acquisition based on the stamp duty value as on the date of agreement in 2010, allowing for a more accurate determination of the capital gains.

Issue 3: Applicability of Sec. 43CA of IT Act on property transfer
The tribunal discussed the provisions of Sec. 43CA of the IT Act, which apply to the transfer of immovable property without registration of sale deed. The tribunal highlighted that the value adopted for stamp duty purposes at the time of entering the agreement should be considered for computing profits and gains from the transfer. The tribunal emphasized that the stamp duty value as on the date of the initial agreement in 2010 should be adopted for determining the sale consideration. By applying these provisions, the tribunal ruled in favor of the appellant and allowed the appeal.

In conclusion, the ITAT Mumbai's judgment favored the appellant on all three issues, directing the AO to recompute the capital gains by considering the stamp duty value as on the date of the agreement in 2010 and reevaluating the cost of acquisition based on the same valuation. The tribunal also emphasized the applicability of Sec. 43CA of the IT Act in property transfers without registration, ensuring a fair and accurate calculation of capital gains.

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