2020 (6) TMI 74 - AT - Income Tax

Computation of Capital gain - Section 50C applicability - agreement for sale of the property before execution of the sale deed and registration - assessee adopted the guideline value as on 04.08.2012 for computing the capital gain - adoption of guideline value on the date of entering into sale agreement OR based on the execution of sale deed - HELD THAT - It is well settled principles of law that guideline value is only to guide the Sub-Registrar to find out the correct market value for the purpose of collecting stamp duty. Market value is not a constant figure. It may vary depending upon the various factors. Therefore, the guideline value may not always represent the market value of the property. Because of deeming provision, Section 50C of the Act, the guideline value has to be adopted in case the market value or the agreed price between the parties was less than the guideline value fixed by the Government. When there was a difference between the dates of agreement for sale and the actual execution of registrated sale deed another question may arise, whether the guideline value as on the date of agreement has to be adopted or on the date of execution of sale deed has to be adopted. Once the assessee entered into an agreement of sale of the property, the purchaser has the right to enforce the agreement specifically through a competent civil court. Therefore, the assessee being the vendor cannot claim any more money over and above the agreed sale price merely because there was an obvious revision in the guideline value. Keeping this situation in mind, the Parliament in their wisdom incorporated first proviso to Section 50C of the Act by Finance Act, 2016 with effect from 01.04.2017. This is to clarify the existing position of law and to avoid further litigation. Therefore, this Tribunal is of the considered opinion that first proviso to Section 50C of the Act, is applicable retrospectively. It does not create any new right between the parties. It simply clarifies the existing position of law. CIT(A) after referring to first proviso to Section 50C of the Act, directed the Assessing Officer to adopt the guideline value as on 04.08.2012, being the date of agreement and there after compute the assessee s capital gain. Therefore the Revenue cannot have any grievance in the decision of the CIT(A). - Decided in favour of assessee.

Summary

Issues: Interpretation of Section 50C of the Income Tax Act regarding the adoption of guideline value for computing capital gain based on the date of agreement for sale or execution of sale deed.

Analysis:
The judgment by the Appellate Tribunal ITAT Chennai involved an appeal by the Revenue against the order passed by the Commissioner of Income Tax (Appeals) concerning the assessment year 2014-15. The issue revolved around the adoption of guideline value for computing capital gain by the assessee who entered into a property sale agreement. Despite the assessee's absence during the hearing, the Tribunal proceeded to hear the Departmental Representative and make a decision on the appeal.

The Revenue argued that the assessee should adopt the guideline value based on the date of execution of the sale deed, not the agreement date, for computing capital gain. The Revenue contended that the first proviso to Section 50C of the Income Tax Act, which came into effect on 01.04.2017, should not apply retrospectively to the case. The Departmental Representative referenced the judgment in CIT vs. Vatika Township (P.) Ltd., emphasizing that retrospective legislation should not alter past transactions conducted based on the then-existing law.

The Tribunal considered the arguments and examined the facts. It was established that the assessee entered into a property sale agreement for a specific consideration, with the guideline value not exceeding the agreed amount on the agreement date. The Tribunal highlighted the purpose of Section 50C, which deems income of capital gain when the sale deed value is below the guideline value. The Tribunal emphasized that the guideline value is meant to guide the Sub-Registrar for stamp duty collection and may not always reflect the actual market value.

In light of the above, the Tribunal concluded that the first proviso to Section 50C, introduced to clarify the law and prevent further disputes, should be applied retrospectively. The Tribunal reasoned that this proviso does not create new rights but clarifies existing legal positions. Therefore, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to adopt the guideline value based on the agreement date for computing the assessee's capital gain, dismissing the Revenue's appeal.

In conclusion, the Tribunal confirmed the order of the Commissioner of Income Tax (Appeals), dismissing the Revenue's appeal and pronouncing the decision on 27th February 2020 in Chennai.