2020 (12) TMI 981 - AT - Income Tax

Capital gain computation - ascertain the date of applicability of the beneficial proviso to section 50C(1) which gives a breathing space to all such assessee who enter into agreement for transfer of property on a date anterior to the date of actual registration and also receive full or part of the consideration for such transfer - HELD THAT - When we examine the content of the two provisos to section 50C(1) in juxtaposition to the language of sub-section (1), it gets graphically clear that the beneficial proviso has been inserted in order to benefit some assesses who enter into agreement prior to the date of registration and also simultaneously receive full or a part of consideration. Such beneficial provision does not inflict a corresponding detriment to other assessees or the public generally. Since object of the first proviso to section 50C(1) is to confer a benefit to certain class of assesses in the given situation, going by the ratio laid down in Vatika Township 2014 (9) TMI 576 - SUPREME COURT this proviso will have to be held as retrospective applicable from the date of insertion of section 50C w.e.f. 01-04-2003. Our view is fortified by a recent judgment rendered by the Hon ble Madras High Court in CIT Vs. Vummidi Amarendra 2020 (6) TMI 74 - ITAT CHENNAI - It is, therefore, held that the alternate plea raised by the ld. AR for adopting stamp value on the date of agreement in the year 2000 instead of the date of registration in 2006 is hereby countenanced, in principle. Transfer of asset u/s 2(47) - transfer took place on 06.05.2000, being the date of agreement or contradicted by the Revenue by making out a case that the date of registration, being, 03-08-2006 is the real date of transfer attracting section 45 - assessee handed over possession of the property to M/s. V.S. Kolbhor Associates in the year 2000 on receiving substantial part of consideration. This, in our opinion, constituted transfer u/s. 2(47)(v) of the Act read with section 53A of the TPA attracting taxability of capital gain in the A.Y. 2001-02. As the transfer took place in the said earlier year, it cannot once again take place in the assessment year 2007-08 attracting taxation. Setting aside the impugned order, we hold that the transfer took place in the A.Y. 2001-2002 and not 2007-08, leading to taxation of capital gain only in the earlier year and not the latter. As the ld. CIT(A) has upheld taxability of the capital gain in the A.Y. 2007-08, we hereby overturn the same. The Revenue is at liberty to examine the taxability of the capital gain, if any, arising from the transaction in the earlier year, subject to the relevant provisions. In view of our favorable decision on the main argument of the ld. AR, the alternate claim of the assessee and the discussion made has been rendered academic - Decided in favour of assessee.

Summary

Issues Involved:
1. Determination of the date of transfer of property for capital gains tax purposes.
2. Applicability of Section 50C and its provisos regarding the stamp value of the property.
3. Retrospective application of the beneficial proviso to Section 50C(1).

Issue-wise Detailed Analysis:

1. Determination of the date of transfer of property for capital gains tax purposes:
The primary issue was to ascertain the correct date of transfer of the property, which would trigger the provisions of Chapter IV-E of the Income-tax Act, 1961. The Assessing Officer (AO) held that the transfer took place on the date of the registered sale deed, i.e., 03-08-2006, making the capital gains chargeable in the assessment year (AY) 2007-08. The assessee contended that the transfer occurred on 06-05-2000 when the agreement was executed and possession handed over. The Tribunal concluded that the transfer occurred on 06-05-2000, based on Section 2(47)(v) of the Act read with Section 53A of the Transfer of Property Act, 1882, which considers transfer complete when possession is handed over and part of the consideration is paid, even if the contract is not registered. Thus, the capital gain was taxable in AY 2001-02, not 2007-08.

2. Applicability of Section 50C and its provisos regarding the stamp value of the property:
The AO invoked Section 50C, which mandates considering the stamp duty value as the full value of consideration if it exceeds the actual sale consideration. The assessee argued that the first proviso to Section 50C should apply, which allows considering the stamp value on the date of the agreement if the consideration or part thereof was received before the date of the agreement. The Tribunal found that the assessee received substantial consideration through banking channels before the agreement date, satisfying the conditions of the proviso. Therefore, the stamp value on the date of the agreement (06-05-2000) should be considered for computing capital gains, not the value on the date of registration (03-08-2006).

3. Retrospective application of the beneficial proviso to Section 50C(1):
The Tribunal examined whether the first proviso to Section 50C(1), inserted by the Finance Act, 2016, effective from 01-04-2017, could be applied retrospectively to AY 2007-08. Citing the Supreme Court's decision in CIT Vs. Vatika Township Pvt. Ltd. (2014) and the Madras High Court's judgment in CIT Vs. Vummidi Amarendra (2020), the Tribunal held that beneficial provisions should be applied retrospectively if they do not inflict a corresponding detriment on others. Hence, the proviso was deemed applicable from the insertion date of Section 50C (01-04-2003), benefiting the assessee.

Separate Judgments:
The judgment for Sh. Vasant Laxman Khandge (ITA No.653/PUN/2017) was applied mutatis mutandis to the case of Santosh D. Khandge, L/H of Sh. Dattatraya Laxman Khandge (ITA No.652/PUN/2017), as both cases involved identical facts and circumstances. The Tribunal ordered the deletion of the addition of ?75,01,976/- in both cases and allowed the Revenue to examine the taxability for AY 2001-02 as per law.

Conclusion:
The Tribunal allowed both appeals, concluding that the transfer of property occurred on 06-05-2000, making capital gains taxable in AY 2001-02. The beneficial proviso to Section 50C(1) was applied retrospectively, considering the stamp value on the agreement date for computing capital gains. The additions made by the AO were deleted.