2021 (2) TMI 426 - AT - Income Tax

Capital gain by invoking the provisions of section 50C - Year of assessment - HELD THAT - There was no device adopted by the Assessee to ensure that provisions of Sec.50C of the Act were not applicable to his case. Secondly, the registration was completed in the case before the Hon ble Calcutta High on 27.11.2007 i.e., in AY 2008-09 but the case before the Hon ble Court related to AY 2006-07. The Court was interpreting the term assesseable and countered the contention of the Assessee that prior to the amendment of Sec.50C of the Act w.e.f 1-10-2009, it is only cases where the valuation is completed in the relevant AY that provisions of Sec.50C of the Act can be applied. In the present case, no such devise to evade tax has been pleaded by the revenue nor a plea has been taken by the Assessee that sale having taken place earlier to the execution or registration of sale , provisions of Sec.50C of the Act are not applicable. As rightly contended by the learned Counsel for the assessee, it was a decision rendered on the scope of amendment to section 50C of the Act w.e.f. 01.10.2009. The decision referred to by the learned DR in the case of J.Appa Rao 2013 (11) TMI 1775 - ITAT HYDERABAD is a case where it was held that applicability of the provisions of Sec.50C of the Act is mandatory w.e.f .1-4-2003. This decision does not in any way support the case of the revenue regarding the year in which capital gain is liable to be taxed. Capital gain in question cannot be brought to tax in Assessment Year 2011-12. The Revenue authorities erred in bringing to tax the capital gain in Assessment Year 2011-12. The addition made by the AO is accordingly directed to be deleted - Decided in favour of assessee.

Issues Involved:
1. Validity of initiation of reassessment proceedings under section 148 of the Income Tax Act, 1961.
2. Justification of bringing to tax a sum of ?25,53,315/- as capital gain by invoking the provisions of section 50C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of initiation of reassessment proceedings under section 148 of the Income Tax Act, 1961:
The learned Counsel for the assessee submitted that he does not wish to press for adjudication ground No.2 raised by the Revenue with regard to the challenge to the validity of initiation of reassessment proceedings under section 148 of the Income Tax Act, 1961. Therefore, this issue was not adjudicated upon during the appeal.

2. Justification of bringing to tax a sum of ?25,53,315/- as capital gain by invoking the provisions of section 50C of the Income Tax Act, 1961:
The primary issue for adjudication was whether the Revenue authorities were justified in bringing to tax as capital gain a sum of ?25,53,315/- by invoking the provisions of section 50C of the Act. The assessee sold two shops under a sale deed dated 10.08.2009 for a sale consideration of ?32,27,010/-, while the value adopted by the registering authority for stamp duty was ?57,80,325/-. The assessee did not disclose the capital gain on the sale of the property, prompting the AO to initiate reassessment proceedings.

During the reassessment proceedings, the assessee argued that the capital gain should be assessed in the year of transfer, which was the financial year 2009-10, relevant to Assessment Year 2010-11, as the sale deed was executed on 10.08.2009. The AO, however, taxed the difference between the value adopted by the registering authorities and the sale consideration in Assessment Year 2011-12, reasoning that the document was registered on 26.06.2010, making AY 2011-12 the relevant year for applying section 50C of the Act.

The CIT(A) upheld the AO's view, agreeing that section 50C would be applicable in AY 2011-12, as the value for stamp duty and registration was fixed in that year. The CIT(A) also referenced the Calcutta High Court decision in M/s. Bagri Impex Pvt. Ltd. vs. ACIT, which upheld the application of section 50C in a different assessment year from the year of receipt of sale consideration or the year of determination of valuation by the registering authority.

The Tribunal, however, found that the sale deed executed on 10.08.2009 should be regarded as the date of transfer, as per section 47 of the Indian Registration Act, 1908, which states that a registered document operates from the time it would have commenced to operate if no registration had been required. Therefore, the transfer took place in the previous year relevant to Assessment Year 2010-11, making it the correct year for taxing the capital gain.

The Tribunal also noted that section 50C of the Act substitutes the full value of consideration received or accruing on transfer, but does not change the year of transfer as laid down in section 45(1) of the Act. The Tribunal emphasized that section 45 is a charging section for capital gain, while section 48 is a computation provision. If the computation provisions cannot apply, the transaction is not intended to fall within the charging section.

The Tribunal distinguished the Calcutta High Court decision, noting that it dealt with different facts and the interpretation of the term "assessable" post-amendment of section 50C. The Tribunal also found that the decision in the case of J. Appa Rao did not support the Revenue's case regarding the year of taxation.

Conclusion:
The Tribunal held that the capital gain in question could not be brought to tax in Assessment Year 2011-12 and directed the deletion of the addition made by the AO. The appeal by the assessee was allowed.

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