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2021 (7) TMI 247 - AT - Income TaxCapital gain computation - addition u/s. 50C of the Act on account of difference in the value adopted by the DVO and the sale consideration taken by the assessee in his return of income - cost of indexation - HELD THAT - Since the process of sale has been initiated from the date of Sale Agreement, the character of the transaction vis-a-vis Section 50C of the Income tax Act should also be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into. Accordingly, the applicability of the provisions of section 50C should be looked at only on the date of Agreement to Sell i.e. 29.09.2010. According to the Jantri rate on that date, the stamp duty valuation is less than the sale consideration under the sale deed and hence no addition u/s 50C is required to be made as per proviso to Section 50C of the Act. Although the said amendment is effective from 01.04.2017, however it is to be noted that the said provisions are amended to remove an undue hardship to the assessee or to remove an apparent incongruity and hence it can be applied even in the pending matters and treated as retrospective in nature. There cannot be any dispute that this amendment in the scheme of section 50C has been made to remove an incongruity, resulting in undue hardship to the assessee, as is evident from the observation in Easwar Committee report that The (then prevailing) provisions of Section 50C do not provide any relief where the seller has entered into an Agreement to Sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement . Recognizing the incongruity that the date of agreement of sale has been ignored in the statute even though it was crucial as it was at this point of time that the sale consideration is finalized. The incongruity in the statute was glaring and undue hardship not in dispute. Once it is not in dispute that a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as retrospective, effective from the date on which the law, containing such an undue hardship or incongruity, was introduced. As relying on DHARAMSHIBHAI SONANI VERSUS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9, SURAT 2016 (9) TMI 1259 - ITAT AHMEDABAD and taking into account the facts and circumstances, as narrated above, we remit this issue back to the file of assessing officer. If the assessing officer finds that a registered agreement to sale, as claimed by the assessee was actually executed on 29.09.2010 and the partial sale consideration was received through banking channels, the assessing officer should adopt stamp duty valuation as on 29.09.2010 to compute capital gains. Disallowance of cost of indexation claimed - We find that the dispute between the assessee and the assessing officer is the rate of ₹ 825/- per square meter, as fair market value as on 01.04.1981, whereas the DVO has estimated the fair market value as on 01.04.1981 at the rate of 114.30 per square meter. We note that the DVO has himself stated in his report that the impugned land was situated at more appropriate location as compared to sale instances considered by him. We also agree with assessee s land is situated in New City Light Area of Surat, which is costly area and prices of the land in the said area is very higher side. Therefore, considering the entirety of the facts and taking a holistic view the fair market value @ 607 per square meter should be adopted to meet the end of justice. Accordingly, the AO is directed to apply rate of ₹ 607 per sq. meter for calculation of indexed cost of acquisition for the purpose of computation of long-term capital gain in the hands of the assessee. Therefore, Ground No.2 raised by the assessee is partly allowed.
Issues Involved:
1. Addition under Section 50C of the Income Tax Act due to difference in value adopted by the DVO and the sale consideration declared by the assessee. 2. Addition due to disallowance of cost of indexation claimed by the assessee. Detailed Analysis: Issue 1: Addition under Section 50C The assessee sold a property along with two co-owners for ?4,00,00,000, where the assessee's share was ?1,79,50,000. The Stamp Valuation Authority valued the property at ?5,29,72,000. The Assessing Officer (AO) adopted the value of ?4,77,32,590 as per the Departmental Valuation Officer (DVO) and recalculated the Long Term Capital Gain (LTCG) at ?1,55,65,753, making an addition of ?34,70,000 under Section 50C. The assessee argued that the property was sold based on an agreement dated 29.09.2010, during FY 2010-11, where substantial payment (54.20%) was received, and the possession was given on 30.05.2012. The sale deed was registered on 07.11.2012. The assessee contended that the jantri rate as of the agreement date should be considered for Section 50C purposes, not the date of registration. The Tribunal noted that the first proviso to Section 50C, effective from 01.04.2017, is curative and should be applied retrospectively to avoid undue hardship. The Tribunal remitted the issue back to the AO to adopt the stamp duty valuation as of 29.09.2010 if the agreement to sell was executed and partial consideration was received through banking channels. Issue 2: Disallowance of Cost of Indexation The AO adopted the fair market value (FMV) as on 01.04.1981 at ?5,08,750 (?114.30 per sq. meter) as per the DVO's report, resulting in an indexed cost of ?19,45,130 for the assessee's share. The assessee claimed an indexed cost of ?1,40,40,883 based on a valuation report by a government-approved valuer, who valued the land at ?825 per sq. meter as on 01.04.1981. The Tribunal observed that the DVO did not provide a satisfactory reason for rejecting the government-approved valuer's report, which considered factors like location, utility, and future potential. The Tribunal referred to similar cases where the valuation by government-approved valuers was accepted over the DVO's report. The Tribunal concluded that the FMV should be ?607 per sq. meter to meet the ends of justice, directing the AO to apply this rate for calculating the indexed cost of acquisition. Conclusion: The appeal was partly allowed. The Tribunal directed the AO to: 1. Consider the stamp duty valuation as of 29.09.2010 for Section 50C purposes if the agreement to sell and partial consideration were received through banking channels. 2. Apply the rate of ?607 per sq. meter for calculating the indexed cost of acquisition for the purpose of computing LTCG.
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