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2021 (11) TMI 416 - AT - Income TaxLong term capital gain by adopting full value of consideration by invoking provisions of section 50C(1) - HELD THAT - In the present case agreement was with one Mr. Mohamed Zabeer and sale deed was executed in favour of Mrs. Maryam Mahmood and Mrs.Thaika Sithi Aliya, sister and Mother of purchaser of property and hence, it does not in any way take away right of the assessee to get benefit of proviso to section 50C(1) - insofar as observations of the CIT(A) with regard to non-registration of sale agreement, it is very clear from the Registration (Tamil Nadu Amendment) Act, 2012, any instruments of agreement relating to sale of immovable property registration was made mandatory from October, 2012. Therefore, for non-registration of sale agreement, more particularly when the assessee has subsequently acted upon such sale agreement, benefit cannot be denied to the assessee. We are of the considered view that the Assessing Officer as well as learned CIT(A) has erred in recomputing long term capital gain by adopting full value of consideration by invoking provisions of section 50C(1) of the Act and further, adopting guideline value of property as on date of registration of property, even though the assessee has fixed consideration for transfer of property by entering into an agreement to sell. Hence, we direct the AO to adopt sale consideration for transfer of property as agreed between the parties in sale agreement dated 09.02.2012. - Decided in favour of assessee.
Issues Involved:
1. Validity of the addition made under Section 50C of the Income Tax Act, 1961. 2. Applicability of the proviso to Section 50C inserted by the Finance Act, 2016 retrospectively. 3. Consideration of the guideline value of property as on the date of agreement versus the date of registration. 4. Validity of sale agreement and sale deed executed with different parties. Issue-wise Detailed Analysis: 1. Validity of the Addition Made under Section 50C: The core issue revolves around the addition of ?2,67,34,750/- made by the Assessing Officer (AO) under Section 50C of the Income Tax Act, 1961. The AO adopted the guideline value of the property as on the date of the sale deed (?7,76,70,000/-) instead of the actual sale consideration (?5,10,00,000/-) mentioned in the sale agreement dated 09.02.2012. This resulted in the addition of ?2,67,34,750/- to the assessee's total income. 2. Applicability of the Proviso to Section 50C Inserted by the Finance Act, 2016 Retrospectively: The assessee argued that the proviso to Section 50C, introduced by the Finance Act, 2016 and effective from 01.04.2017, should be applied retrospectively. This proviso states that if the date of agreement and the date of registration are not the same, the stamp duty valuation as on the date of the agreement should be considered, provided the consideration or part thereof was received through an account payee cheque or bank draft. The assessee contended that since the proviso is curative in nature, it should apply retrospectively to the assessment year 2013-14. 3. Consideration of the Guideline Value of Property as on the Date of Agreement versus the Date of Registration: The assessee entered into a sale agreement on 09.02.2012 with a sale consideration of ?5,10,00,000/- and received an advance of ?1.00 crore by cheque. The property was registered on 07.05.2012, at which time the guideline value had increased to ?7,76,70,000/-. The AO adopted the guideline value as on the date of registration for computing long-term capital gains, whereas the assessee argued that the guideline value as on the date of the agreement should be considered. 4. Validity of Sale Agreement and Sale Deed Executed with Different Parties: The CIT(A) observed that the sale agreement was with one party (Mr. Mohamed Zabeer) while the sale deed was executed in favor of different parties (Mrs. Maryam Mahmood and Mrs. Thaika Sithi Aliya, sister and mother of Mr. Mohamed Zabeer). The CIT(A) held that this discrepancy invalidated the assessee's claim for considering the guideline value as on the date of the agreement. Tribunal's Findings: On the Validity of the Addition under Section 50C: The Tribunal found that the AO and CIT(A) erred in adopting the guideline value as on the date of registration without considering the sale agreement. It was noted that the guideline value as on the date of the agreement (09.02.2012) was less than the agreed sale consideration, and the subsequent increase in guideline value should not affect the computation of long-term capital gains. On the Applicability of the Proviso to Section 50C Retrospectively: The Tribunal referred to various judicial precedents, including the decision of the Hon'ble Madras High Court in CIT Vs. Vummudi Amarendran, which held that the proviso to Section 50C is curative and should be applied retrospectively. The Tribunal concluded that the proviso should apply to the assessee's case, thereby considering the guideline value as on the date of the agreement. On the Consideration of Guideline Value: The Tribunal agreed with the assessee's contention that the guideline value as on the date of the agreement should be considered for computing long-term capital gains. The Tribunal emphasized that the proviso to Section 50C should be applied, as it relieves the assessee from undue hardship. On the Validity of Sale Agreement and Sale Deed Executed with Different Parties: The Tribunal found that the sale agreement was with Mr. Mohamed Zabeer, and the property was registered in the names of his mother and sister. This did not invalidate the sale agreement or the assessee's claim for considering the guideline value as on the date of the agreement. The Tribunal also noted that the mandatory registration of sale agreements in Tamil Nadu came into effect only from October 2012, after the date of the assessee's agreement. Conclusion: The Tribunal directed the AO to adopt the sale consideration as per the sale agreement dated 09.02.2012 for computing long-term capital gains, thereby allowing the assessee's appeal and setting aside the additions made by the AO and upheld by the CIT(A). The assessee's appeal was allowed, and the order was pronounced in the open court on 27th October 2021.
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