2022 (9) TMI 767 - AT - Income Tax

Capital gain computation - year in which the transfer of property has taken place - section 50C applicability - transfer development rights in the plot of land to the builder - whether section 50C of the Act is applicable to the facts of the present case for computation of long term capital gains? - whether rights transferred on the date of letter dated 04/10/2000, or on the date of agreement dated 18/02/2010 ? - HELD THAT - All the essentials of a contract i.e. offer, acceptance and consideration are fulfilled in the present case. In any case, by non fulfilment of any condition of the contract, same becomes only voidable at the option of the parties and it does not render the contract to be void. We find that despite the delay in payment of the advance money, the vendor i.e., the assessee society honoured the initial terms of offer letter and ultimately executed agreement dated 20/05/2009, with the builder. Thus, we do not agree with the view of the learned CIT(A) that the letter of offer was not acted upon between the parties. As on one hand the Revenue did not dispute the fact that the impugned property was purchased by the society in the year 1969 and accordingly computed the long term capital gain, despite the fact that conveyance deed in respect of that transaction was also delayed and was ultimately executed in the year under consideration, while, on the other hand, in respect of the transaction of transfer of development right to the builder, the Revenue is considering the date of registration of the agreement, i.e. 18/02/2010, as the date of transfer for the purpose of computation of capital gains tax. Thus, in view of the aforesaid factual and legal position, we are of the considered view that development rights in the plot of land were transferred to the builder in the financial year 2000 01. Further, since provisions of section 50C of the Act were inserted in the Act w.e.f. 01/04/2003, the same are not applicable in the present case. Accordingly, grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Taxation of capital gains in AY 2010-11.
2. Adoption of stamp duty value as on the date of registration.
3. Application of section 50C of the Income Tax Act without the benefit of the proviso inserted by the Finance Act, 2016.

Detailed Analysis:

1. Taxation of Capital Gains in AY 2010-11:
The primary issue is whether the capital gains should be taxed in AY 2010-11 or AY 2001-02. The assessee argued that the plot was sold in AY 2001-02, when section 50C was not applicable. The Assessing Officer (AO) held that the transfer occurred in the financial year 2009-10, as the agreement was registered on 18/02/2010. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the letter dated 04/10/2000 was merely an offer and not a contract, and the possession of the property was retained by the assessee until 20/05/2009. The Tribunal, however, found that the development rights were transferred in the financial year 2000-01, as the offer letter was accepted, advance payment was made, and the possession was given to the builder in 2001. Therefore, the capital gains should be considered for AY 2001-02, not AY 2010-11.

2. Adoption of Stamp Duty Value as on the Date of Registration:
The AO adopted the stamp duty value of Rs. 98,08,500 as on the date of registration for computing the long-term capital gain, instead of the actual consideration of Rs. 19,29,700. The CIT(A) upheld this view, asserting that the agreement dated 20/05/2009 was the actual contract, and the transfer took place only upon registration on 18/02/2010. The Tribunal disagreed, noting that the development rights were transferred in the financial year 2000-01, and the provisions of section 50C, which were introduced w.e.f. 01/04/2003, were not applicable. Thus, the actual consideration should be adopted.

3. Application of Section 50C Without the Benefit of the Proviso Inserted by Finance Act, 2016:
The assessee contended that section 50C should not apply as the transaction occurred before its introduction. The AO and CIT(A) applied section 50C, considering the registration date. The Tribunal ruled that since the transfer of development rights occurred in the financial year 2000-01, section 50C, effective from 01/04/2003, was not applicable. Therefore, the proviso inserted by the Finance Act, 2016, was also irrelevant in this case.

Conclusion:
The Tribunal allowed the appeal, concluding that the development rights were transferred in the financial year 2000-01, and hence, the provisions of section 50C were not applicable. The capital gains should be taxed in AY 2001-02 based on the actual consideration received.

Order Pronounced:
The appeal by the assessee was allowed, and the order was pronounced in the open Court on 14/09/2022.