2024 (3) TMI 655 - AT - Income Tax

Capital gain - Denial of benefit of 1st proviso to section 50C(1) which allows the consideration value fixed in the agreement to be considered instead of the stamp valuation for the computation of full value of consideration for transfer - Denial of benefit of exemption u/s 54B to assessee - submission of Ld. AR that the cheque received by assessee from buyer was post-dated 09.10.2006 - HELD THAT - Although the cheque was cleared on 11.10.2006, it could be treated as having been received on 09.10.2006. But it cannot be accepted as having been received on 29.09.2006. Had the assessee received on 29.09.2006, a present-dated cheque and not post-dated cheque and the same would be have been cleared in bank in 2-3 normal working days, there might have been strength in the argument that it should be treated as having been received on 29.09.2006 but this is not so in present case. AR has not quoted any decision holding that in a case where cheque itself is post-dated 09.10.2006 and cleared on 11.10.2006, the payment can be treated to have been received on 29.09.2006. In any case, we also agree with Ld. DR that if the stand taken by assessee/Ld. AR is accepted, it would give an unfettered leeway to persons to by-pass the requirement of 2nd proviso to section 50C(1) by applying a trick where a person can receive a post-dated cheque of any period and thereby mis-use the benefit of 1st proviso. We do understand that such a situation ought to be stopped. Therefore, we are not convinced by arguments of Ld. AR in this respect. In conclusion, we are not satisfied that the assessee has received any part of consideration through cheque on or before 29.09.2006 (date of agreement) and therefore we hold that the AO was right in not giving benefit of 1st proviso to section 50C(1) to assessee. The first grievance projected by assessee is therefore rejected. Benefit of exemption u/s 54B - whether the investment made by assessee after execution of sale-agreement but before registration of sale-deed, from the moneys received under sale-agreement, is eligible for exemption or not? - On a careful consideration, we find that the issue is settled in favour of assessee by the decisions quoted by Ld. AR as mentioned in foregoing paragraph. Therefore, we hardly need to delve this issue. We are inclined to carry the view taken in those judicial rulings and accordingly hold that the investment by assessee in the new land from sale-proceed of old land, even if made before registration of sale-deed, is eligible for exemption. Accordingly, we direct the AO to allow exemption. This grievance of assessee is accepted.

Issues Involved:
1. Sustaining the addition of Rs. 46,13,227/- under capital gain.
2. Denial of deduction u/s 54B of the Income-tax Act, 1961.
3. Non-consideration of the provision of section 50C(2) of the Income-tax Act, 1961.
4. Charging of interest u/s 234A and 234B.
5. Levy of penalty u/s 271(1)(c).

Summary:

Issue 1: Sustaining the Addition under Capital Gain
The assessee challenged the capital gain assessed by AO at Rs. 46,13,227/-. The first grievance was the non-allowance of the benefit of the 1st proviso to section 50C(1), which, though enacted through Finance Act, 2016 w.e.f. 01.04.2017, was agreed to be retrospective and applicable to AY 2011-12. The sale was made pursuant to an agreement dated 29.09.2006, and the stamps authority valuation on that date was not more than Rs. 35,00,000/-. However, the lower authorities adopted the valuation of Rs. 48,05,000/- on the date of registration of the sale deed, ignoring the 1st proviso. The AO was right in not giving the benefit of the 1st proviso to section 50C(1) as the assessee did not satisfy the requirement of the 2nd proviso, which mandates receipt of consideration through an account payee cheque or draft on or before the date of the agreement.

Issue 2: Denial of Deduction u/s 54B
The assessee claimed exemption u/s 54B for the investment made in the name of his son. The lower authorities denied the exemption as the new land was not purchased in the name of the assessee and the investment was made before the date of transfer. The Tribunal held that the assessee's case is covered by the decision of the Hon'ble Jurisdictional High Court of Madhya Pradesh in PCIT Vs. Balmukund Meena, which allows exemption even if the land is purchased in the name of the son. The Tribunal also held that the investment made before the registration of the sale deed but after the sale agreement is eligible for exemption, following judicial precedents.

Issue 3: Non-consideration of Section 50C(2)
The Tribunal did not specifically address this issue separately, as it was intertwined with the first issue regarding the benefit of the 1st proviso to section 50C(1).

Issue 4: Charging of Interest u/s 234A and 234B
The interest charged u/s 234A/234B is statutory and to be charged as per relevant provisions. No submission was made by the assessee's representative on this ground, leading to its dismissal as non-pressed/non-pleaded.

Issue 5: Levy of Penalty u/s 271(1)(c)
The penalty u/s 271(1)(c) is an independent levy and cannot be a part of the present appeal. No submission was made by the assessee's representative on this ground, leading to its dismissal as non-pressed/non-pleaded.

Conclusion:
The appeal is partly allowed, granting the benefit of exemption u/s 54B for the investment made in the name of the son and before the registration of the sale deed, while upholding the addition under capital gain and dismissing the grounds related to interest and penalty.

← Previous Next →