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TMI Blog2016 (7) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property will be ₹ 100 lacs being ₹ 60 lacs paid by the buyer to the seller and ₹ 40 lacs will be added being loan outstanding against the said property which the buyer agreed to discharge directly to the lender and not ₹ 60 lacs which the buyer agrees to pay to the seller as sale consideration as ₹ 40 lacs is an additional burden with which property was saddled with at the time of sale which the buyer has agreed to discharge on behalf of the seller and is infact part and parcel of full value of consideration as contemplated u/s 48 of the Act. Addition as such and in the manner made by the AO cannot be sustained under law and matter needs to be restored to the file of the AO for computing full value of consideration in the manner as outlined by us and then granting relief on account of deductions of indexed cost of acquisition of land and building/structure which in the instant case is not disputed by the AO as per assessee’s valuer report and such other deductions/reliefs which the assessee is legally entitled to under the provisions of the Act on merits such as Section 54EC of the Act as claimed by the assessee , which shall be granted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the computation of long term capital gains on sale of inherited property viz. Roshan Villa at ₹ 15,74,215/- by making his own valuation u/s 50C without referring the matter to the valuation officer and without deducting the cost of acquisition and thereby upholding the Protective Assessment made by the Assessing Officer failing to appreciate that such a course of action is not backed by any of the provisions of the law. 2.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in failing to appreciate that the capital gains arises only after cost of acquisition is deducted from sale consideration. 2.2 On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in invoking the provisions of sec. 50C of the Income Tax Act failing to appreciate that the sale agreement could not be registered as the said property was in the name of the deceased mother of the appellant and has not been transferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- has to be adopted. 3. Withdrawal of Grounds We have to further state that we would like to withdraw the following grounds of appeal since the Assessing officer has given relief on the below mentioned grounds in his order u/s 154 subsequent to filing of this appeal. 1. Ground No. 1 - Taxing long term capital gains of ₹ 16,44,413/- computed without claiming indexation @20% as against 10%, as provided in proviso to section 112 of the Income Tax Act, 1961. 2. Ground No. 2.5 - Rejection of claim for exemption u/s 54 EC of the Income Tax Act, 1961 amounting to ₹ 8,00,000/-. 3. Ground No. 2.6 - Not granting set off for long term capital loss of ₹ 40,138/- (on redemption of mutual fund) and short term loss of ₹ 210/- on sale of shares - as claimed in the return of income. 4. The brief facts of the case are that assessee is a partner in M/s Dadar Motor Works and M/s Dadar Auto Spares. During the year the assessee has declared income from share, interest and remuneration from these partnership firms. The assessee has also disclosed income from house property, capital gains on sale of shares and sale of inherited property, dividend from shares and mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and the assessee has made the transaction by selling the property only on a piece of paper without registering the same. The assessee submitted that since no formal registered document has been executed, the provisions of section 50C of the Act are not attracted to this transaction. The assessee was show-caused as to why the said property may not be valued as per market rate and the difference amount be added to income and taxed u/s 50C of the Act. In reply thereof, the assessee submitted that since no agreement has been executed on stamp paper and the property has not been registered, the provisions of section 50C of the Act are not applicable. In support, the assessee relied on the decision of the Tribunal, Mumbai Bench in the case of Shingar India Pvt. Ltd. v. ITO in ITA No. 1785/Mum/2007 dated 6th May, 2009 and also circular no 5 of 2010 dated 03-06-2010 to contend that applicability of Section 50C of the Act to the properties which are not registered is applicable for transactions entered into on or after 01-10-2009. Thus, the assessee relying on provisions of Section 50C of the Act contended that the same are not applicable to the transaction of sale of inherited proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue as submitted by stamp valuing authority on the basis of value as per ready reckoner during the relevant period of sale. However, since the property was not registered , the stamp valuing authorities expressed their inability to value the cost of the building constructed on the property. Since, the whole property could not be valued by the Stamp valuing authorities , the valuation report submitted by the assesse of a Government registered valuer namely M/s Anmol Sekhri Consultants Pvt. Ltd. vide their valuation report dated 15-10-2011 whereby the said registered valuer valued the land at ₹ 80 per square meters and the building at ₹ 100 per square feet as on 01-04-1981 was also considered by the AO. The stamp valuing authorities valued the land @ ₹ 780 per square meters on the basis of ready reckoner rates in the relevant period of sale which was considered by AO for computing full value of consideration of land , while for computing full value of consideration of Building/structure on the land, the AO adopted the value of building of ₹ 100 per square feet as on 01-04-1981 as per assessee s valuer report and multiplied the same with cost inflation index t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of acquisition ₹ 10,55,184 as per Valuation report which was indexed to Rs.61,41,171/- (i.e. ₹ 10,55,184 x 582/100 ₹ 61,41,171/- Rs.(-)36,41,171/- Assessee s share is 1/3rd Rs.(-) 12,13,602/- The A.O. arrived at capital gain of ₹ 15,74,215/- by taking recourse to Section 50C of the Act whereby the AO calculated the land value at ₹ 26,83,044/-, and value of the superstructure at ₹ 45,39,600/- based on the value as on 1st April, 1981 as per the assessee valuer s report and adjusted with cost inflation index to arrive at the total value of the property as on date of transfer at ₹ 72,22,644/- which was considered as full value of the sale consideration for arriving at the capital gains by invoking the provisions of section 50C of the Act. Hence, it was submitted that the A.O. erred in adopting the full value of the sale consideration as ₹ 72,22,644/- without referring the property for valuation to the Valuation Officer which was mandatorily required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee submitted that the property, Roshan Villa was owned by the assessee s mother which was purchased on 29th December, 1937. The mother of the assessee expired on 3rd October, 2005 and after her death, the property was inherited by the assessee as well as his brothers and sisters as co-owners. The property was sold on 16th January, 2009, however, no formal registered document had taken place, hence, section 50C of the Act is not applicable. The A.O. has made protective addition in the hands of the assessee and the learned CIT(A) has confirmed the same. No substantive addition is made in the hands of the assessee . The ld. Counsel further submitted that the A.O. has referred the matter to the Stamp Duty Valuation Authority who valued the land at ₹ 26,83,044/- , while they have expressed their inability to value the building as the said property was not registered. The assessee has given the valuation as per the Government approved valuer to work out the cost of acquisition as on 1-4- 1981. Addition has been made by taking the value of land as per the stamp duty officer and the building has been valued as on 1-4-1981 and then indexation was applied to determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - These amendments have been made applicable with effect from 1st October, 2009 and will accordingly, apply in relation to transactions undertaken on or after such date. 11 The ld. D.R. relied on the orders of the authorities below and submitted that the A.O. has made the addition on protective basis and no substantive addition has been made. 12. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee has sold the property namely Roshan Villa , which is situated at Matheran. The said property was owned by the assessee s mother since 1937. The property consist of land and an building/ structure thereon. The mother of the assessee expired on 03-10-2005 and the property devolved on the assessee and his brothers and sister under inheritance in line of succession whereby the assessee has 1/3rd share in the said property Roshan Villa . The said property was not transferred /mutated to the legal heirs i.e. the assessee and his brothers and sisters after the death of their mother on 03-10-2005. The property was sold by the assessee and co-owners for total sale consideration of ₹ 25,00,000/- on 16-01-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessable is added to Section 50C(2) of the Act and explanation 2 to Section 50C(2) was inserted by Finance Act, 2009 w.e.f. 1-10-2009 . Section 50C of the Act as amended by Finance Act , 2009 is reproduced hereunder : [Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority ) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section (1), where- (a) the assessee claims before any Assessing Officer that the value adopted or assessed 20a[or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain. However, the present scope of the provisions does not include transactions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney. 23.2 With a view to preventing the leakage of revenue, section 50C is amended, so as to provide that where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both is less than the value adopted or assessed or assessable by an authority of State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain. 23.3 Further, Explanation 2 has been inserted in the sub-section (2) of the section 50C, so as to clarify the meaning of the term assessable . 23.4 Applicability - These amendments have been made applicable with effect from 1st October, 2009 and will accordingly, apply in relation to tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total consideration of ₹ 25 lacs whereby the buyer agreed to assume all such unpaid and outstanding liabilities which the property was saddled with on the date of sale i.e. 16-01- 2009 and agreed to discharge the same after its acquisition at his cost. In our considered view all such un-paid and outstanding liabilities such as outstanding municipal taxes , transfer, registration and mutation charges and costs with respect to the said property Roshan Villa in favour of the assessee and co-owners , with which the property was saddled with on the date of sale on 16-01-2009, and which the buyer agreed to assume and discharge the same as his liabilities after acquisition of property Roshan Villa needs to be added to the sale consideration value of ₹ 25,00,000/- to arrive at full value of consideration to determine long term capital gains arising from the sale of the property. We would like to give an example to explain the same say for example , one property is worth ₹ 100 lacs and there is a loan outstanding of ₹ 40 lacs against the said property. The buyer agrees to pay ₹ 60 lacs to the seller for acquiring the said property and agrees to discharge lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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