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TMI Blog2019 (2) TMI 1650X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, once the assessee accepted the remaining amount subsequent to the date of 30/08/2010, it implies the assessee has acted in accordance with the terms of agreement dated 17/07/2010. Therefore, ld. CIT(A) is not correct in saying that the purchaser failed to fulfil the conditions laid down in the agreement, therefore, the assessee need not sell the property for the same price. As decided in SMT. CHALASANI NAGA RATNA KUMARI VERSUS ITO, WARD-3 (2) , VISAKHAPATNAM [ 2016 (12) TMI 1406 - ITAT VISAKHAPATNAM] Although, stamp duty value of the propety has been changed as on the date of sale deed, for the purpose of determination of deemed consideration u/s 50C of the Act, stamp duty value of the property as on the date of execution of agreement to sale should be adopted, instead of value on the date of execution of sale deed. Therefore, we are of the view that the A.O. was erred in adopting value of the property as on the date of sale deed to determine deemed consideration u/s 50C - we direct the A.O. to adopt value of the property as on the date of agreement to sale for the purpose of computation of capital gain u/s 50C Insofar as SRO value as on the date of agreement i.e. 17/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitting total income of ₹ 2,94,160/-. The Assessing Officer has noticed that assessee had sold a house site admeasuring 1941.51 sq.yds. for a consideration of ₹ 1.90 crores as against SRO value of ₹ 2,95,02,500/- and as per the provisions of section 50C, the sale consideration of ₹ 2,95,02,500/- as deemed consideration. The Assessing Officer, thus, noted that the income chargeable to tax under the head capital gain has escaped assessment and accordingly issued notice under section 148 of the Act. The Assessing Officer after considering the explanation of the assessee, assessment was completed under section 143(3) r.w.s. 147 of the Act by determining taxable long term capital gain at ₹ 1,31,92,445/-. While completing the assessment, the Assessing Officer adopted the deemed consideration under section 50C of ₹ 2,95,02,500/- for computation of capital gains and restricted the claim of deduction under section 54 to ₹ 58,00,000/- as against assessee s claim of ₹ 84,89,945/-. In the assessment order, the Assessing Officer has noted that the assessee has adopted sale consideration at ₹ 1.90 crores while computing taxable capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f July itself. 4. Subsequently, the Purchaser had paid the balance amount from time to time till the date of registration and on 8th of October 2010 the Registration of the said property took place with the Registering Authority on the agreed consideration of ₹ 190,00,00 which is binding on me. 5. However, while registering the document, the Purchaser had paid the differential Stamp duty on the Market value of the property as on date of registration which stood at ₹ 2,95,02,500/-. 6. The Assessing Officer proposed to make addition of ₹ 105,02,500/- representing the difference between the market value adopted for registering the property and the actual consideration of the said property. 7. The appellant filed the copy of the Agreement, copy of the bank account, the market value certificate issued by the Registering Authority reconciling with the value adopted by both the parties, purchaser and seller at the time of signing the agreement and also explained that the provisions of section 50C are inapplicable in the present case as the transaction is made during July 2010 and the market value of the said property is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was noted that the alleged sale agreement dated 17.7.2010 was not a registered sale agreement and has no sanctity. 4.4 During the appeal proceedings the same contentions were reiterated and it was submitted that the sale agreement dated 17th July, 2010 was binding on assessee, and as per which the agreed consideration was only ₹ 1,90,00,000/-. It was also submitted that the transaction was completed in July, 2010 and that the market value and the sale consideration was the same at that time and that subsequent enhancement after the agreement is not attributable to the appellant. 4.5 I have perused the sale agreement dated 17th July, 2010, under which the assessee had received advance of ₹ 80 lakhs and the balance consideration should be paid by the purchaser before 30th September, 2010, and if the balance consideration was not paid by 30th September, the agreement would stand cancelled. The relevant clauses in the said agreement are as under: 1. The purchaser has paid the sum of ₹ 80,00,000/- (Rupees Eighty Lakhs only) to the vendor as an advance by way of bankers cheque No. 756358, dated 14/07/2010 of ING Vysya Bank, Visakhapatna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any rights or interest over the subject property to the intended purchaser. The possession and ownership of the subject property remained vested with the assessee and there was no transfer of any interest, whatsoever pertaining to the subject immovable property under the said Agreement to Sell. None of the situations provided in Sec.2(47) of the I.T.Act defining 'transfer' were found attracted. As per the provisions of Sec.45 of the I.T.Act, the liability to capital gains arises with the transfer of a capital asset. The provisions of Sec.50C also refer to the consideration on transfer of a capital asset. The factual matrix of the case clearly show that there was absolutely no element of 'transfer' under the Agreement to Sell. The 'transfer' was effected only with the execution of Sale deed on 8 t October, 2010, and therefore, the market value as on October, 2010 should be reckoned for the purpose of capital gain computation as per the provisions of Sec.50C of the Act. In this context, it is also relevant to note that the Hon'ble Supreme Court in the case of Suraj Lamps has held that an Agreement to Sell does not create any interest or charge on the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation of capital gains and not the amount as on the date of sale deed. He further submitted that there are some lapses committed by the purchaser in respect of payment, but ultimately payment is made as per the agreement and property is registered, therefore, the date of agreement has to be considered for the purpose of valuation of the property and not the date of registration. He relied on the decision of the ITAT, Ahmadabad B Bench in the case of Rahul G. Patel vs. DCIT in ITA No. 2767/Ahd/2016, dated 29/06/2018 and submitted that even though the agreement is not registered, the same has to be considered as a valid document for the purpose of determining the value of the property. He also submitted that a provision has been introduced to section 50C is curative in nature, therefore, it applied retrospectively. He also relied on the decision of the ITAT, Visakhapatnam Bench in the case of M/s. Lahiri (supra) and also the decision in the case of Smt. Chalasani Naga Ratna Kumari vs ITO in ITA No. 639/VIZ/2013, dated 23/12/2016. 8. Ld. Departmental Representative has relied on the orders of the authorities below. 9. We have heard both the parties, peruse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) is not correct in saying that the unregistered sale agreement not valid in the eye of law. So far as lapses committed by the purchaser are concerned, once the assessee accepted the remaining amount subsequent to the date of 30/08/2010, it implies the assessee has acted in accordance with the terms of agreement dated 17/07/2010. Therefore, ld. CIT(A) is not correct in saying that the purchaser failed to fulfil the conditions laid down in the agreement, therefore, the assessee need not sell the property for the same price. The coordinate bench of the Ahmadabad tribunal, B' Bench in the case of Rahul G. Patel (supra) has considered the issue in respect of unregistered sale agreement vis-a-vis application of proviso to section 50C held as under:- 8. We have duly considered rival contentions and gone through the record carefully. Section 48 of the Income Tax Act provides mode of computation of capital gain. It contemplates that income arising under the head capital gains shall be computed by deducting from the full value of the consideration received or accruing, as a result of the transfer of the capital assets the following amounts, viz. (a) expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he commencement of the Registration and Other Related laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A. 49. Effect of non-registration of documents required to be registered.-No document required by section 17 1[or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.] 12. We also deem it pertinent to take note of Section 53A of the Transfer of Property Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of protecting the possession, un-registered contract could not be enforced. The transfer within the meaning of section 2(47) of the Income Tax Act would complete, if possession is protected. Thus on execution of an agreement, if it was not registered then transfer within the meaning of section 2(47) will not happen. Like in the present case, agreement was executed on 8.2.2010 but not registered. Therefore, it is to be construed that transfer did not take place on 8.2.2010 rather took place on 5.6.2012 when sale deed was executed and registered. This may be the reason for the assessee to offer capital gain in the Asstt.Year 2013-14 only. 14. It is pertinent to observe that an agreement to sale was executed by the assessee on 8.2.2010 which is followed by payment through account payee cheque. Details of payments have been duly noticed by the ld.AO as well as by the ld.CIT(A). First cheque was received on 1.4.2011 for a consideration of ₹ 10 lakhs; then ₹ 30 lakhs on 23.7.2011; ₹ 15 lakhs on 28.12.2011 and ₹ 50 lakhs on 26.3.2012. Similarly on 1.5.2012 ₹ 45 lakhs was received through account payee cheque. It means that sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than the amount mentioned in the agreement, though such situation may arise after three-four years on execution of the decree passed in a suit for specific performance. In between there may an appreciation or depreciation in the said property. Circle rate may rise or reduce. In other words, at the time of an agreement in respect of an immovable property, a right in persona is created in favour of the transferee/vendee. When such right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because vendee in whose favour right in persona is created has legitimate right to enforce such specific performance of the agreement, if the vendor for some reason is not executing the sale deed. Thus, by virtue of agreement to sell, some right is given to the vendee by the vendor. It is encumbrance on the property. At this stage, we would like to make reference to new proviso appended to section 50C by way of Finance Act, 2016 and the background, under which such provision has been incorporated. In 2015, Government of India has set up Income Tax Simplication Committee headed by Justice R.V.Easwar, former judge of Delhi High Court. The Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer. 16. This amendment was explained in the Memorandum explaining the provisions of Finance Bill 2016. It reads as under: Rationalization of Section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property Under the existing provisions contained in Section 50C, in case of transfer of a capital asset being land or building on both, the value adopted or assessed by the stamp valuation authority for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad the DVO to determine the fair market value of the property on the date of sale at a lesser amount than the value adopted for the purpose of payment of stamp duty. We have already made a reference to Specific Relief Act and how a vendor or vendee could enforce the sale agreement under Specific Relief Act. Under such enforcement, they would settle their right on the basis of agreed terms in the sale agreement. This proviso would only simplify this exercise i.e. instead remitting the matter to the DVO under section 50C(2), he would conduct an inquiry as to what could be value of the property on the date of execution of the agreement, and whether such agreement has created any encumbrance or not. There could be a difference in the actual sale consideration than the amount on which stamp duty was paid. This proviso has simplified this thing. It contemplates that stamp duty valuation of the property for the purpose of stamp duty payment on the date of agreement can be deemed as full consideration of the capital asset. Thus, in this way, the proviso can be construed as clarificatory in nature, and can be applied on pending matters as already held by the ITAT in the case of Dharamshibh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 50C as on the date of sale agreements. Accordingly, the order of ld. CIT(A) is reversed. 12. The coordinate bench of the Visakhapatnam tribunal in the case of Smt. Chalasani Naga Ratna Kumari (supra) has considered the same issue and held as under:- 13. In the present case, on perusal of the facts available on record, we find that the assessee has entered into a sale agreement in the year 2007 and as on that date, the stamp duty value of the property was less than sale consideration agreed to be paid between the parties. Although, stamp duty value of the propety has been changed as on the date of sale deed, for the purpose of determination of deemed consideration u/s 50C of the Act, stamp duty value of the property as on the date of execution of agreement to sale should be adopted, instead of value on the date of execution of sale deed. Therefore, we are of the view that the A.O. was erred in adopting value of the property as on the date of sale deed to determine deemed consideration u/s 50C of the Act. Hence, we direct the A.O. to adopt value of the property as on the date of agreement to sale for the purpose of computation of capital gain u/s 50C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l G. Patel (supra) has considered the same issue and held that the proviso to section 50C inserted by the Finance Act, 2016 w.e.f. 01/04/2017 is curative in nature, therefore it operates retrospectively. The coordinate bench of the Visakhapatnam tribunal in the case of Smt. Chalasani Naga Ratna Kumari (supra) has also considered the issue to determine the deemed consideration as per section50C, the date of agreement has to be considered not date of sale. No material has been brought to our notice to show that the above said order has been modified or reversed by the Hon'ble High Court. Further, ld. Departmental Representative could point out any contrary decision. We therefore respectfully following the decision of the coordinate bench of the tribunal in above referred to case, this ground of appeal raised by the assessee is allowed. 14. Insofar as SRO value as on the date of agreement i.e. 17/07/2010, the counsel for the assessee has submitted that which is more than the sale consideration agreed by the assessee. This fact is not examined by the Assessing Officer. Therefore, we remit the issue back to the Assessing Officer for the limited purpose to ascertain the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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