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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 ..... nt. 3. The learned Commissioner of Income Tax (Appeals) ought to have held that the assessing officer was not justified in not adopting the SRO value as on 17.07.2010 for purposes of S.50C in as much as the sale deed registered on 08.10.2010 was in pursuance of the agreement of sale executed on 17.07.2010. 4. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) ought to have referred the matter to the DVO for ascertaining the fair market value of the property for purposes of S.50 C of the Act. 5. Any other ground that may be urged at the time of appeal hearing." 3. Facts of the case, in brief, are that assessee is an individual filed his return of income for the year under consideration on 17/06/2011 admitting total income of Rs. 2,94,160/-. The Assessing Officer has noticed that assessee had sold a house site admeasuring 1941.51 sq.yds. for a consideration of Rs. 1.90 crores as against SRO value of Rs. 2,95,02,500/- and as per the provisions of section 50C, the sale consideration of Rs. 2,95,02,500/- as deemed consideration. The Assessing Officer, thus, noted that the income chargeable to tax under the head capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission, which is as under:- "1. The appellant entered into an "Agreement to Sell" with Vira Chand Bothra on the 17th Day of July 2010 for a total consideration of Rs. 190,00,000 (Rupees One Crore Ninety Lakhs only) which is the market value of the said property as on the date of entering into the said agreement to sell. 2. As per the Agreement to sell, the appellant had received an amount of Rs. 80,00,000 (Rupees Eighty Lakhs) as advance by way of Banker's Cheque dated 14th July 2010 payable at ING Vysya Bank, Visakhapatnam. 3. The said Banker's Cheque of Rs. 80,00,000/- was cleared and was credited into my ICICI Bank Account on 20th July 2010 making the Agreement to sell complete in all respect during the month of 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 Rs. 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 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90,00,000/-, and whose value as per SRO was Rs. 2,95,02,500/-. The assessee's contention against adoption of SRO value was that he had entered into a sale agreement for sale of the property on 17th July, 2010 and that the market value as on the date of sale agreement was the same as the consideration agreed for the transfer and therefore the SRO value as on the date of registration of the sale i.e on 8th October, 2010, at Rs. 2,95,02,500/should not be adopted as the full value of consideration; and for which reliance was placed on the decision of the Hon'ble ITAT, Vizag in the case of Lahiri Promoters. The AO rejected the said contention as it 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 Rs. 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 2010, this agreement stands cancelled. Upon such cancellation, the vendor shall retain Rs. 10,00,000/- (Rupees Ten Lakhs only) and refund balance amount of Rs. 70,00,000/- (Rupees Seventy Lakhs only). The amount of Rs. 10,00,000/- (Rupees Ten lakhs only) retained by vendor is treated as damages. 4.6 It is relevant to note that the said 'Agreement to Sell', was not registered and as such lacks sanctity and credibility and is not referred in the sale deed. Even otherwise, as per the recitals in the said Agreement, the assessee has not d 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration of Rs. 1.90 crores and received advance of Rs. 80.00 lakhs through bankers cheque No. 756358, dated 14/07/2010 of ING Vysya Bank, Visakhapatnam and submitted that as per the proviso to section 50C, the SRO value as on the date of agreement has to be considered. He further submitted that purchaser has paid the entire remaining balance through banking channels, therefore, the amount received by the assessee as per agreement dated 17/07/2010 has to be considered as the sale price for the purpose of calculation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement, therefore, the value of the property has to be considered as on the date of sale deed and not on the sale agreement. We find that the assessee by entering into agreement, he has received substantial amount i.e. Rs. 80 lakhs through banking channels and both the parties bound by the agreement and the purchase have interest on the property i.e. as sale agreement dated 17/07/2010. The assessee has to sell the property to the purchaser as per the sale agreement even though the sale agreement is not a registered. The ld. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement executed in part performance of the contract under section 53A of 1882 Act. The amendments have been made to sections 17 and 49 of the Indian Registration Act, 1908. It is pertinent to take note of section 17(1A) as well as Section 49 of the Registration Act. "17.(1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the 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 unr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such contract, then, he would not be able to protect his possession or any benefit conferred by section 53A of the TPA. Proviso appended to section 49 of the Indian Registration Act only postulates that such agreement could be tendered in evidence in a suit for specific performance. In other words, validity of unregistered agreement has not been denied for the purpose of adducing it as evidence for obtaining the benefit flowing from such contract. But for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance under the Specific Relief Act. The time limit to file a suit for specific performance has been provided in Indian Limitation Act, which is three years. In such situation, when the vendor files a suit for specific performance to force the vendee to purchase the property. In that situation, he will not pay anything over and above, the amount stated in the sale agreement. In that situation, the assessee would not get anything more 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, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the agreement. (5) The provisions of sub-section (4) shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before a date of agreement for transfer of the asset. ......" 15. Taking a clue from the report, a proviso has been appended by way of Finance Act, 2016 to section 50C and such proviso reads as under: "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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deed. In between if circle rate is being enhanced, then he would like to challenge adoption of higher sale value on the strength of sale agreement. In that situation, unnecessary energy would be devoted in ascertaining fair market value of the property on the date of sale. The encumbrance on the property by virtue of sale agreement would also goad 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the impugned sale transactions as on the date on which sale agreements were entered into. Since the applicability of section 50C as on the date of sale agreements is required to be examined by the AO , we set aside the issue to the file of the AO with a direction to compute the capital gains on sale of impugned properties after applying the provisions of section 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 valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, the assessee has received an amount of Rs. 80.00 lakhs through banking channels on 14/07/2010 i.e before the date of agreement. Therefore, in our opinion, proviso to section 50C has been fulfilled by the assessee therefore proviso to section 50C applies to the assessee's case. The ITAT, Ahmadabad 'B" Bench in the case of Rahul 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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