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TMI Blog2018 (6) TMI 1651X X X X Extracts X X X X X X X X Extracts X X X X ..... y to verify the veracity of the agreement to sell , dated 27.08.2009, as well as the claim raised by the assessee on the basis of the same to bring its case within the realm of the provisos to Sec. 50C. In case, the A.O is satisfied with the genuineness of the agreement to sell , and the claim raised by the assessee on the basis of the same are found to be in order, then, he shall redetermine the LTCG in the hands of the assessee u/s 50C in terms of our aforesaid observations. Entitlement for claim of deduction under Sec. 54F in respect of an investment that was made by him towards purchase of a property, vide a registered agreement dated 10.07.2013 - HELD THAT:- The said claim was never raised by the assessee before the lower authorities. The assessee in support of his aforesaid entitlement towards deduction under Sec.54F had placed on record the copy of the purchase deed , dated 10.07.2013. Admittedly, an A.O in the backdrop of the judgment of the Hon ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT [ 2006 (3) TMI 75 - SUPREME COURT] is not vested with any powers to entertain a claim for deduction/relief raised by the assessee, except for those raised either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant : Shri Anil Thakrar, A.R For The Respondent : Shri Manoj Kumar Singh, D.R ORDER PER RAVISH SOOD, JM - The present appeal filed by the assessee is directed against the order passed by the CIT(A)-41, Mumbai, dated 07.11.2017, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short IT. Act ), dated 22.12.2016. The assessee has assailed the order passed by the CIT(A) on the following grounds of appeal before us : 1. The Ld. AO as well as CIT(A) erred in treating the amount of ₹ 2,67,740/- as income from other sources whereas the said amount represents agriculture income. 2. The Ld CIT(A) erred in confirming the action of AO in treating the amount of ₹ 3,84,33,378/- as gain on sale of ancestral agricultural land. 3. The Ld. CIT (A) is also erred in considering agricultural land as capital asset within the meaning of Sec 2(14) of the Income Tax Act, 1961. 4. The Ld. AO as well as CIT(A) erred in calculating the Capital gain on sale of agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by him. It was observed by the A.O that the reserve price of the aforesaid property as per the stamp valuation authority as was discernible from the sale deed was ₹ 5,81,79,500/-. Accordingly, the A.O called upon the assessee to explain as to why the capital gain on the sale of the aforementioned property may not be worked out as per Sec.50C of the I.T Act. As the assessee failed to put forth any explanation, therefore, the A.O worked out the long term capital gain (for short LTCG ) in the hands of the assessee as per Sec. 50C of the I-T Act. Further, as the assessee did not place on record the copy of the purchase deed, therefore, the A.O worked out the share of the LTCG in the hands of the assessee at 66.06% of the deemed sale consideration under Sec. 50C of ₹ 5,81,79,500/-. Accordingly, the A.O worked out the LTCG in the hands of the assessee at ₹ 3,84,33,378/- (i.e 66.06% of ₹ 5,81,79,500/-) and assessed his income at ₹ 3,87,01,120/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). During the course of the appellate proceedings, it was claimed by the assessee that as the agricultural land was a rur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. A.R took us through a general Power of Attorney (for short POA ) dated 27.08.2009 that was given by the assessee along with the other 4 co-owners to two directors of the purchaser company i.e M/s Kavir Rambha Properties Pvt. ltd. It was submitted by the ld. A.R that a reference of the agreement to sell , dated 27.08.2009 was found mentioned in the said POA. Apart there from, the ld. A.R took us through Page 3 of the POA, which revealed that on payment of the full sale consideration the possession of the property was to be delivered to the aforementioned purchaser. The ld. A.R took us through the details of the sale consideration which was received by the assessee and the remaining 4 co-owners from the aforementioned purchaser company. On a perusal of the details of the sale consideration received by the assessee, it stood revealed that out of his total share of ₹ 1,09,00,000/- an amount aggregating to ₹ 14 lac was received by him up to the date of the agreement to sell i.e 27.08.2009. As regards the balance amount, the same was received over the period spread over from F.Y 2009-10 till F.Y 2013-14. Further, the ld. A.R also placed on record a copy of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stamp duty valuation as on the date of execution of the sale deed would be devoid of any rational basis as there would be a considerable gap between the date of agreement to sell and that of the execution of the sale deed . 6. Per contra, the ld. Departmental Representative (for short D.R ) submitted that as the assessee had not furnished any copy of the agreement to sell , dated 27.08.2009 in the course of the assessment proceedings, therefore, the cognizance of the same could not be taken in the course of the proceedings before the second appellate authority. It was submitted by the ld. D.R, that as the assessee had not made any request for referring its case to the valuation cell as per the first proviso of Sec.50C, therefore, the lower authorities had rightly worked out the LTCG by invoking the said statutory provision. It was submitted by the ld. A.R that the LTCG as per Sec. 50C was to be worked out as on the date of the execution of the sale deed . Lastly, it was averred by the ld. D.R that in the absence of any claim for deduction under Sec. 54F having been raised by the assessee before the lower authorities, the same did not merit acceptan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dated 27.08.2009 finds a specific mention in the registered sale deed , dated 28.06.2013, which forms part of the records of the lower authorities. Accordingly, in our considered view, the fact, that the assessee along with other 4 coowners had agreed to sell the property under consideration vide an agreement to sell , dated 27.08.2009 is clearly discernible from the records which were available before the lower authorities. We thus in the backdrop of the aforesaid facts admit the agreement to sell , dated 27.08.2009 which though had been filed by the assessee for the very first time before us. 9. We find that the controversy involved in the present case revolves around three aspects viz. (i). that, as to whether the quantification of the LTCG on the sale of the property under consideration as per the deeming provisions of Sec.50C of the I-T Act was to be done as per the reserve price applicable on the date of execution of the agreement to sell , dated 27.08.2009; (ii). that, as to whether the lower authorities are right in adopting the cost of acquisition of the property claimed by the assessee to be an ancestral property at Rs. Nil for computing the LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation of capital gains. The Income Tax Simplification Committee (Easwar Committee) has in its first report, pointed out that this provision does not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Act i.e. when an immovable property is sold as a stock-in- trade. It is proposed to amend the provisions of section 50C so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned for the time being, that the value, for the purpose of computing stamp duty, adopted by the stamp duty valuation authority represents fair indication of the market price of the property sold. Section 50C(1) provides that, 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 . The trouble, however, is that while the sale consideration is fixed at the point of time when agreement to sell is entered into, there is sometimes considerable gap in parties agreeing to a transaction (i.e. agreement to sell) and the actual execution of the transaction (i.e. sale deed), and yet, it is the value as on the date of execution of sale deed which is recognized by Section 50C for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The present provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement. A later similar provision inserted by way of section 43CA does take care of such a situation. 6.2 It is therefore proposed to insert the following provisions in section 50C: ( 4) Where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the value referred to in sub- section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of 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. 5. True to the work ethos of the current Government, it was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration. It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property. 30 These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years. 7. While the Government has thus recognized the genuine and intended hardship in the cases in which the date of agreement to sell is prior to the date of sale, and introduced welcome amendments to the statue to take the remedial measures, this brings no relief to the assessee before me as the amendment is introduced only with prospective effect from 1st April 2017. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an intended consequence to punish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 8. Their Lordships were pleased to hold that this reasoning and rationale of this decision merits acceptance . The same principle, when applied in the present context, leads to the conclusion that the present amendment, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect. Quite clearly therefore, even when the statute does not specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot on the statute book when the assessments were made in the case of Allied Motors (P) Ltd. Etc. (supra). However, the assessee contended that even though the first proviso came to be inserted w.e.f. 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1 st April, 1984, when s. 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Ltd. Etc. (supra). This Court, in Allied Motors (P) Ltd. Etc. (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P) Ltd. Etc. (supra), held that the first proviso was curative in nature, hence, retrospective in operation w.e.f. 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to Section 50C being treated as retrospective and with effect from 1st April 2003. The plea of the assessee is indeed well taken and deserves acceptance. What follows is this. The matter will now go back to the Assessing Officer. In case he finds that a registered agreement to sell, as claimed by the assessee, was actually executed on 29.6.2005 and the partial sale consideration was received through banking channels, the Assessing Officer, so far as computation of capital gains is concerned, will adopt stamp duty valuation, as on 29.6.2005, of the property sold as it existed at that point of time. In case the assessee is not content with this value being adopted under section 50C, he will be at liberty to seek the matter being referred to the DVO for valuation, again as on 29.6.2005, of the said property. As a corollary thereto, the subsequent developments in respect of the property sold (e.g. the conversion of use of land) are to be ignored. It is on this basis that the capital gains will be recomputed. With these directions, the matter stands restored to the file of the Assessing Officer for adjudication de novo, after giving an opportunity of hearing to the assessee and by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e backdrop of the judgment of the Hon ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC) , is not vested with any powers to entertain a claim for deduction/relief raised by the assessee, except for those raised either in his original return of income or through a revised return. However, we are of the considered view that as observed by the Hon ble High Court of Bombay in the case of CIT Vs. Pruthvi Broker and Share Holders Ltd (2012) 349 ITR 0336 (Bom) , no such restriction is placed on the appellate authorities for entertaining an additional claim of the assessee. Accordingly, we restore the matter to the file of the A.O, with a direction to him to consider the said claim of the assessee in the course of the set aside proceedings. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate his aforesaid claim of deduction on the basis of supporting documentary evidence. 14. Insofar the claim of the assessee that the lower authorities had erred in not allowing deduction of the cost of acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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