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TMI Blog2021 (1) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the assessee and examine how the same are dealt with by the DVO. In coming to the above proposition we draw support from the decision of honourable Supreme Court in the case of Kapurchand Shrimal [ 1968 (8) TMI 16 - SUPREME COURT] that it is the duty of the appellate authority to correct the errors in the order of the authority below and if necessary, remit the matter for reconsideration with or without direction unless prohibited by law. Whether the transfer of development right would come under the sweep of section 50 C? - There is no cogent submission by the learned counsel of the assessee as to how the decisions referred by learned CIT appeals including that from the honourable Supreme Court in the case of Sanjeev Lal [ 2014 (7) TMI 99 - SUPREME COURT] are not applicable. The decision referred by learned counsel of the assessee from honourable Bombay High Court in this regard was with reference to transfer of leasehold rights. In our considered opinion, when the issue is being remitted to the file of learned CIT appeals, the learned CIT appeals shall consider this aspect also afresh. He shall take into account the decisions referred by learned counsel of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge Mundhwa, Haveli; Pune, from 03.07.2006 onwards. During the financial year, the said land was sold by it as three plots and three separate sale agreements were executed with the following particulars: (in Rs.) Sr. No Name of Purchasers (Shri) Area of plot Sale Consideration Stamp Duty value i. Avinash Nirvuti Bhosale /Amit AvinashBhosale 20,000 sq.m 27,00,00,000/- 18,98,00,000/- ii. Shree Balaji Estates Properties 18,500 sq.m 25,00,00,000/- 17,66,60,000/- iii Subhash Sitaram Goel 9,685 sq m 2,50,00,000/- 6,53,27,000/- Total 54,50,00,000/- 43,17,87,000/- The Assessing Officer observed that the plot at (iii) above (hereinafter, 'the 3rd plot'} sold to one Shri Subhash Sitaram Goel for a consideration of ₹ 2,50,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined by the DVO. Ex- consequenti, the amount in dispute now stood reduced to ₹ 1,62,09,900/- (i.e., ₹ 4,12,09,000/- minus ₹ 2,50,00,000/-). 6. Upon the assessee s appeal, the ld. CIT(A) elaborately dealt with the assessee s objection. He found that the provision of section 50C are fully applicable. We may gainfully refer to his order in this regard as under: Section 50C of the Act, is reproduced below for ready reference: Special provision on for full/value PJ consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assesses 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 Stats Government (hereafter in this section. referred to as the stamp valuation authority ) for the purpose o/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 Provided that where the date of the agreement fixing the amount of consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable means the price which '-the stamp valuation authority would have, notwithstanding anything to the contrary contained in ' any other law for the time being in force, 'adopted or assessed, if it were referred to such authority-for, the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained- under subsection (2) exceeds the value adopted or assessed or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable] by such authority shall, be taken as the full value of the consideration received or accruing as a result of the transfer. 4.1 A bare perusal of the aforesaid shows that the conditionally, as literally evident through plain words, for the successful invocation of section 50C of the Act can be encapsulated and enumerated as below: (i) That there should be capital asset comprising either land or building or both (ii) That there should be a 'transfer' thereof (iii) That the stated consideration should be less than its Stamp Duty value (iv) On this event happening, the Stamp Duty value wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibiting commercial construction ' and reservation for the Economically Weaker Sections (EWS) cannot be considered or that one party had to grant easement to others. After all, the land was voluntarily sold to multiple persona, in such a configuration that it wanted and if that necessitated inter-ss right-of-way arrangements, then that would have no impact on statutory compliance to section 50C of the Act if otherwise warranted. Further, that the appellant chose to have all the agreements signed on the same day or that the sale agreements referred to the adjacent plots with each being a reciprocally confirming party, are wholly extraneous for determining the applicability of the said section. In other words, it would have made no difference to the legal position if the sale agreements had been entered on. three different dates or that they were to refer to more agreements or that they had common confirming parties as buyers of contiguous plots or that the three new owners, had decided to perhaps jointly prepare and submit a sub- division plan to the municipal authorities. These aspects, even if correct, are agreed to among the parties themselves as per their own will and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is amply borne out.from the considerable depletion in the fair market value of the 3rd plot as determined by the DVO. Hence, the arguments taken for justifying the deflated sale price, are of little relevance. The cumulative effect of all germane factors such as shape, size, location/ and future potential were duly reckoned in the report of the DVO. 4.6 There is no legal justification seeking the aggregation of the three independent sale agreements for the purpose of benchmarking the separately stated sale consideration with their Stamp Duty value. Accepting such a prayer would confer an undeserved tax advantage. The sale was as per the voluntary will, structure and scheme mutually conceived and devised by the parties concerned. The provisions of the Act must, therefore, apply to the consequences flowing therefrom. The reality is that there was transfer of land/asset through three instruments to three parties for three different sale consideration as elected by the appellant. If this be so, the Assessing Officer was duty bound to consider likewise. Hence, there is no force in the inexplicable contention that regardless of the commercial reality, the transactions should have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant was to the sale of a piece and parcel of land and not to a 'right1. In the undated correspondence to the Assessing Officer/ the appellant mentions the cost of land to be ₹ 22,50,00, 000/-. The appellant stated that in the sale agreements, there was a clause for the sub-division of land as per which ;the buyers shall jointly prepare a pUn for the plot and obtain requisite sanction from the authorities to issue separate 7/12 extracts. This too demonstrates that the property alienated was land itself and not some intangible, since modification of Sand records (7/12 extracts) is associated with land ownership. Accordingly, the aforesaid decision of the Id. Appellate Tribunal, Mumbai, is not on all fours. 4.8 Be that as it may, there is a far more compelling reason, as to why the provision of section 50C of the Act will apply to the transaction entered, irrespective of the fact that it is characterized as a Development Agreement. Once this is found to be so, then it does not really matter as to who is the continuing registered owner of the land in the 7/12'records or the 'Ownership History' narrated by the appellant or recorded in the valuation repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulty that executing a Development Agreement would amount to 'transfer1 contemplated in section 50C of the Act. 4.10 The Id. Appellate Tribunal, Mumbai, in ACIT(OSD)-2(3), MumM vs. Seth Industries (P)'Ltd (ITA 4094/Mum/2013 dated 18.05.2013) held.that 'transfer' of land would.be on the date of executing the registered Development Agreement transferring development rights. It observed as under: As could be seen from the.-facts on record, assessee has entered into a registered development agreement with MJs. Sanghvi Premises P. Ltd. on 29.10.2005. As per the terms of the agreement, transfer of the land should be concluded on the date of execution 6f the deed. Thus, in terms of Section 2(47)(v) of the Act there was transfer of capital asset insofar as it relates to the land in question. The ratio laid down by the Hon'ble Jurisdictional High Court in the case of Chaturbhuj Dwarkadas Kapaida (supra) supports this view 4.11 The Id. Appellate Tribunal, Mumbai, in ArifAkhatar Hussain vs ITO 12(2X1), Mumbai [2011] (45 SOT 257), considered an identical case and held asunder (emphasis supplied): 9. The .main contention of the learned AR is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The substantial relief has already been given by the DVO as well as by the AO while passing the consequential order as per the DVO's report. Accordingly, the appeals of the assessee are devoid of merits on this issue. 4.12 The Hon'ble Allahabad High Court in Commissioner of Income-tax-II, Agra vs Shimbhu Mehra [2016] reported 65 taxmann.com 142, had two dates to consider. The first was the agreement for .sale date being 04,07.2001 and other Was the execution of Sale deed in April, 2003. It was held as ' under (emphasis added): 14. In the light of the aforesaid provision, it is apparently clear that the moment an agreement to sell is executed between the parties and part consideration is received, the transfer for the purpose of Section 50C of the Act takes places and computation under Section 48 of the Act will start accordingly, for the purpose of calculating the capital gains under Section 45 of the Act. The aforesaid was followed by the Id. Appellate Tribunal, Allahabad, in Hari Mohan Das Tandon vs Pr. CIT [2018] reported in 91 taxmann.com 199. ' 4.13 The Id, 'Appellate Tribunal, Mumbai, 'in ACIT-25(3)I Mumbai vs Dattani Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Rao [2016] reported in 75 taxmann.com 270, observed that that it was illogical and improper on the part of the assessee to say that 'transfer, within the meaning of section 2(47}(v) of the Act took place, but yet there was no application of provisions of section 50C of the Act when the property has been transferred by way of registered un-pqssessory sale-cum-GPA. It noted that the assessee had computed long-term capital gain by adopting sale consideration-shown.in the sale deed. The averments of the appellant are congrupus. The Id. ITAT held as under (emphasis supplied): In this 'case, admittedly, the assessee himself has admitted long term capital gain on transfer of asset, The moment transfer took place inviting the meaning of section 2(47)(u) of the Act, the . deeming fiction provided u/s.50C of the Act are applicable, when the sale consideration shown in the sale deed is less than the market value determined by the stamp duty authority for the purpose of payment of stamp duty. 4.15 The Hon'ble Supreme Court in Sri Sanjeev Lal etc. etc. v.CIT, Chandigarh Anr. (Civil Appeal Nos. 5899-5900/2014 dated 01.07.2014) examined this issue albeit in the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eemed to have always included disposing of or parting with an asset or any interest therein, . or creating any interest-in any asset in any manner whatsoever, directly or indirectly, absolutely or. conditionally, voluntarily or-involuntarily, by way of an agreement (whether entered into in India of outside India) or otherwise, notwithstanding' that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India; As thus seen, there is a catena of judicial authorities holding categorically that 'transfer of land or building' will encompass in its fold transfer of Development Rights. As. a result, even if it is taken that what was transferred was such a right alone, even then the application of section 50C of the Act remains 'intact and unaltered. Needless to add, the debate as to whether a particular Development Agreement leads to the incidence of Capital Gains or not, is settled here, as the appellant itself has recognized, computed and offered .the gains arising to tax without any dispute or reservation. Hence, this arena is not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing section 50C of the Act was to curb the deliberate under-valuation of immovable property as a tool of tax-avoidance. Allowing Development Agreements, a widespread modality adopted for transfer of beneficial ownership of immoveable property, to escape the vigil of section 50C of the Act would defeat the aforementioned intent in a substantial way leading to the emasculation of the said section. The appellant has pointed out that section 50C of the Act was a deeming fiction and, hence, ought to be given a restricted, strict meaning. No doubt the provision is a deeming one, but it would be useful to refer to the decision of the Hon'ble Apex Court in A. Madan Mohan vs Kalavakunta Chandrasekhara (1984 AIR 871), where the following observation speaks for itself (emphasis supplied): . It is a well settled principle of interpretation of statute that wherever a statute contains stringent provisions they must be literally and strictly construed so as to promote the object of the Act. 4.20 From the legal and factual discussion as foregoing, it is evident that the transaction in the 3rd plot squarely fell in the ambit of 'transfer' within the meaning of section 2(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the valuation officer is not binding on the CIT [A) he has to independently apply his mind and has to decide on merit. 13. In Suresh C. Mehta v. ITO (2013) 144 ITD 427 (Mum)(Trib.) held that, assessee had made various objections to such valuation report before Commissioner (Appeals), Commissioner [Appeals) was bound to look into these objections so as to arrive at proper fair market value. The Commissioner (Appeals) and the Tribunal can entertain objections relating to such valuation and Valuation Officer's valuation is not binding upon them. 14. In CIT v. Prabhu Steel Industries Ltd. (2013) 218 Taxman 290 / (2014) 265 CTR 581 (Bom.)(HC) the Court held that, valuation officer is an independent and distinct statutory forum for resolving controversy regarding determination of market value of property with all necessary powers; its order or report is made binding on Assessing Officer. When report/order of Valuation Officer under section 50C (2) is objected to by assessee, CIT(A) or Tribunal are obliged to extend an opportunity of hearing to such Valuation Officer. 15. Without prejudice to the above, if the combined stamp duty value of all three agreements is se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee may be allowed. 10. Per Contra, the learned departmental representative relied upon the orders of the authorities below. He pleaded learned CIT appeals has very elaborately dealt with all the issues raised by learned counsel of the assessee. He fully relied upon the case laws mentioned by learned CIT appeal. 11. Upon consideration of the submission of the parties and perusal of the records and case laws, we note that CIT appeals has elaborately addressed the various legal issues raised by the assessee. However, he has not dealt with the merits of the objections of the assessee that there were inherent defects/deficiencies in the said piece of land, due to which the assessee was contesting the valuation. It is not discernible whether the merits of various objections of the assessee to the deficiency in the said piece of land were considered by the DVO in his report. We find that it is necessary in the interest of justice that the various objections on merits of the valuation be dealt with by the learned CIT appeals by a speaking order. This is also noted that the said objections were not subject matter of consideration by the assessing officer also. In this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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