9911796707
TMI Blog2021 (1) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation adopted by the Stamp Duty Valuation authority is only 6.55%, and it was put to the learned Departmental Representative as to why the assessee not be allowed the benefit of the third proviso to Section 50C(1) as the variation is much less than the prescribed permissible variation of up to 10%. Learned Departmental Representative pointed out to us that the third proviso to Section 50 C (1) is applicable, by virtue of Finance Act 2018, only with effect from 1st April 2019, and, as for the permissible variation of 10% as against variation of 5% originally enacted the third proviso to Section 50C, this enhancement in permissible variation, by virtue of Finance Act 2020, is effective from 1st April 2021. It was submitted that the insertion of the third proviso to Section 50C could not be treated as retrospective in nature, as there is a specific date, as set out in the related amendment itself, from which the amendment in law is effective. We then requested the learned Departmental Representative to address us on the question as to whether these amendments by the Finance Act, 2018 and Finance Act, 2020 could be said to be retrospective in effect and could be treated as relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tolerance band of 5% was increased to 10% by substituting the words "does not exceed one hundred and five percent of the consideration received or accruing" with "does not exceed one hundred and ten percent of the consideration received or accruing". The net result of this amendment is that where the variation in actual sale consideration vis-à-vis the stamp duty valuation does not exceed 10%, the fiction of Section 50C will not come into play, and, therefore, capital gains will have to be computed with reference to the actual sale consideration only- disregarding the stamp duty valuation. 6. Learned Departmental Representative contends that the amendments can only be prospective in nature as the law states so specifically. The relevant submissions, in his written note, are as follows: The Honourable Member directed the undersigned to submit a note on the larger question of retrospective applicability of third proviso of Section 50C whereby a variation of 5% wef 1.4.2019 [10% wef 1.4.2021 as Act no. 12 of 2020] is permissible in the sale consideration vis-a-vis valuation adopted by Stamp valuation authorities. In this regard, it is humbly submitted that the Finance Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 2020 Increase in safe harbour limit of 5 per cent. under section 43CA, 50C and 56 of the Act to 10 per cent.. Section 43CA of the Act, inter alia, provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (i.e. "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 purpose of computing profits and gains from transfer of such assets, be deemed to be the full value of consideration. The said section also provide that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration. Section 50C of the Act provides that where the consideration decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther humbly submitted that a) The value determined by Valuation officer is statutorily required to be adopted u/s 50C(2) of Act and in the present case, the AO has already referred the matter to valuation officer and the same is awaited. Hence, it is humbly submitted that deemed sale consideration may be taken as determined u/s 50C(2) of the Act b) the third proviso is applicable prospectively especially as retrospective effect is neither mentioned in the provisions of section 50C nor in the Explanatory Notes to Finance Act 2018 issued vide Circular 8/2018 ... c) the variation permissible is only 5% as on date and the enhanced variation of 10% is applicable only from 1.4.2021. Lastly it is also submitted that in case the Honourable Tribunal is not inclined to accept the submissions, it is requested that it may kindly be mentioned that relief is being provided as a special case and this decision may not be considered as a precedent. 7. These submissions, however, do not impress us. As noted by the Central Board of Direct Taxes circular # 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that "It has been pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance". The same was the path followed by another bench of this Tribunal in the case of Dharmashibhai Sonani Vs ACIT [(2016) 161 ITD 627 (Ahd)] which has been approved by Hon'ble Madras High Court in the judgment reported as CIT Vs Vummudi Amarendran [(2020) 429 ITR 97 (Mad)]. The question that we must take a call on, therefore, is as to what is the rationale behind the insertion of the third proviso to Section 50C(1), and if that rationale is to provide a remedy for unintended consequences of the main provision, we must hold that the third proviso to Section 50C(1) comes into force with effect from the same date on which the main provision, unintended provisions of which are sought to be nullified, itself was brought into effect. Let us understand what the nature of the provisions of Section 50C is. In terms of this provision, if the property is sold below the stamp duty valuation rate, which is often called circle rate, this stamp duty valuation report is assumed as sale consideration for the property in question, and, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as disclosed by the assessee vis-à-vis the stamp duty valuation for the said immovable property. Obviously, therefore, disturbing the actual sale consideration, for the purpose of computing capital gains, and adopting a notional figure, for that purpose, will not be justified in such cases. On a conceptual note, an estimation of market price is an estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of Section 50C(1) was thus relaxed, and very thoughtfully so, to take these bonafide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. In our humble understanding, it is a case of a curative amendment to take care of unintended consequences of the scheme of Section 50C. It makes perfect sense, and truly reflects a very pragmatic approach full of compassion and fairness, that just because there is a small variation between the stated sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated statutory provision of Section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti-avoidance provisions under section 50C will not be invoked. 8. Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of Section 50 C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti-avoidance provisions under section 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., Section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. We order accordingly. Learned Departmental Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
