9911796707
TMI Blog2010 (4) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... l the seven appeals and for the sake of convenience and brevity we will discuss ITA No.3374/Ahd/2009 in the case of Kaushik Sureshbhai Reshamwlal. The grounds raised by the assessee, which reads as under:- "1. On the facts and circumstances of the case and in law The Learned Commissioner of Income Tax (Appeal) has erred in enhancing the value of land from ₹ 400/- Sq. Mtr. to ₹ 5000/- Sq. Mtr. 2. On the facts and circumstances of the case The Learned Commissioner of Income Tax ought to have taken view to accept the sales price at ₹ 400/- per Sq. Mtr. Shown by your appellant and deleted the addition of ₹ 21,24,472/- being amount estimated at ₹ 700/- per Sq. Mtr. By the Assessing Officer. 3. It is therefore prayed that the addition made by The Assessing Officer and there after enhancement made of ₹ 1,23,08,119/- by the Learned Commissioner of Income Tax Appeal-IV, may please be deleted." 3. The brief facts leading to the above issue are that the assessee along with other six family members owned an ancestral agricultural land at Survey No.227 Bhestan, Surat ad measuring 88700 sq. mt. agricultural land falling under Surat Urban Development Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Govardhan D Reshwamwala (HUF) 15,00,000 2,50,000 14. Jaswantlal D Reshamwala (HUF) 15,00,000 2,50,000 Total 3,00,00,000 49,99,990 4. Post survey proceedings, the Revenue summoned the purchaser, Shri Hitendra D Patel and recorded his statement u/s.131 of the Act, wherein he admitted to have purchased the agricultural land for total consideration of ₹ 3 crore from Reshamwala Family, and they offered the above sale consideration in their respective return of income qua their individual shares. While framing the assessment the Assessing Officer estimated the value of land @ 700 per sq.mt and worked out capital gains, accordingly at ₹ 21,24,472/-, as against the capital gain declared by the assessee at ₹ 7,48,128/- and thereby made addition of ₹ 19,76,374/-. The AO while computing this capital gain adopted the fair market value of the land at ₹ 700/- per sq.mt. as against the stamp valuation fixed by the Registration Authority at ₹ 400/- per sq.mt. The assessee disclosed the value in terms of per sq.mt. at ₹ 483/- per sq.mt. The Assessing Officer also adopted the cost of acquisition of the above said agricultural land at ₹ 25 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which amply evidences that the prevailing market rates were very much higher as compared to the old jantry rates. Therefore, the sales consideration as shown by the appellant as per the old jantry rates, is not at all acceptable. Further, it is a matter of common sense that property prices would not increase abnormally from ₹ 400/- per sq. mt. to ₹ 5,000/- per sq. mt. in just a few months, but in fact this suggests that the actual market rates were much higher than the old Jantry prevailing during 2006 i.e. during the period when the deal under consideration was finalized. In the State of Gujarat, stamp duty is recovered as per the provisions of Section 32(A) of the Bombay Stamp Act, 1958. The first jantry was prepare in 1984 and thereafter in 1999. The Jantry made applicable in 2008 was based on the market situation during the period 2005- 2006 i.e. during the period when the subject deal had taken place. Therefore, the revised jantry rate of ₹ 5,000/- per sq. mtr. is the perfect basis for determining the market value of the subject land in the year 2006 and the rate of ₹ 700/- per sq. mtr. as adopted by the AO is rejected as being without any basis. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of acquisition, is to be determined according to the assessee as per valuation report obtained from approved Valuer, Shri P. K. Desai, who valued the land as on 01-04-1981 at ₹ 60 per sq. mt. as against this, the Assessing Officer determined the fair market value at ₹ 25/- per sq. mt. on the ground that the comparable sale instance given by the Registered valuer ranges from ₹ 15/- to ₹ 32 per sq. mt. 7. We find one more interesting fact from the orders of the lower authorities as well as from the submissions of the assessee's counsel and Ld. CIT-DR that the total consideration of ₹ 3 crores was received by the co-owners up to Dec.'05 but the sale deeds were registered in Feb'07 and the assessee had to received further amount from the buyers amounting to ₹ 8 lakh, which was balance, to be received at the time of registration of sale deed. The Ld. counsel for the assessee before us stated that the lower authorities have failed to appreciate the fact that the deal was entered into in April'05 from where the payment started received from the buyer by the co-owners. Out of 14 co-owners - 3 co-owners, namely Ramkrishna Hasmukhbhai Reshamwala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was not paid on or before 31-03-2006 and possession of land was not handed over by these co-owners to the seller. Even otherwise, we accept the claim of the Revenue that the possession of this land and the balance payment of ₹ 8 lakh was delivered at the time of registration of sale deed in Jan. & Feb'07, when the sale deeds were registered, the Revenue cannot assess the capital gain in the assessment year under consideration i.e. assessment year 2006-07. However, the vital issue before us is whether in the case of sale through registered sale agreement, the capital gain is to be computed in terms of Sec.50C of the Act or not. We are of the view that when the asset is transferred in terms of Sec.53A of the Transfer of Property Act, 1882, the provisions of Sec.50C of the Act will apply to the transaction. The relevant provision of Sec. 2(47) of the Act reads as under:- 2(47) transfer, in relation to a capital asset, includes, - "(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or" Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on received on accruing as a result of the transfer." 9. The relevant provision of Section 50C of the Act was explained and elaborated in the following portion of the Departmental Circular No.8 of 2002 dated 27-08-2002, as under:- "37. Computation of capital gains in real estate transactions, - 37.1 The Finance Act, 2002 has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. 37.2 It 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 by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act. 37.3 It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, and he has not disputed the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957, shall, with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. The Valuation Officer shall be the Valuation Officer as defined in clause ® of section of the Wealthtax Act, 1957. The proposed sub-section (3) provides that where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the authority referred to in sub-section (1), the value so adopted or assessed by the authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. This amendment will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years." Memorandum Explaining Provisions of Section 50C in the Finance Bill, 2002, as under:- " The Bill proposes to insert a new section 50C in the Income-tax Act to make a special pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the purposes of computation of capital gains on the sale of property. (ii) It is open to the taxpayer to plead that such stamp value is abnormal and contest the same in appeal under the stamp law requiring adoption of reduced value. If such value is reduced in appeal under the provisions of the relevant stamp law, such reduced value would alone be adopted. (iii) Where such stamp value is not disputed, it is open to the assessee to require the Assessing Officer to refer the valuation to the Valuation Officer, who shall fix the valuation by adoption of the procedure prescribed under section 16A of the Wealth-tax Act. It is such value, which will be adopted by the Assessing Officer. 12. We further find from the Memorandum Explaining the provision of Section 50C in the Finance Bill, 2002, which clearly states that where the consideration declared to be received or accruing as a result of transfer of land or building or both is less than the value adopted or assessed by any authority of a Sate Govt. for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is held that legal fictions are for a definite purpose and are limited to the purpose for which they are created and should not be extended beyond its legitimate field. The statutory fiction introduced in one enactment cannot be incorporated in another enactment. The point that legal fiction cannot be extended to a new field was highlighted by Hon'ble Madras High Court in CIT v. Rajam T.S, (19SS) 125 ITR 207(Mad,) wherein it is held that section 41(2) creates a legal fiction under which the balancing charge is treated as business income chargeable to tax but when this amount is distributed to shareholders then it would not become deemed dividend and it would be only a capital receipt and not distribution of accumulated profits. Thus, a legal fiction was invoked in the hands of the assessee company and was not extended inthe hands of the shareholders. In the present case, section 50C creates a legal fiction for taxing capital gains in the hands of the seller and the difference between apparent consideration and valuation done by Stamp Valuation Authorities to be assessed as capital gain. It is for the legislature to introduce legal fiction to overcome difficulty in taxing cert ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
