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TMI Blog2024 (7) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... HI] we hold that the actual consideration received is within the 10% of tolerance limit as per section 50C(1) third proviso, therefore the actual consideration received is to be considered as sale value for the purpose of computation of Long Term Capital Gain u/s 48 of the Act. and the amendment made by the Finance Act. 2018 will apply in the case of the assessee. Accordingly we allow the ground No. 4 of the assessee. - Smt. Beena Pillai, Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Appellant : Ms. Suman Lunkar, CA For the Respondent : Shri Subramanian S., Jt.CIT(DR)(ITAT), Bengaluru. ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER This appeal is filed by the assessee against the order dated 05.03.2024 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2016-17 on the following grounds:- 1.1 The learned Commissioner of Income tax (Appeals) has erred in confirming the assessment order passed by the Assessing Officer. The Commissioner of Income tax (Appeals) should have on the facts and circumstances of the case, quashed the impugned Assessment Order as bad in law and void ab initio. 1.2 In any case, the appellate order passed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above and on other grounds to be adduced at the time of hearing, it is requested that the orders passed be quashed or atleast, the addition made u/s 50C of the Act be deleted, returned income be accepted and the interest levied be also deleted. 2. Briefly stated the facts of the case are that assessee filed return of income on 28.07.2016 declaring total income of Rs. 1,76,21,740. Later on action u/s. 147 was initiated on the basis of reasons recorded and notice u/s. 148 was issued on 13.01.2021. The assessee furnished reply. Subsequently other statutory notices were issued to assessee. The assessee had transferred immovable property along with four other co-owners for a total consideration of Rs. 8.70 crores and made agreement on 15.12.2014 and received post dated cheques which were encashed on 04.02.2015. The Sale Deed was executed on 21.03.2016. In the sale deed duly registered, first payment was made on 15.12.2014 is also mentioned, however the stamp duty at Rs. 9,26,40,000 was paid by the purchaser on execution of sale deed. The AO as per section 50C note that there is a difference of Rs. 56,40,000 between consideration received and stamp duty and it was treated as esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/-. The guidance value of this site as on the date of agreement to sell was Rs. 7,01,80,000/-. The entire sale consideration for sale was received through cheque only. 6. The absolute sale deed was executed on 21.03.2016. In the sale deed duly registered, the first payment is stated to be paid through cheque dated 15.12.2014. For this sale deed, the Stamp Duty for the sale was paid by the Purchaser Sri. Bharath G Mehta based on the Government value of Rs. 9,26,40,000/- prevailing on the date of execution of sale deed. 7. The long-term capital gains of Rs. 1,65,93,642/- was computed and offered to tax by the appellant based on sale consideration received as per sale deed dated 21.03.2016. 8. Thereafter, the case of the appellant was reopened and notice u/s. 148 of the Act dated 31.03.2021 was issued on the appellant by ITO, Ward-7(2)(1), Bangalore. In response thereto, the appellant had filed return of income on 17.04.2021 vide acknowledgement no.342267940170421 declaring income as declared originally by the appellant. 9. Simultaneously, the appellant had filed manually a letter dated 13.04.2021 on 19.04.2021 vide acknowledgement no.222262110005 in which the appellant had obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, makes the order passed bad in law and hence the order as passed is required to be quashed. 11. Subsequently, a notice u/s. 143(2) r.w.s 147 dated 06.10.2021 was issued on the appellant by the assessing officer, Ward-7(2)(1), Bangalore. However, no response was filed to this notice. Thereafter, several notices u/s. 142(1) on various dates were issued and served electronically on the appellant. In compliance to the notices, appellant e-filed detailed replies on 30.11.2021, 22.01.2022 and 09.03.2022. The appellant in response to these notices, stated that the provisions of section 50C are not applicable in case of the appellant as the case of the appellant is covered by the provisos to section 50C(1) of the Act. In support of the above views, the appellant submitted all the relevant details and documents. 12. Thereafter, the appellant had received show cause notice dated 15.03.2022 along with a draft assessment order. In response thereto, the appellant had e-filed a detailed reply explaining that the provisos to section 50C of the Act are applicable and that the consideration received on sale being more than the guidance value on the date of agreement to sell, the addition shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The total sale consideration as per sale deed was Rs. 8,70,00,000/- of which the appellant s share was Rs. 1,74,00,000/-. It can be seen that the sale consideration of Rs. 8,70,00,000/- as per the sale deed is the same as per the Agreement to Sell dated 15.10.2014. In the sale deed duly registered also the first payment is stated as cheque dated 15.12.2014. A copy of the sale deed is enclosed as Annexure 4. 19. However, the Stamp Duty for the sale was paid by the purchaser Sri. Bharath G Mehta based on the Government value of Rs. 9,26,40,000/- prevailing on the execution of sale deed. 20. As stated above, the agreement to sell was entered into on 15.10.2014 and the absolute sale deed was executed on 21.03.2016. As on the date of entering into the agreement to sell, the guidance value as per special state gazette issued under notification dated 07.08.2013 was applicable and the guidance value as on date of agreement to sell was Rs. 7,01,80,000/- only, as against guidance value of Rs. 9,26,40,000/- prevailing on the execution of sale deed. Copy of the guidance value notification is enclosed as Annexure 5. 21. The guidance value in the area was enhanced to as per notification later t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment has been received by the assessee long after the agreement. The appellant submits that none of the provisions of section 50C speak of encashment of cheque. What is material is the date of payment on or before the date of agreement. In common parlance, a post-dated cheque has a validity period of 3 months from the date of its issuance. Where such a cheque is encashed within the above said time limit, the date of payment goes back to the original date of the cheque and not the date of its encashment. 28. It is pertinent to note that the final sale deed and the encashment of cheque did not alter the nature of transfer of the immoveable property in the hands of the appellant nor did it alter the sale value fixed in the agreement to sale. The appellant cannot be fastened with the liability of higher rate of valuation of the property. 29. The case of the appellant is clearly governed by first and second proviso to section 50C of the Act and since the consideration received on sale is not less than the guidance value on the date of agreement to sell, there is no question of any addition to income. 30. For the sake of convenience, provision of 50C are reproduced as follows; Sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d where any such reference is made, the provisions of sub-sections (2), (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 (27 of 1957), shall, with 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. Explanation 1. For the purposes of this section, Valuation Officer shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2. For the purposes of this section, the expression assessable 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 sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eddy v. ITO (ITAT-Visakhapatnam) [ITA No.311/Vizag/ 2010; AY : 2006-07; Date of order: 10.12.2010] f) Parekh Marketing Ltd. v. ACIT (ITAT-Mumbai) [ITA No.4307/Mum/2013; AY : 2008-09; Date of order: 26.5.2015] 3. Insertion of 2 provisos to Section 50C by Finance Act, 2016 The Finance Act, 2016 has amended the provisions of section 50C of the Act by inserting the following two provisos with effect from 1.4.2017 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. 34. Explanatory Memorandum to the Finance Bill, 2016 The Explanatory Memorandum to the Finance Bill, 2016 state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al land for the purchaser who was a private limited company. The AO computed capital gains on transfer of land by adopting stamp value prevalent on the date of registration in April 2007 which was much higher than the consideration agreed to under the agreement to sell dated 29th June, 2005. The assessee contended that in the facts of his case, the stamp duty value of 2007 is not relevant to determine the capital gains tax liability. Aggrieved, the assessee filed an appeal to CIT(A) who upheld the action of the AO. 36. The Ahmedabad Bench of the Tribunal, in the case of Dharamshibhai Somani v. ACIT [(2016) 161 ITD 627 (Ahd. Trib.)(SMC)](ITA No. 1237/Ahd/2013; AY 2008- 09; order dated 30.9.2016)(Ahd Trib SMC) held 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; The proviso to section 50C should also be treated as curative in nature and with retrospective effect from 1st April, 2003, i.e. the date effective from which Section 50C was introduced The Tribunal has observed that the amendment is one step short of what ought to have been done in as much as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Pvt. Ltd. v. ACIT [(2017) 78 taxmann.com 123 (Mumbai Trib.)] d) Hari Mohan Das Tandon v. Pr. CIT [(2018) 91 taxmann.com 199 (Allahabad Trib.)] e) Rahul G. Patel v. DCIT [(2018) 97 taxmann.com 598 (Ahmedabad-Trib.)] f) Smt. Chalasani Naga Ratna Kumari v. ITO [(2017) 79 taxmann.com 104 (Visakhapatnam Trib.)] Thus, it can be seen that though the first proviso is inserted from 01.04.2017, the effect thereof is retrospective is applicable to appellant for the year. 39. From the above detailed discussion, it is very clear that the benefit of proviso is applicable retrospectively and further in the appellant s case all the advances have come by cheque. Therefore, the appellant is fully entitled to benefit given under the law and on proper consideration it will be clear that there is no understating of consideration and hence no variation is called for. Alternatively, without prejudice, the appellant wishes to submit as follows; 40. Even otherwise alternatively the case of the appellant is also saved by the third proviso to sec. 50C. a) Insertion of third proviso to section 50C by Finance Act, 2018 The Finance Act, 2018 has further amended the provisions of section 50C of the Act by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as period upto AY 2018-2019 is concerned, either the ratio of the aforesaid judgments, favorable to the taxpayer, will apply or atleast a variation of 5% ought to be permitted based on subsequent amendment. Option for approaching Valuation Officer, under section 50C(2), for valuing property in question continues to be available even subsequent to the amendment. Illustration Particulars Situation 1 Situation 2 Consideration as per agreement of transfer 10,000 10,000 Stamp duty value 12,000 10,400 Stamp duty value as a percentage of declared consideration 120% 104% Whether stamp duty value exceeds 105% of consideration as per agreement of transfer Yes No Consideration for computing capital gains 12,000 10,000 d) Why the Safe Harbour Limit of 10% Should be Retrospective ? Legal maxim 'Law Prospicit Non Respicit' presumes law to be prospective not retrospective. However, where the legislation is enacted with a purpose of mitigating undue hardship the provision in such a case has to be given a reasonable equitable construction has to be considered to be retrospective in nature so as to make the provisions workable. The rule of beneficial construction should apply in such a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inherently in the nature of an anti-avoidance provision, is invoked. viii. Once this situation is sought to be addressed, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific time period only ix. The Tribunal observed that x. 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 bona fide cases of small variations between the stated sale consideration vis- -vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. It is a case of a curative amendment to take care of unintended consequences of the scheme of section 50C. xi. Parliament has introduced third proviso in section 50C(1) of the Act, as per which the difference in stamp duty valuation and actual consideration should be ignored, if it is less than 5%/10%. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata bench of ITAT also supports the contentions of the assessee. In view of the foregoing discussions, we find merit in the prayer of the assessee. We notice that the addition of Rs. 15,92,800/- sustained by Ld CIT(A) works out to less than 10% of the actual consideration of Rs. 2,33,00,000/- paid by the assessee. Accordingly, we modify the order passed by Ld. CIT(A) and direct the A.O. to ignore the difference between fair market value determined by CIT(A) and the actual consideration as the same is less than 10% of the actual consideration. b) Maria Fernandes Cheryl v. Income Tax Officer, (International Taxation), 2(3)(1) (ITAT Mumbai) [2021] 123 taxmann.com 252 (Mumbai - Trib.) dated 15.01.2021. Para 7 of the decision makes a reference to the Central Board of Direct Taxes (CBDT) Circular (Circular No. 8 of 2018): 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 the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 50C 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. c) Mamatha Divakar Shetty vs ITO in ITA No. 1204/H/2017 for AY 2009-10 dated 30.09.2021. (ITAT Hyderabad) 9. Further, on going through the latest amendments made by the Finance Act, in section 50C(1), 3rd proviso, where the value adopted or assessed or assessable by the same valuation authority does not exceed 10% of the consideration received or accruing as a result of transfer of consideration so received or accruing as a result of the transfer shall for the purpose of section 48 deemed to be the full value of the consideration. As per the above proviso, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the orders of lower authorities. 7. Considering the rival submissions, we note that the dispute is only with regard to applicability of section 50C of the Act and stamp duty value adopted by the Registering Authority of Rs. 9,26,40,000. The agreement is made on 15.10.2014 for Rs. 8,70,00,000. Accordingly there is a difference of Rs. 56,40,000. The Sale Deed was registered on 21.03.2016. The payment is received by the assessee through Post Dated Cheques which was encashed on 04.02.2015. Considering the entire arguments noted supra, as per the mandate provisions the tolerance band of 10% was introduced by the Finance Act, 2018. The difference between the sale consideration received and stamp duty valuation is less than 10% of the tolerance limit as per section 50C(1) third proviso, for purpose of section 48, be deemed to be the full value of the consideration. The amendment made is retrospective as per the judgment of the coordinate Bench of Tribunal in Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi- Trib.) wherein it is held as under:- 8. We have heard the rival contentions and perused the material available on record. We find that there is no dispute with regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced . Referring to this decision, and extensively reproducing from the same, including the portion extracted above, Hon'ble Delhi High Court, in the case of CIT v. Ansal Landmark Township Pvt Ltd. [(2015) 61 taxmann.com 45 (Del)], has approved this approach and observed that (t)he Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 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 v. ACIT [(2016) 161 ITD 627 (Ahd)] which has been approved by Hon'ble Madras High Court in the judgment reported as CIT v. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to rest when the variations between the stated consideration and the stamp duty valuation figure are treated as explained. The insertion of the third proviso to section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti-avoidance provisions of section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bona fide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the assessee vis- -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 comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 vis- -vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis- -vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related 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 Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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