2013 (8) TMI 632 - AT - Income Tax

Tribunal rules Section 50-C not retroactive, grants relief on interest levied.

The Tribunal allowed the appeal of the assessee, ruling that Section 50-C of the Income Tax Act, 1961, could not be applied to sale agreements made before ... Applicability of provisions of section 50-C of the Act - Date of agreement versus date of excution of agreement (i.e. conveyance deed) – Held that:- Relying upon the decision in the case of M. Siva Parvathi & Ors[2009 (10) TMI 618 - ITAT VISAKHAPATNAM], it is held that section 50-C of the Act cannot be applied to the sale agreements entered into before the introduction of the said provisions i.e before 1-4-2003 especially when delay in execution and registration of conveyance is sufficiently explained and there is no allegation of suppression of actual consideration – Decided in favor of Assessee. Issues Involved:1. Applicability of Section 50-C of the Income Tax Act, 1961.2. Levy of interest under sections 234B and 234D.Detailed Analysis:1. Applicability of Section 50-C of the Income Tax Act, 1961:The primary issue in this case was whether Section 50-C of the Income Tax Act, 1961, which deals with the valuation of property for the purpose of calculating capital gains, was applicable when the sale agreements were made before the section came into force but the conveyance deeds were executed after its enactment.The assessee, acting as an administrator to the Estate of Late Mr. E.F. Dinshaw, sold two properties and declared the profits as 'long term capital gain.' The Assessing Officer (A.O.) reclassified the profits as 'income from business' and, using the stamp duty authority's valuation, calculated a significantly higher profit. The A.O. justified this by noting that the stamp duty value was based on the current market trend and was not disputed by the assessee.Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] agreed with the assessee that the profits should be taxed as capital gains but upheld the application of Section 50-C, arguing that it was applicable to transactions after April 1, 2003, irrespective of when the sale agreements were made.The assessee contended that the sale agreements were made before Section 50-C was enacted, and the delays in executing the conveyance deeds were due to factors beyond their control, such as obtaining necessary permissions. They argued that the consideration agreed upon in the original agreements should be used for tax purposes, not the stamp duty valuation at the time of conveyance.The Tribunal examined the sequence of events and supporting documents, noting that the delays were indeed beyond the assessee's control. They referenced a similar case (M. Siva Parvathi & Ors vs. ITO) where it was ruled that Section 50-C could not apply to agreements made before its enactment if the delays were justifiable and there was no suppression of actual consideration.The Tribunal concluded that Section 50-C should not apply to the assessee's transactions, as the agreements were made before the section's introduction, and the delays were sufficiently explained. They deleted the addition made by the A.O. and confirmed by the CIT(A), allowing the assessee's appeal on this ground.2. Levy of Interest under Sections 234B and 234D:The second issue involved the levy of interest under sections 234B and 234D of the Income Tax Act. The assessee sought only consequential relief on this matter. The Tribunal directed the A.O. to allow consequential relief to the assessee regarding the interest levied under these sections.Conclusion:The Tribunal allowed the appeal of the assessee, ruling that Section 50-C of the Income Tax Act, 1961, could not be applied to sale agreements made before its enactment, provided the delays in executing conveyance deeds were beyond the assessee's control and there was no suppression of actual consideration. Additionally, the Tribunal directed the A.O. to provide consequential relief concerning the interest levied under sections 234B and 234D.