2018 (11) TMI 1699 - AT - Income Tax

Tribunal directs use of circle rates on agreement date for capital gains computation

The tribunal upheld the authorities' decision treating the property as a capital asset, resulting in short-term capital gains. It directed the Assessing ... Capital gain computation - Gain arising from the sale consideration as chargeable to tax under the head 'Income from capital gain' - adoption of circle rate on the date of agreement to sell in order to compute the consequential capital gain - whether the amendment is prospective in nature i.e., will be applicable from A.Y. 2017-18 or is retrospective in nature being curative in nature? - whether stamp valuation authority on the date of agreement may be taken and, thus, the assessee has correctly adopted the rates applicable on the date of the agreement as against the date of actual sale? - HELD THAT:- We find identical issue had come up before the Ahmedabad Bench of the Tribunal in the case of Dharamshibhai Sonani versus ACIT [2016 (9) TMI 1259 - ITAT AHMEDABAD] where it has been held that amendment to section 50C introduced by the Finance Act, 2016 for determining full value of consideration in the case of involved property is curative in nature and will apply retrospectively. As in RAHUL G. PATEL VERSUS DCIT, CIR. 1 (2) , BARODA [2018 (9) TMI 1696 - ITAT AHMEDABAD] has held that the proviso to section 50C(1) introduced by the Finance Act, 2016 can be construed as clarificatory in nature and can be applied on pending matters. The various other decisions relied on by the ld. counsel for the assessee also support the case of the assessee that where the date of the agreement fixing the amount of consideration and the date of registration regarding the transfer of the capital asset in question are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of the agreement is to be taken for the purpose of full value of consideration. Therefore, accept the argument of the ld. counsel for the assessee in principle and restore the issue to the file of the AO with a direction to verify necessary facts and decide the issue in the light of my above observation directing to adopt the circle rate on the date of agreement to sell in order to compute the consequential capital gain. Appeal filed by the assessee is allowed for statistical purposes. Issues:1. Determination of nature of income from sale of property - Capital gain or business income2. Applicability of section 50C for determining full value of consideration3. Retroactive application of proviso to section 50CAnalysis:Issue 1: Determination of nature of income from sale of property - Capital gain or business incomeThe assessee declared income from sale/purchase of properties under 'Income from other sources' instead of 'Capital gain.' The Assessing Officer considered the property as a capital asset under section 2(47)(v) of the IT Act, leading to short-term capital gain determination. The CIT(A) upheld this decision. The assessee argued that the transaction should be treated as business income, not capital gains. However, the tribunal found in favor of the authorities, considering the property as a capital asset and the profit as short-term capital gain.Issue 2: Applicability of section 50C for determining full value of considerationThe Assessing Officer applied section 50C to determine the full value of consideration based on circle rates. The assessee contended that the rates applicable on the date of the agreement should be considered, not the actual sale date. The tribunal examined the proviso to section 50C(1) inserted by the Finance Act, 2016, effective from 01.04.2017. Citing precedents and the curative nature of the amendment, the tribunal directed the Assessing Officer to verify facts and adopt the circle rate on the date of the agreement to sell for computing capital gain.Issue 3: Retroactive application of proviso to section 50CThe tribunal deliberated on the retrospective application of the proviso to section 50C(1) and referred to judgments supporting its retrospective nature. Considering the curative aspect of the amendment, the tribunal concluded that the proviso should be applied retrospectively. This decision aligned with previous rulings and directed the Assessing Officer to reevaluate the case based on the proviso to section 50C(1) for computing capital gains.Therefore, the tribunal allowed the appeal for statistical purposes, emphasizing the need to consider the circle rate on the date of the agreement for determining the full value of consideration in the computation of capital gains.