Section 50C valuation and section 54EC relief hinge on agreement-date consideration and pre-registration investment in eligible bonds.

Section 50C valuation for immovable property was treated as referable to the date of agreement to sell where the agreement preceded registration and part consideration had been received by account payee cheque. The Finance Act, 2016 proviso was regarded as clarificatory, so the stamp duty value on the agreement date was to be considered in such cases; the matter was sent back for recomputation of capital gains on that basis. Advance sale consideration invested in specified bonds before execution of the sale deed was also treated as eligible for section 54EC relief, because earnest or advance money forms part of sale consideration and the time condition was not applied hypertechnically.

---

---

Issues: (i) Whether, for purposes of section 50C, the stamp duty value on the date of agreement to sell could be adopted where the agreement preceded the registered sale deed and part consideration had been received by account payee cheque; (ii) whether exemption under section 54EC was admissible on investment made out of advance sale consideration received before execution of the sale deed.

Issue (i): Whether, for purposes of section 50C, the stamp duty value on the date of agreement to sell could be adopted where the agreement preceded the registered sale deed and part consideration had been received by account payee cheque.

Analysis: Section 50C deems stamp duty value as full consideration in place of the declared consideration for transfer of land or building. The proviso inserted by the Finance Act, 2016 was treated as clarificatory and applicable to pending matters because it was intended to remove hardship where the agreement to sell and registration dates differ and consideration is received otherwise than in cash before the agreement. The agreement to sell created a binding right in favour of the transferee and, in the facts found, the unregistered agreement did not attract section 53A of the Transfer of Property Act, 1882 read with section 17(1A) and section 49 of the Registration Act, 1908 so as to complete transfer on the agreement date. At the same time, the existence of the agreement and receipt of consideration before registration required the stamp duty value on the date of agreement to be taken into account.

Conclusion: The matter on valuation under section 50C was restored to the Assessing Officer to determine the stamp duty value as on the date of agreement and recompute capital gains accordingly.

Issue (ii): Whether exemption under section 54EC was admissible on investment made out of advance sale consideration received before execution of the sale deed.

Analysis: The Board's circular recognised that advance or earnest money forms part of sale consideration and that investment of such amount in specified assets before the date of transfer should not be denied exemption merely on a technical reading of the time condition. Since the assessee had invested the amounts received in specified bonds before registration of the sale deed, the investment was treated as qualifying for the intended relief.

Conclusion: Exemption under section 54EC was allowed.

Final Conclusion: The appeal succeeded on the exemption issue and the valuation issue was sent back for recomputation, resulting in partial relief to the assessee.

Ratio Decidendi: Where an immovable property is sold pursuant to an earlier agreement to sell supported by non-cash consideration received before registration, the later clarificatory proviso to section 50C governs valuation by reference to the agreement date, and advance consideration invested in eligible bonds before transfer cannot be denied section 54EC relief on a hypertechnical reading.

---