2019 (2) TMI 280 - AT - Income Tax

Tribunal recalculates capital gains, upholds section 50C(1) amendment, excludes liability from sale proceeds

Dy. C.I.T., Range-2, Lucknow. Versus Ms. Zubeida Shahanshah

Dy. C.I.T., Range-2, Lucknow. Versus Ms. Zubeida Shahanshah - TMI Issues Involved:1. Whether the sale of the property was a distress sale.2. Whether the CIT(A) erred in deleting the addition by invoking the amended proviso to section 50C(1) retrospectively.3. Whether the CIT(A) erred in excluding the value of land area for stamp duty valuation.4. Whether the CIT(A) should have taken the stamp duty value as on the date of agreement instead of the fair market value.5. Whether the CIT(A) allowed relief to the assessee without proper appreciation of facts and law.Issue-wise Detailed Analysis:1. Distress Sale:The first issue was whether the CIT(A) wrongly considered the sale of the property as a distress sale. The Tribunal noted that the original builder agreement dated 10/10/2005 involved a smaller land area of 884.24 sq. meters, while the subsequent memorandum of understanding dated 11/10/2011 increased the area to 2591.12 sq. meters. The Tribunal concluded that the sale could not be considered a distress sale since the land area in the new agreement was significantly larger. Therefore, the argument that the entire property was sold under distress was not upheld, and the first ground of appeal was allowed.2. Retrospective Application of Section 50C(1):The second issue was whether the CIT(A) correctly invoked the amended proviso to section 50C(1) retrospectively. The Tribunal found that the amendment to section 50C(1) by the Finance Act 2016, which allows the value on the date of the agreement to be considered if part of the consideration was paid by cheque or electronic means, should be applied retrospectively. This interpretation was supported by the judgment of the Ahmedabad Tribunal in the case of Dharmshibhai Sonani vs. ACIT. Therefore, the Tribunal upheld the CIT(A)’s decision to take the circle rate as of the agreement date, dismissing the second ground of appeal.3. Exclusion of Land Area Value:The third issue concerned the exclusion of the value of land area for stamp duty valuation. The Tribunal noted that the original agreement dated 10/10/2005, which mentioned an advance of Rs. 10,00,000, was not executed due to disputes, leading to a fresh memorandum of understanding with a revised sale consideration. Legal opinion indicated that the Rs. 10,00,000 was a liability to be repaid. The Tribunal agreed with the CIT(A) that the addition of Rs. 46,43,320, being the deemed value of Rs. 10,00,000, was incorrect, and thus, this ground was dismissed.4. Stamp Duty Value vs. Fair Market Value:The fourth issue was whether the CIT(A) should have taken the stamp duty value as on the date of the agreement instead of the fair market value. The Tribunal found that the agreement to sell was entered on 11/10/2011, with a stamp duty valuation of Rs. 4,18,52,923. Since the property was not sold under distress, the Tribunal directed the Assessing Officer to take the consideration of Rs. 4,18,52,923 instead of Rs. 4,05,00,000 and recompute the capital gains. Thus, this ground was allowed.5. Proper Appreciation of Facts and Law:The fifth issue was whether the CIT(A) allowed relief to the assessee without proper appreciation of facts and law. The Tribunal’s detailed analysis and decisions on the previous grounds indicate that the CIT(A)’s decisions were reviewed comprehensively, leading to a partial allowance of the appeal.Conclusion:The appeal of the Revenue was partly allowed, with specific directions to recompute the capital gains based on the correct valuation. The Tribunal concluded that the sale was not a distress sale, upheld the retrospective application of the amended section 50C(1), and agreed with the CIT(A) on the exclusion of the Rs. 10,00,000 liability from the sale proceeds.