2022 (1) TMI 1447 - AT - Income Tax

Proviso to Section 50C(1) applies retrospectively from AY 2014-15 for capital gains computation using stamp valuation authority's value

Bellandur Chikkagurappa Jayaramaredd Versus. The Assistant Commissioner of Income Tax, Circle 4 (3) (1), Bengaluru.

ITAT Bangalore held that the proviso to section 50C(1) introduced by Finance Act 2016 applies retrospectively from AY 2014-15. The tribunal determined ... Capital gain - Applicability of Sec. 2(47)(v) of the IT Act and Sec. 53A of the Transfer of Property Act - Determination of the date of transfer - amendment to section 50C which was introduced w.e.f. AY 2007-08 was applicable retrospectively for AY 2014-15 when the language used in the proviso does not indicate that it was inserted as a clarification - purposes of stamp duty be considered as Sale Consideration for the purposes of computation of capital gains under the Act - why the date of transfer be considered to be 24-02-2014 instead of 08-04-2013? - HELD THAT:- The legislature took note of the fact that there are different situations where sale agreements are entered into between the parties for an agreed sale consideration and paid a part of sale consideration as advance and the agreement was put in writing and sale deed is to be considered on a subsequent date, so there was amendment to section 50C of the Act. In the present case, the JDA was executed on 1.3.2013. MoU was entered on 8.4.2013. The guidelines value was revised on 12.8.2013. According to the assessee, transfer took place on the date of JDA on 1.3.2013 and the relevant value as on the date of JDA or the date of MoU to be applied, instead of applying guidelines value on 12.8.2013 in view of the proviso to section 50C(1) of the Act. Proviso to section 50C(1) deals with cases where the date of agreement fixing the amount for consideration and the date of registration for transfer of capital asset are not the same. The value adopted or assessed or assessable by the stamp valuation authority on the date of agreement to be taken for the purposes of computing full value of consideration for such transfer. This amendment by insertion of proviso seeks to relieve the assessee from undue hardship. There was payment on 23.11.2011 by cheque No.259865 drawn on Vijaya Bank, Sarakki Branch, Bangalore. Being so, the argument of the ld. DR is that MoU is not suggesting any payment so as to apply the proviso to section 50C, thus it is deemed retrospective in nature. In our opinion, as held in the case of Vummudi Amarendran [2020 (10) TMI 517 - MADRAS HIGH COURT], proviso to section 50C(1) is retrospective in nature applicable from AY 2014-15. Further part of the consideration has already been passed through MoU as enumerated above. It cannot be said that no consideration is paid on the date of MoU. This finding of the lower authorities is not proper. Accordingly, we hold that proviso to section 50C(1) by the Finance Act, 2016 is retrospective and also the assessee proved that the 2nd proviso to section 50C(1) is satisfied since the assessee has paid a part of sale consideration on the date of such MoU dated 8.4.2013. In view of this, we hold that the guidance value has to be computed as prevailing on the date of MoU dated 8.4.2013. Appeal of the assessee is allowed. Issues Involved:1. Assessment of capital gains in the relevant year.2. Applicability of Sec. 2(47)(v) of the IT Act and Sec. 53A of the Transfer of Property Act.3. Determination of the date of transfer for capital gains computation.4. Valuation date for computation of capital gains.5. Consideration of the value fixed for registration as actual consideration.6. Registration requirement of the Memorandum of Understanding (MOU).7. Determination of registerable value under Sec. 50C.8. Applicability of the amendment to Sec. 50C by Finance Act, 2016.9. Allowance of cost of improvement in computing capital gains.10. Excessive determination of capital gains.11. Levy of interest under Sec. 234B and 234D of the Act.Detailed Analysis:1. Assessment of Capital Gains in the Relevant Year:The assessee challenged the assessment of capital gains in the relevant year, arguing that the transfer occurred in the previous financial year. However, grounds related to this issue were not pressed during the hearing and were dismissed accordingly.2. Applicability of Sec. 2(47)(v) and Sec. 53A:The assessee contended that the provisions of Sec. 2(47)(v) of the IT Act were applicable when the Joint Development Agreement (JDA) was executed and registered on 1.3.2013, and the developer was put in possession, satisfying all conditions of Sec. 2(47)(v) r.w.s. 53A of the Transfer of Property Act. The Tribunal noted that the transfer occurred when the developer was put in possession, and the conditions of Sec. 53A were met.3. Determination of the Date of Transfer for Capital Gains Computation:The assessee argued that the transfer should be considered on the date of the MOU (8.4.2013) or the JDA (1.3.2013). The Tribunal held that the date of transfer should be the date of the MOU, as the developer was put in possession of the property, and the MOU was acted upon.4. Valuation Date for Computation of Capital Gains:The assessee contended that the value as on 8.4.2013 should be considered for computation of capital gains. The Tribunal agreed, noting that the guidance value on the date of the MOU should be used for determining the sale consideration.5. Consideration of the Value Fixed for Registration as Actual Consideration:The assessee argued that the value fixed for registration in the case of the Exchange Deed was notional and should not be considered the actual consideration. The Tribunal held that the guidance value on the date of the MOU should be considered instead of the registration date.6. Registration Requirement of the MOU:The AO argued that the MOU was not registered and thus could not be considered for determining the date of transfer. The Tribunal noted that for income tax purposes, a capital asset is transferred when possession is given, regardless of registration. The Tribunal cited various judgments to support this view, including the Supreme Court's decision in S. Kaladevi vs. V.R. Somasundaram, which allowed unregistered documents as evidence of an agreement.7. Determination of Registerable Value under Sec. 50C:The assessee argued that the registerable value should be determined as on the date of the MOU. The Tribunal agreed, holding that the guidance value on the date of the MOU should be used for computing capital gains.8. Applicability of the Amendment to Sec. 50C by Finance Act, 2016:The assessee contended that the amendment to Sec. 50C by the Finance Act, 2016, which allows the value on the date of the agreement to be considered if part of the consideration was received before the date of registration, should apply retrospectively. The Tribunal agreed, citing the Madras High Court's decision in CIT v. Vummudi Amarendran, which held that the amendment is retrospective.9. Allowance of Cost of Improvement in Computing Capital Gains:The assessee argued that the cost of improvement should be considered in computing capital gains. The Tribunal did not provide a detailed analysis on this issue, as it was not a primary contention in the appeal.10. Excessive Determination of Capital Gains:The assessee argued that the determination of capital gains was excessive and arbitrary. The Tribunal's decision to use the guidance value on the date of the MOU addressed this issue, resulting in a lower capital gains computation.11. Levy of Interest under Sec. 234B and 234D:The assessee contested the levy of interest under Sec. 234B and 234D. The Tribunal did not specifically address this issue, as the primary focus was on the correct determination of capital gains.Conclusion:The Tribunal allowed the appeal of the assessee, holding that the guidance value on the date of the MOU (8.4.2013) should be used for computing capital gains, and the amendment to Sec. 50C by the Finance Act, 2016, is retrospective. The Tribunal's decision resulted in a lower computation of capital gains for the relevant assessment year.