Section 50C 5% safe harbor limit applies retrospectively as curative amendment addressing unintended consequences

ITAT Mumbai held that the 5% safe harbor limit introduced by the 3rd proviso to section 50C(1) through Finance Act 2018 applies retrospectively. The Tribunal ruled this was a curative amendment addressing unintended consequences of the anti-avoidance provision, acknowledging genuine variances between stamp duty values and actual consideration due to property-specific factors like location and dimensions. Following precedent from Maria Fernandes Cheryl and Rajeev Kumar Agarwal cases, the Tribunal determined curative amendments avoiding unintended consequences are retrospective by nature. The assessee was granted section 50C benefit, appeal succeeded, and impugned addition was set aside.

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Issues:
Whether the "safe harbour limit of 5%" under section 50C of the Income Tax Act is retrospective in operation.

Analysis:
The case involves an appeal by the assessee challenging an order passed by the CIT (A) regarding the application of section 50C of the Income Tax Act for A.Y. 2016-17. The appellant, engaged in property management, had sold a property in Mumbai, and the Assessing Officer added the valuation difference to the income. The appellant contended that the benefit of the proviso introduced in 2019 should be extended to A.Y. 2016-17. The CIT (A) denied the benefit, stating it applied from A.Y. 2019-20 onwards.

The Tribunal considered the circumstances and submissions. The property was sold for Rs. 90 crores, with a valuation of Rs. 91,05,55,000, resulting in a difference of Rs. 1,05,55,000, less than 5% of the consideration. Section 50C deems the stamp valuation as full consideration. The proviso introduced in 2019 allows a 5% deviation from the stamp valuation. The Tribunal referred to a previous case where a 6.55% difference prompted an addition, and the subsequent amendment in 2020 increased the safe harbor limit to 10%.

The Tribunal emphasized that the proviso aimed to address genuine variances due to property factors and acknowledged the retrospective application of curative amendments. Referring to Circular 8 of 2018, the Tribunal highlighted the rationale behind the amendments to sections 43CA, 50C, and 56 of the Act to prevent unintended hardships. Citing precedents, the Tribunal held that curative amendments are retrospective in nature, even if not explicitly stated, and must be given effect from the intended point in time.

In conclusion, the Tribunal held that the appellant was entitled to the benefit of section 50C, setting aside the addition made by the Assessing Officer.

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