2024 (7) TMI 504 - AT - Income Tax

Section 50C amendment retrospective: stamp duty value on agreement date applies for capital gains computation

The ITAT Raipur allowed the assessee's appeal regarding capital gains computation under Section 50C. The tribunal held that the Finance Act 2016 amendment ... Capital gain computation- applicability of section 50C - Scope of amendment brought by Finance Act, 2016 to Section 50C(1) - as argued agreement of sale of land was executed on 31.03.2014 and part consideration was also received through proper banking channel on the date of agreement, therefore, stamp duty value as on the date of agreement was relevant in view of the amendment brought in by the Finance Act, 2016, which is curative in nature and therefore, has retrospective effect HELD THAT:- As first proviso to section 50C(1) deemed to be retrospective in nature and, therefore, benefit of the same shall be available to the assessee for the AY 2015-16 i.e., in the present case. Accordingly, the decision of Ld. CIT(A) accepting the contention of Ld. AO that the amendment introduced in section 50C(1) in Finance Act, 2016 is effective prospectively is found to be contrary to the analogy drawn in the case of Vummudi Amarendran (2020 (10) TMI 517 - MADRAS HIGH COURT], therefore, we are unable to concur with the same, accordingly the order of Ld. CIT(A) is liable to be set aside. Further, we may herein observe that since the stamp duty valuation of the subject land as on the date of agreement i.e., 31.03.2014 was Rs. 49,86,000/- which was also the actual consideration received by the assessee as emanating from the assessee’s reply before the Ld. AO, which was not disputed by the revenue, therefore, we direct the Ld. AO to vacate the addition, and recompute the capital gain adopting the full value of consideration being the value of land for stamp duty purpose as on the date of agreement to sale. Resultantly, ground no. 1 of the assessee stands allowed. Issues Involved:1. Applicability of Section 50C of the Income Tax Act, 1961.2. Retrospective effect of the amendment brought by Finance Act, 2016 to Section 50C(1).3. Determination of full value of consideration for capital gains computation.Detailed Analysis:1. Applicability of Section 50C of the Income Tax Act, 1961:The primary issue is whether the addition of Rs. 9,51,000/- by invoking Section 50C was justified. The assessee argued that the agreement for the sale of land was executed on 31.03.2014, and part of the consideration was received through proper banking channels on the date of the agreement. Therefore, the stamp duty value as on the date of the agreement should be relevant. The Assessing Officer (AO) rejected this contention, asserting that the transfer of property only occurs upon the execution of the sale deed, not the agreement to sell. The AO emphasized that the value adopted by the stamp valuation authority on the date of transfer (31.03.2015) should be considered, leading to the addition of Rs. 9,51,000/-.2. Retrospective Effect of the Amendment by Finance Act, 2016 to Section 50C(1):The assessee contended that the amendment introduced by the Finance Act, 2016, which added the first proviso to Section 50C(1), should be considered retrospective since it is curative in nature. This proviso states that if the date of the agreement and the date of registration are not the same, the value adopted by the stamp valuation authority on the date of the agreement should be considered. The CIT(A) disagreed, holding that the amendment is prospective and applicable from 01.04.2017. However, the ITAT referenced the judgment by the Hon’ble Madras High Court in Commissioner of Income Tax Vs. Vummudi Amarendran, which held that the amendment should be given retrospective effect to prevent undue hardship to the assessee.3. Determination of Full Value of Consideration for Capital Gains Computation:The ITAT examined whether the full value of consideration for computing capital gains should be the value on the date of the agreement or the date of registration. The assessee provided evidence that part of the consideration was received through banking channels on the date of the agreement (31.03.2014), and the stamp duty value on this date was Rs. 49,86,000/-. The ITAT, following the Madras High Court’s judgment, concluded that the amendment by the Finance Act, 2016, should apply retrospectively. Therefore, the stamp duty value on the date of the agreement should be considered for capital gains computation.Conclusion:The ITAT ruled in favor of the assessee, setting aside the addition of Rs. 99,400/- confirmed by the CIT(A). The ITAT directed the AO to recompute the capital gains by adopting the full value of consideration as the stamp duty value on the date of the agreement (31.03.2014), which was Rs. 49,86,000/-. Consequently, the appeal of the assessee was allowed, and the addition made by the AO was vacated.