2025 (4) TMI 745 - AT - Income Tax

Section 50C addition invalid when payment received via account payee cheque before new Jantri rate effective date

The ITAT Ahmedabad held that Section 50C addition based on difference between Jantri rate and actual sale consideration was not applicable. The tribunal ... Addition u/s 50C - difference of sale consideration as per Jantri Rate and actual sale deed - whether the full value of consideration should be adopted? - HELD THAT:- The Act provided consideration of date of agreement for determination of stamp duty value and compared to the value of the SRO as on the date of registration. However, the Act also laid down a condition that these provisions will apply in cases only in which where the part of the consideration has been received by account payee cheque. It is clear that the assessee has received payments by cheques even before the effective date of new Jantri rate i.e. 01.04.2011. Hence, the assessee is saved by the provision to Section 50C(1) of the Act. Appeal of the assessee is allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:1. Whether the Assessing Officer correctly applied Section 50C of the Income-tax Act, 1961, by adopting the stamp duty value of Rs. 3,55,00,200/- as the full value of consideration for the purpose of computing long-term capital gains, instead of the actual sale consideration of Rs. 1,20,00,000/- as per the sale agreement.2. Whether the assessee is entitled to have the full value of consideration determined based on the date of the sale agreement, considering the payments were made via account payee cheques before the revision of the stamp duty rates.ISSUE-WISE DETAILED ANALYSIS1. Application of Section 50C of the Income-tax Act, 1961Relevant legal framework and precedents: Section 50C of the Income-tax Act, 1961, mandates that if the consideration received from the transfer of a capital asset is less than the value assessed by the stamp valuation authority for stamp duty purposes, the latter value is deemed as the full value of consideration for calculating capital gains. A proviso added by the Finance Act 2016, effective from 01.04.2017, allows for the consideration on the date of the agreement to be used if certain conditions are met.Court's interpretation and reasoning: The Tribunal examined the applicability of the proviso to Section 50C, which permits the consideration as per the agreement to be used if the agreement date and registration date differ and part of the consideration was received through specified banking channels before the agreement date.Key evidence and findings: The Tribunal noted that the sale agreement was executed on 24.05.2011, fixing the consideration at Rs. 1,20,00,000/-, and payments were made via cheques before the new Jantri rate became effective on 01.04.2011. The registration occurred later on 27.12.2011, with a higher stamp duty value.Application of law to facts: The Tribunal found that the payments were made via account payee cheques before the effective date of the revised stamp duty rates, thus satisfying the conditions of the proviso to Section 50C(1). Consequently, the sale consideration as per the agreement should be adopted.Treatment of competing arguments: The Tribunal considered the arguments of both parties. The assessee argued for the application of the proviso to adopt the agreement value, while the Department contended that the conditions of the proviso were not met. The Tribunal sided with the assessee, finding that the conditions were indeed satisfied.Conclusions: The Tribunal concluded that the full value of consideration should be based on the sale agreement amount of Rs. 1,20,00,000/-, not the stamp duty value of Rs. 3,55,00,200/-.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: The Tribunal stated, 'It is clear that the assessee has received payments by cheques even before the effective date of new Jantri rate i.e. 01.04.2011. Hence, the assessee is saved by the provision to Section 50C(1) of the Act.'Core principles established: The judgment reinforces the principle that the proviso to Section 50C(1) can be applied retrospectively if the conditions regarding the receipt of consideration via specified banking methods before the agreement date are met.Final determinations on each issue: The Tribunal allowed the appeal, determining that the full value of consideration for computing long-term capital gains should be Rs. 1,20,00,000/-, as per the sale agreement, rather than the higher stamp duty value.