2026 (3) TMI 1120 - AT - Income Tax

Stamp duty valuation as on agreement date governs full value of consideration; registered transfer date governs section 54 investment period.

Where agreement (MOU) and registration dates differ, the stamp duty value assessed as on the agreement date must be adopted as full value of consideration ... LTCG - sale consideration which the assessee is deemed to have received on sale of immovable property - Application of First proviso to section 50C(1) retrospectively - Stamp duty valuation as on date of agreement to be used for computation of full value of consideration - date of transfer for section 54 reckoned from registered transfer deed where capital gain is offered in that year LTCG - Scope of First proviso to section 50C(1) - computation of full value of consideration u/s 50C(1) - long term capital asset - reference to value adopted by the Stamp Valuation Authority - HELD THAT: - The Court held that the first proviso to section 50C(1), though introduced by Finance Act, 2016, is a beneficial provision and applies retrospectively to mitigate hardship caused by delayed registration. Where the date of the agreement fixing consideration and the date of registration differ, the value adopted by the Stamp Valuation Authority on the date of the agreement may be taken for computing full value of consideration. On the facts the assessee executed an MOU, received consideration earlier and had held the property for over 36 months; the authorities failed to apply the proviso and to verify the stamp duty valuation as on the MOU. Accordingly the AO is directed to recompute capital gain taking the stamp duty valuation as on the date of the MOU and to treat the asset as long-term for computation of capital gain. [Paras 9, 10, 11] Recompute long-term capital gain by using stamp duty valuation as on the date of the MOU and treat the asset as a long-term capital asset Deduction u/s 54 - date of transfer for computing investment period - HELD THAT: - The Court found that the assessee offered capital gain in the assessment year based on the registered transfer deed; therefore the statutory period for making the investment under section 54 is to be counted from the date of execution of that registered transfer deed. As the assessee made the investment within the stipulated period counted from the date of the registered deed, he is eligible for deduction under section 54. AO is directed to allow the deduction after recomputing the capital gain as directed. [Paras 12] Allow deduction u/s 54 after recomputation of capital gain, counting the investment period from the date of the registered transfer deed Final Conclusion: The appeal is partly allowed: the Assessing Officer is directed to recompute long-term capital gain by applying the first proviso to section 50C(1) using the stamp duty valuation as on the date of the MOU and, thereafter, allow deduction under section 54 treating the registered transfer deed as the date of transfer for computing the investment period. Issues: (i) Whether the stamp duty valuation to be adopted for computing full value of consideration under section 50C of the Income-tax Act, 1961 is the value as on date of registration or the value as on date of the agreement (MOU) where the dates differ; (ii) Whether the assessee is eligible to claim deduction under section 54 of the Income-tax Act, 1961 having received sale proceeds earlier but executed registered transfer deed and invested in new asset within the stipulated period.Issue (i): Whether the value adopted by the Stamp Valuation Authority on the date of agreement (MOU) should be taken for computing full value of consideration where the agreement date and registration date are different.Analysis: The Court examined facts showing possession and agreement dates prior to registration, the receipt of sale proceeds earlier, and the enactment of the first proviso to section 50C(1) (introduced w.e.f. 01.04.2017) which permits use of stamp duty value as on the date of agreement where agreement and registration dates differ. The proviso is a beneficial amendment addressing hardship from delayed registration; the Court followed consistent judicial precedent applying the proviso retrospectively. The authorities had not factually verified the stamp duty value as on the date of the MOU or the indexation claim based on that date and therefore erred in treating the later registration valuation as the deemed sale consideration.Conclusion: In favour of the assessee. The stamp duty valuation as on the date of the agreement (MOU) must be used for computing full value of consideration and the assessing officer is directed to recompute long term capital gain accordingly.Issue (ii): Whether the assessee is entitled to deduction under section 54 where sale proceeds were received earlier but the registered transfer deed was executed in the year under assessment and investment in new asset was made within the stipulated period from the date of registration.Analysis: The Court considered that the assessee offered capital gain in the assessment year based on the registered transfer deed executed in that year. The statutory period for making the investment under section 54 is to be reckoned from the date of transfer as evidenced by the registered deed relied upon for offering the gain. The assessee made the investment within the stipulated period measured from the date of the registered transfer deed. The assessing officer's rejection based on earlier receipt of sale proceeds and delayed registration was not a valid ground to deny the deduction where the registered transfer deed formed the basis of the return and the investment timing met the statutory requirement.Conclusion: In favour of the assessee. The assessee is eligible for deduction under section 54 of the Income-tax Act, 1961 and the assessing officer is directed to allow the deduction after recomputation.Final Conclusion: The appeal is partly allowed; the assessing officer is directed to recompute long term capital gain using the stamp duty valuation as on the date of the agreement (MOU) and thereafter allow deduction under section 54 of the Income-tax Act, 1961.Ratio Decidendi: Where the date of the agreement fixing the amount of consideration and the date of registration differ, the stamp valuation authority's value as on the date of the agreement (MOU) is to be used for computing full value of consideration; a beneficial proviso permitting this is to be applied so as to mitigate hardship from delayed registration, and the date of registered transfer governs the commencement of the period for investment under the capital gains reinvestment deduction.