TaxTMI 
TaxTMI 
2010 (4) TMI 866
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....e grounds raised by the assessee, which reads as under:- "1. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in enhancing the value of land from Rs. 400 sq. mtr. to Rs. 5,000 sq. mtr. 2. On the facts and circumstances of the case, the learned Commissioner of Income-tax ought to have taken view to accept the sales price at Rs. 400 per sq. mtr. shown by your appellant and deleted the addition of Rs. 21,24,472 being amount estimated at Rs. 700 per sq. mtr. by the Assessing Officer. 3. It is, therefore, prayed that the addition made by the Assessing Officer and thereafter enhancement made of Rs. 1,23,08,119 by the learned Commissioner of Income-tax Appeal-IV, may please be deleted." 3. The brief facts leading to the above issue are that the assessee along with other six family members owned an ancestral agricultural land at Survey No. 227 Bhestan, Surat admeasuring 88,700 sq. mt. agricultural land falling under Surat Urban Development Authority ('SUDA' in short), whereby the land admeasuring 6,610 sq. mt. was acquired and the balance land of 62,090 sq. mt. was left with 14 co-owners of Rashamwala family and t....
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.... 15,00,000 2,50,000 14. Jaswantlal D. Reshamwala (HUF) 15,00,000 2,50,000 Total 3,00,00,000 49,99,990 4. Post survey proceedings, the revenue summoned the purchaser, Shri Hitendra D. Patel and recorded his statement under section 131 of the Act, wherein he admitted to have purchased the agricultural land for total consideration of Rs. 3 crores from Reshamwala Family, and they offered the above sale consideration in their respective return of income qua their individual shares. While framing the assessment, the Assessing Officer estimated the value of land at the rate of 700 per sq.mt. and worked out capital gains, accordingly, at Rs. 21,24,472, as against the capital gain declared by the assessee at Rs. 7,48,128 and thereby made addition of Rs. 19,76,374. The Assessing Officer while computing this capital gain adopted the fair market value of the land at Rs. 700 per sq.mt. as against the stamp valuation fixed by the Registration Authority at Rs. 400 per sq.mt. The assessee disclosed the value in terms of per sq.mt. at Rs. 483 per sq.mt. The Assessing Officer also adopted the cost of acquisition of the abovesaid agricultural land at Rs. 25 per s....
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.... that the prevailing market rates were very much higher as compared to the old jantry rates. Therefore, the sales consideration as shown by the appellant as per the old jantry rates, is not at all acceptable. Further, it is a matter of common sense that property prices would not increase abnormally from Rs. 400 per sq. mt. to Rs. 5,000 per sq. mt. in just a few months, but in fact this suggests that the actual market rates were much higher than the old Jantry prevailing during 2006, i.e., during the period when the deal under consideration was finalized. In the State of Gujarat, stamp duty is recovered as per the provisions of section 32(A) of the Bombay Stamp Act, 1958. The first jantry was prepare in 1984 and thereafter in 1999. The Jantry made applicable in 2008 was based on the market situation during the period 2005-06, i.e., during the period when the subject deal had taken place. Therefore, the revised jantry rate of Rs. 5,000 per sq. mtr. is the perfect basis for determining the market value of the subject land in the year 2006 and the rate of Rs. 700 per sq. mtr. as adopted by the Assessing Officer is rejected as being without any basis. Moreover, it is seen that in ....
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....l land was ancestral agricultural land and, accordingly, fair market value as on 1-4-1981 for computation of capital gain, i.e., the cost of acquisition, is to be determined according to the assessee as per valuation report obtained from approved Valuer, Shri P.K. Desai, who valued the land as on 1-4-1981 at Rs. 60 per sq. mt. as against this, the Assessing Officer determined the fair market value at Rs. 25 per sq. mt. on the ground that the comparable sale instance given by the Registered Valuer ranges from Rs. 15 to Rs. 32 per sq. mt. 7. We find one more interesting fact from the orders of the lower authorities as well as from the submissions of the assessee's counsel and ld. CIT-DR that the total consideration of Rs. 3 crores was received by the co-owners up to December 2005 but the sale deeds were registered in February 2007 and the assessee had to received further amount from the buyers amounting to Rs. 8 lakhs, which was balance, to be received at the time of registration of sale deed. The ld. counsel for the assessee before us stated that the lower authorities have failed to appreciate the fact that the deal was entered into in April 2005 from where the payment started re....
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.... of the sale deeds was amounting to Rs. 3,00,11,111. We find that the revenue could not bring any evidence that the entire consideration was not paid on or before 31-3-2006 and possession of land was not handed over by these co-owners to the seller. Even otherwise, we accept the claim of the revenue that the possession of this land and the balance payment of Rs. 8 lakhs was delivered at the time of registration of sale deed in January and February 2007, when the sale deeds were registered, the revenue cannot assess the capital gain in the assessment year under consideration, i.e., assessment year 2006-07. However, the vital issue before us is whether in the case of sale through registered sale agreement, the capital gain is to be computed in terms of section 50C of the Act or not. We are of the view that when the asset is transferred in terms of section 53A of the Transfer of Property Act, 1882, the provisions of section 50C of the Act will apply to the transaction. The relevant provision of section 2(47) of the Act reads as under:- "2(47) transfer, in relation to a capital asset, includes,- (v)any transaction involving the allowing of the possession of any immovable property....
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....essed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received on accruing as a result of the transfer." 9. The relevant provision of section 50C of the Act was explained and elaborated in the following portion of the Departmental Circular No. 8 of 2002, dated 27-8-2002, as under:- "37. Computation of capital gains in real estate transactions.-37.1 The Finance Act, 2002 has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. 37.2 It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly, under section 48 of the Income-tax Act. 37.3 It is further provided that where the asses....
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.... High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957, shall, with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. The Valuation Officer shall be the Valuation Officer as defined in clause (R) of section of the Wealth-tax Act, 1957. The proposed sub-section (3) provides that where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the authority referred to in sub-section (1), the value so adopted or assessed by the authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. This amendment will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years." M....
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.... are provided:- (i)The value which is considered as the proper value of the property as fixed by the authority for registration for stamp duty purposes is presumed to be the fair market value for the purposes of computation of capital gains on the sale of property. (ii)It is open to the taxpayer to plead that such stamp value is abnormal and contest the same in appeal under the stamp law requiring adoption of reduced value. If such value is reduced in appeal under the provisions of the relevant stamp law, such reduced value would alone be adopted. (iii)Where such stamp value is not disputed, it is open to the assessee to require the Assessing Officer to refer the valuation to the Valuation Officer, who shall fix the valuation by adoption of the procedure prescribed under section 16A of the Wealth-tax Act. It is such value, which will be adopted by the Assessing Officer. 12. We further find from the Memorandum Explaining the provision of section 50C in the Finance Bill, 2002, which clearly states that where the consideration declared to be received or accruing as a result of transfer of land or building or both is less than the value adopted or assessed by any authority ....
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....definite purpose and they must be limited to that purpose and should not be extended beyond that legitimate field. In CIT v. Bharani Pictures [1981] 129 ITR 244 (Mad.), it is held that legal fictions are for a definite purpose and are limited to the purpose for which they are created and should not be extended beyond its legitimate field. The statutory fiction introduced in one enactment cannot be incorporated in another enactment. The point that legal fiction cannot be extended to a new field was highlighted by Hon'ble Madras High Court in CIT v. T.S. Rajam [1980] 125 ITR 207 wherein it is held that section 41(2) creates a legal fiction under which the balancing charge is treated as business income chargeable to tax but when this amount is distributed to shareholders then it would not become deemed dividend and it would be only a capital receipt and not distribution of accumulated profits. Thus, a legal fiction was invoked in the hands of the assessee-company and was not extended in the hands of the shareholders. In the present case, section 50C creates a legal fiction for taxing capital gains in the hands of the seller and the difference between apparent consideration and valuati....