TaxTMI 
TaxTMI 
2010 (6) TMI 770
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.... of three immovable properties. In respect of two properties, the market value of properties for the purposes of stamp duty valuation was shown at Rs. 36,98,500/- and Rs. 38,56,500/- respectively. However the apparent sale consideration of the said two properties was shown at Rs. 29,31,000/- and Rs. 30,70,000/- respectively. Thus there was an aggregate difference of Rs. 15,54,000/- between the apparent sale consideration and the market value determined for the purposes of collecting stamp duty. The assessee had computed the capital gains on the basis of apparent consideration. However, the AO, by invoking the provisions of section 50C, added the above said difference to the income disclosed by the assessee. The said addition was confirmed by Ld CIT(A). Hence the assessee is in appeal before us. 4. The assessee herein, by way of two sale agreements entered on 27.03.2003, agreed for the sale of the impugned properties for Rs. 29,31,000/- and Rs. 30,70,000/- respectively. At the time of entering into the agreements, the assessee had received advance of Rs. 11,000/- and Rs. 12,00,000/- from the vendees, being two brothers named V.Jayakanth and V.V.Kameswara Rao. Shri V.V.Kameswara R....
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....n being bona fide one and further since there was no intention to defraud revenue, the provisions of Sec 50C should not be made applicable to the impugned transaction of the transfer of house property as on the date of registration of the sale deed, but may be applied on the date of entering into the sale agreement. 6. On the contrary, Ld DR submitted that as per the provisions of section 50C, the AO has to make a comparison between the apparent consideration and the value adopted or assessed for stamp duty purposes. Ld DR further submitted that there is no reference in the sale deed, of the details of advance payments made by the vendees. Accordingly Ld DR contended that the provisions of section 50C, being a legal fiction created by the statute, is applicable to the impugned transactions and accordingly prayed for the confirmation of the orders passed by the tax authorities. 7. In the rejoinder, Ld AR submitted that the details of payment of advance have been declared by the vendees in the return of income filed by them and in that regard, he invited our attention to the copies of the return of income compiled in the paper book. 8. We have heard the rival contentions and....
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.... of then existing Sec 52(2) of the Act, which provided that where a capital asset is transferred and if in the opinion of the ITO, the fair market value of that asset exceeds the full value of the consideration declared by the assessee by an amount of not less than 15% of the value so declared, then the full value of the consideration shall be taken to be its fair market value on the date of its transfer. The revenue took the stand that in order to invoke the provisions of section 52(2), it is enough if it is shown that the fair market value exceeded the disclosed value by 15%. However, the Hon'ble Supreme Court held that a fair and reasonable construction of Sec 52(2) would be to read into it a condition that it would apply only where the consideration for the transfer is under- stated and hence it would have no application in the case of a bonafide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. For the sake of convenience, we extract below the relevant observations of the Hon'ble Apex Court on the rule of interpretation and the logical conclusion: "5. Now, on these provisions the question arises as to what is....
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....ot to make a fortress out of the dictionary: but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning". We must not adopt a strictly literal interpretation of s.52, sub-s. (2), but we must construe its language having regard to the object and purpose which the legislature had in view in enacting that provision and in the context of the setting in which it occurs. We cannot ignore the context and the collocation of the provisions in which s.52, sub-s (2) appears, because, as pointed out by Judge Learned Hand in the most felicitous language: "... the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create." Keeping these observations in mind we may now approach the construction of s.52, sub-s. (2). 6. The primary objection against the literal construction of s.52, subs,(2), is that it leads to manifestly unreasonable and absurd consequences. It is true that the consequences of a suggested cons....
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....se where A sells his property to B with a stipulation that after some time which may be a couple of years or more, he shall re-sell property to A for the same price. Could it be contended in such a case that when B transfers the property to A for the same price at which he originally purchased it, he should be liable to pay tax on the basis as if he has received the market value of the property as on the date of re-sale, if, in the meanwhile, the market price has shot up and exceeds the agreed price by more than 15%. Many other similar situations can be contemplated where it would be absurd and unreasonable to apply s.52, sub-s (2), according to its strict literal construction. We must, therefore, eschew literalness in the interpretation of s.52, sub-s (2), and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation. It is now a well-settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been ....
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....ernment legitimately entitled to by pumping in black money. The impugned provision has been incorporated to check such evasion of tax by undervaluing the real properties. ...................... Tax could be evaded by breaking the law or could be avoided in terms of the law. When there is a factual avoidance of tax in terms of law, the legislature steps into amend the IT law to catch such an income within the net of taxation." Hence the object of introduction of section 50C is to prevent under valuation of the real value of the property in the sale deed to avoid payment of tax or duty which the Government is entitled to, which, in our opinion, is akin to the objective of introduction of section 52, which was existing earlier. 11. In the case of K.P. Varghese, supra the Hon'ble Apex Court contemplated a situation, by way of an example, where the completion of sale took place after a couple of years after the date of agreement. In this connection it is pertinent to extract the relevant observations of the Hon'ble Supreme Court, at the cost of repetition, as the said example contemplated by the Hon'ble Apex Court is squarely applicable to the facts of the presen....
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....isclosed by him and there was no concealment or suppression of the consideration. The Hon'ble Supreme Court, after considering the speech of the Finance Minister, has understood that the object of introduction of section 52(2) was to curtail those transactions of sale of property, where the actual consideration received was understated in the sale deed. However, though the object of introduction of section 50C was not mentioned in the relevant Finance bill or in the speech of the Finance minister, yet, the Hon'ble Madras High Court in the case of K.R. Palani Swamy and others, Supra has stated that the provision of Sec 50C was inserted in the income-tax act to prevent large scale under valuation of real value of property in the sale deed, so as to defraud revenue which the government is legitimately entitled to, by pumping in black money. Thus we can see that the purpose of introduction of section 52(2) earlier and section 50C w.e.f. 1.4.2003 are for the purpose of achieving similar objectives. 11.3 In the instant case also, the assessee herein has fulfilled a contractual obligation on 30-6- 2005, which the assessee is bound by law to carry out as per the sale agreement entered i....