TaxTMI 
TaxTMI 
TaxTMI 
2010 (7) TMI 1034
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....located at No.54-11-5, Gudadals, Vijayawada. Both the assessees sold the said property by executing separate conveyance deeds. Shri K.Satya Srinivas executed the document numbered as 3068/2005 for a value of Rs. 32,94,720/-, while Smt. K.Anupama executed the document numbered as 3067/2005 for a value of Rs. 32,94,720/-. Both the documents were registered on 25.8.2005. However, for the stamp duty purposes, the SRO determined the market value of the property that was executed by Shri K.Satya Srinivas at Rs. 55,11,000/-. Similarly the market value for stamp duty purposes was determined at Rs. 54,98,000/- in respect of the property executed by Smt. K.Anupama. For the purposes of computation of capital gains, the Assessing Officer adopted the value determined by the SRO, by invoking the provisions of section 50C. The said action of the Assessing Officer was confirmed by Learned CIT(A). Hence both the assessees are in appeal before us contesting the decision of the tax authorities. 4. The submissions of the assessees are that:- (a) An agreement was entered on 04-6-2005 followed by an oral agreement on 19-5-2005, i.e. before the sale of said immovable property. As per this agreement, t....
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....o a separate sale agreement with the two vendees respectively on 27.3.2003. The assessee has cited certain reasons for not executing the sale deed immediately which were not found to be false. Thereafter, the sale deeds were executed on 30.6.2005 by complying with the terms of the sale agreement. Hence the sale deed was executed for the consideration as agreed between the parties as per the sale agreement. If we apply the provisions of section 50C literally, the tax authorities are right in adopting the value assessed by the stamp authority for the purposes of computation of capital gains. However, Ld AR has heavily placed reliance on the decision of Hon'ble Supreme Court in the case of K.P.Verghese Vs. ITO, referred supra, with regard to the proper interpretation of section 50C in the facts and circumstances of the case. 10. The Hon'ble Supreme Court in the case of Shri K.P. Varghese Vs. ITO Supra has observed that while interpreting a provision, strictly literal reading of Section should not be adopted if it leads to manifestly unreasonable and absurd consequences. However attempt should be made to discover the intent of the legislature from the language used by it. The....
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....h is not there; indeed, it would amount to re-writing the section. This argument was based on a strictly literal reading of s.52, subs. (2), but we do not think such a construction can be accepted. It ignores several vital considerations which must always be borne in mind when we are interpreting a statutory provision. The task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and, as pointed out by Lord Denning, it would be idle to expect every statutory provision to be "drafted with divine prescience and perfect clarity". We can do no better than repeat the famous words of judge Learned Hand when he said: ...it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable source of interpreting the meaning of any writing: be it a statute, a contract or anything else. But it is one of the surest ....
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....date of the sale is very much more than the price at which the property is sold under the agreement. Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no under-statement of consideration in respect of the transfer and the transaction is perfectly honest and bonafide and, in fact, in fulfilment of a contractual obligation, the assessee, who has sold the property, should be liable to pay tax on capital gains which have not accrued or arisen to him? It would indeed be most harsh and inequitable to tax the assessee on income, which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation undertaken by him. It is difficult to conceive of any rational reason why the legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell the property at the agreed price and honestly carried out such a contractual obligation. It would indeed be strange if obedience to the law should attract the levy of tax on income, which has neither arisen to the assessee nor has been received by him. If we may take another....
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....rt also observed that while interpreting a section it would be legitimate to consider what was the mischief and defect, which was sought to be remedied by an enactment. In that connection the speech made by the Finance Minister while moving the amendment is extremely relevant as it throws a considerable light on the objectives and purpose of enactment. However, as pointed out by Ld AR the purpose of introduction of Sec 50C was not mentioned by the Finance Minister at the time of moving amendment. It was also not explained in the Notes on clauses and Explanatory Memorandum attached to the relevant Finance Bill. However, the Hon'ble Madras High Court in the case of K.R. Palani Swamy and others Supra, while upholding the constitutional validity of Sec 50C, had an occasion to spell out the objective of introducing Sec 50C. The relevant observations are extracted below: "17. Let us consider the legislative competence of the Parliament in inserting the provision s.50C in the IT Act. It is obvious from the reading of the above provision and rather it is not disputed that the same is inserted to prevent large scale under valuation of the real value of the property in the sale deed so as ....
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....transaction is perfectly honest and bonafide and, in fact, in fulfilment of a contractual obligation, the assessee, who has sold the property, should be liable to pay tax on capital gains which have not accrued or arisen to him? It would indeed be most harsh and inequitable to tax the assessee on income, which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation undertaken by him. It is difficult to conceive of any rational reason why the legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell the property at the agreed price and honestly carried out such a contractual obligation. It would indeed be strange if obedience to the law should attract the levy of tax on income, which has neither arisen to the assessee nor has been received by him." 11.2 The Hon'ble Apex court in the case of K.P.Verghese, supra has held that the provisions of section 52(2) that was existing at the relevant point of time was not applicable to a honest and bona fide transaction where the consideration received by the assessee was correctly declared or disclo....
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....be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into. Accordingly, the applicability of the provisions of section 50C should be looked at only on the date of sale agreement. The assessee has filed a certificate obtained from the Joint Sub Registrar, Visakhapatnam, regarding market value of the impugned property as on the date of the sale agreements. The said certificate was not produced before the tax authorities. We have already held that the provisions of section 50C should be applied to the impugned sale transactions as on the date on which sale agreements were entered into. Since the applicability of section 50C as on the date of sale agreements is required to be examined by the AO, we set aside the issue to the file of the AO with a direction to compute the capital gains on sale of impugned properties after applying the provisions of section 50C as on the date of sale agreements. Accordingly, the order of Ld CIT(A) is reversed." 6. In the cases before us also, there is no dispute that the assessees herein entered into sale agreements on 04-6-2005 and the sale value fixed on that date was equivalent to the SRO rate....