2016 (3) TMI 27

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....authorities below were in error in computing the 'Capital gains' in the hands of the appellant firm by applying the provisions of Section 50C?" 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant firm was running a rice mill at Moga under the name and style of M/s Guru Dashmesh Rice and General Mills. It executed an agreement to sell dated 3.11.2004 in the financial year 2004-05 with regard to land measuring 24 kanals 4 marlas, 6 Sarsai for a total sale consideration of Rs. 12,80,000/-. Earnest money of Rs. 2 lacs was received while balance was to be received at the time of execution of the registered deed by not later than 30.5.2005. As per the said agreement to sell, the appellant firm was to vest the legal title of whole of the aforesaid property vide two sale deeds in favour of the purchaser. Pursuant to the said agreement, the appellant firm executed sale deed as on 27.12.2004 in the financial year 2004-05 and pursuant whereto absolute internal and external rights, right to passage alongwith title as regards part of the land measuring 6 kanals 1 marla 4 sarsai out of the said land stood vested ....

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....ansfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section (1), where- (a) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the 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 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in rel....

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....for the purposes of taxing the difference between the apparent consideration in the instrument of transfer and the valuation done for the purpose of Section 50C of the Act under the head capital gains. The purpose of incorporating this provision is to prevent undervaluation of the real value of the property in the instrument of transfer so as to defraud the revenue of its legitimate claim to capital gain tax thereon. 11. The scope and effect of Section 50C of the Act was elaborately discussed in Circular No.8 of 2002 dated 27th August 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 val....

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....rm capital gain. The Tribunal upheld the findings recorded by the CIT(A). The relevant findings recorded by the Tribunal read thus:- "11(10) A bare perusal of the above reproduced documents clearly reveals that a single agreement to sell was executed on 3.11.2004 in respect of sale deeds executed by the assessee in respect of ¼ share and ¼ share on 27.12.2004 and 10.5.2005 respectively. A perusal of the conveyance deed registered on 10.5.2005 reveals the possession of the land in question has been handed over to the vendee on 10.5.2005 i.e. the date of registration of the sale deed. Thus, the vendee was not handed over possession of the said land earlier to this specified date. This factum is further established as no possession had been given to the vendee vide single agreement to sale dated 3.11.2004. Thus, the finding of the AO as reproduced above, on the date of handing over the possession on 10.5.2005, is factually correct. In view of this, the transfer of the said land does not fall under section 2(47)(v) of he Act as contended by the assessee. 11(11). In this context, the relevant para 4 of the assessment order is reproduced hereunder, wherein....

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....er on 10.5.2005. In view of the above discussion, it is amply clear that the registered sale deed certified that the possession of the said land was given to the vendee, on 10.5.2005. Thus, the transfer for the purpose of charging capital gain has become effective and concluded, on the date of registration of said sale deed as on this date, the possession of the land was handed over to the vendee. In view of this, the plea of the assessee that land in question stands transferred within the meaning of section 2(47)(v) of the Act is not legally and factually tenable. The land in question does not fall within the definition of transfer as contemplated under section 2(47) of the Act. Accordingly, the capital gain is to be charged from the date of registration of the said deed, as the possession was given to the vendee only on that date. 11(13) The learned counsel for the assessee placed reliance on the judgment of Hon'ble Supreme Court in the case of CIT vs. Podar Cement Pvt. Limited and others, (1997) 226 ITR 625. The decision has been rendered by the Hon'ble Supreme Court, in the context of section 22 of the Income Tax Act, 1961. In this case, it was held that the &#....

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.... of sale deed - Amendment of section 27 by Finance Act of 1987 is classificatory in nature - Income Tax Act, 1961 - ss 22, 27 - Indian Income Tax Act, 1922. Interpretation of taxing statutes - Construction which takes into account changes since provision was enacted - Construction beneficial to assessee in case of ambiguity - Rule against retrospectivity not applicable to declaratory provisions. 12. In view of the above detailed discussion, we are of the considered opinion that the provisions of section 50C are attracted to the sale of land in question made by the assessee. Thus, the findings of the CIT(A) on this issue are upheld and consequently, the grounds of appeal bearing No.2, 3 and 4 raised by the assessee are dismissed." 13. Examining the next contention, Explanation 2 to Section 2(47) of the Act was inserted by the Finance Act 2012 with retrospective effect from 1.4.1962. According to the said explanation, the term "transfer" is defined to include and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditi....