TaxTMI 
TaxTMI 
2019 (6) TMI 1085
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....iled the return of income on 30.09.2011 declaring total income of Rs. 9,84,14,290/-. The case was taken up for scrutiny and the assessment was completed on total income of Rs. 16,58,69,630/- vide order dated 31.03.2014. During the assessment proceedings the AO found that the assessee has sold the of vacant site in Kakinada admeasuring 6,602 sq.yds in Door No.2-4-34 for a consideration of Rs. 10,56,32,000/- vide sale deed dated 28.02.2011 to M/s Chandana Brothers Shopping Mall., Visakhapatnam. Prior to execution of sale deed , the assessee had entered into an agreement with the purchaser on 16.11.2010 for sale consideration of Rs. 10,56,32000/- which was registered before the registering authority and the assessee filed the return of income accordingly, admitting long term capital gains of Rs. 9,80,73,696/- declaring full value of consideration at Rs. 10,56,32,000/-. The Assessing Officer (AO) found from the sale deed dated 28.02.2011 that though the market value of the property was Rs. 10,56,32,000/- accepted by the SRO as on the date of registration of the agreement, subsequently it was revised and refixed at Rs. 17,17,78,000/- u/s 47(A) of the Indian Stamps Act for the purpose....
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....so relied on the following decisions a) Dy.CIT, Circle-11(1), Hyderabad Vs. S.Venkat Reddy, Hyderabad in ITA No.974/Hyd/2010, Assessment Year 2006-07 by the Hon'ble ITAT, Hyderabad, Bench-B, Hyderabad dated 09.11.2012) b) Moole Rami Reddy, Visakhapatnam Vs. ITO, Ward-1(2), Visakhapatnam in ITA No.311/Vizag/2010, Assessment Year 2006-07 by the Hon'ble ITAT, Visakhapatnam Bench, Visakhapatnam dated 10.12.2010. 3.1. The AO considered the explanation offered by the assessee but did not find merit in the assessee's request to consider the sale deed value due to the following reasons : (a) It is an undisputed fact that the market value of the property sold was determined at Rs. 17,17,78,000 by the District Registrar & Collector u/s 47(A) of the I.S.Act for the purpose of payment of stamp duty vide proceedings No.G2/MV/486/2011 dated 04.03.2011. (b) it is also an undisputed fact that the difference of Stamp Duty of Rs. 46,19,820 was paid by the purchaser of the said property on 04.03.2011. (c) These above mentioned two facts were clearly endorsed on the reverse of the 4thpage of the Registered Sate Deed dated 28.02.2011, a copy of which is a....
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....apital gains and computed the capital gains and brought to tax the sum of Rs. 16,55,10,331 under the head 'long term capital gains. 4. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) upheld the order of the AO and dismissed the appeal of the assessee. The Ld.CIT(A) in his order endorsed the view of the AO holding that the sale consideration required to be adopted as per the sale deed, but not as per the sale agreement. 5. Against the order of the CIT(A), the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld.AR made two fold arguments. Firstly the Ld.AR argued that the assessee has transferred the property on 16.11.2010 by way of agreement of sale coupled with possession and has transferred the land and handed over the possession of the land to the vendee. Therefore as per section 2(47) of the Act the transfer was completed on 16.10.2010. The agreement also was registered and the assessee had received the part of the sale consideration of Rs. 5.00crores through Demand Draft bearing No.063001 dated 16.11.2010 drawn on Kotak Mahindra Bank, Visakhapatnam. As per the agreement, the purchaser has to pa....
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....herefore, argued that the market value of the property for the purpose of stamp duty as on 28.02.2011 was only Rs. 12,000/- per sq.yard, but not Rs. 26,000/- per sq.yard as fixed by the District Registrar. The valuation made by the District Registrar was arbitrary hence argued that the same should not be adopted for capital gains purpose and it would cause financial injury to the assessee. Though the purchaser has paid the stamp duty the same is in dispute, hence, argued that the market value as on 16.11.2010 as per the sale agreement required to be adopted for the purpose of capital gains, but not the enhanced value of the District Sub Registrar, Kakinada. Accordingly, requested to set aside the order of the Ld.CIT(A) and delete the addition made by the AO. 6. On the other hand, the Ld.DR argued that the assessee had entered into sale agreement on 16.11.2010 and the same was registered for a consideration of Rs. 10,56,32,000/- and the part amount was paid subsequent to sale agreement and the land was registered by sale deed on 28.02.2011 and the Joint Sub Registrar has not released the sale deed, since, there was a dispute in the valuation of the property and the issue was refe....
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....ermined by the stamps and registration authorities of state government at Rs. 10,56,32,000/-. The assessee had also received the part consideration and the vendee had agreed to pay the balance consideration at the time of registration of the sale deed. The part payment was also received by crossed cheque. The document was released and there was no evidence placed by the revenue to show that the market value as on 16.11.2010 was disputed by the stamps and registration authority or referred the matter to the District Registrar for determination. Subsequently, the sale deed was presented for registration by adopting the same value of Rs. 10,56,32,000/- on 28.02.2011 which was not accepted by the registration authorities and referred the valuation to the District Registrar for fixing the value as on 28.02.2011, i.e. the date of registration. The District Registrar has conducted spot enquiries and determined the market value of the property at Rs. 26,000/- per square yard and accordingly valued the scheduled property at Rs. 17,17,78,000/-. As per the proceedings of the District Registrar, though he stated to have conducted the spot enquiries, no comparable case was brought on record whi....
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....04/10/2010, 1.00 lakh on 04/10/2010 and Rs. 10.00 lakhs on 08/10/2010 i.e. on the date of registration of sale deed. Now the question is for the purpose of ascertaining the value as per section 50C, whether the date of agreement has to be considered or date of sale deed has to be considered. According to the assessee on the date of agreement dated 17/07/2010, the SRO value is much lesser than the sale price agreed by the assessee of Rs. 1.90 crores, therefore, the amount agreed on the date of agreement has to be considered and not on subsequent date i.e. date of registration of the sale deed. The case of the Assessing Officer is that the agreement entered by the assessee with the purchaser is unregistered agreement, therefore, there is no validity in the eye of law, hence, as per section 50C the value has to be determined on the date of sale deed. Accordingly, the Assessing Officer adopted SRO value of Rs. 2,95,02,500/-. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer. The ld. CIT(A) further observed that purchaser has not fulfilled the conditions laid down in the unregistered sale agreement, therefore, the value of the property has to be considered as on the dat....
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....f stamp duty. 10. Sub-Section (2) of section 50C further contemplates that in case assessee alleges that stamp duty valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then, the AO may refer the valuation of the capital asset to the Valuation Officer. Subclause (v) of Section 2(47) has a direct bearing on the controversy. Therefore, it is pertinent to taken note of this clause. It reads asunder: 'Section 2 . . . . . . . . . . . . . . . . (47) "transfer", in relation to a capital asset, includes,- (i) to (iva) (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or' 11. Before taking cognizance of any argument, it is pertinent to take note of Registration and other related Laws, Amendment Act, 2001 which has brought about radical changes in the rights flowing on the basis of the agreement executed in part performance of the contract under section 53A of 1882 A....
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....prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 13. A perusal of section 53A of the TPA would indicate that it provides a protection to transferee to retain his possession which was taken in part performance of the contract. He was able to protect his possession even after expiry of limitation to bring a suit for specific performance. But after the amendment effected in the Registration and Other Related Laws Amendment Act, 2001, it has been provided that though a contract accompanied by either of possession or executed in favour of a person in possession is compulsorily registerable under section 17(1A) of the Registration Act, 1908, if he failed to register such contract, then, he would no....
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....isfied with adoption of sale value on which stamp duty was paid, then scheme of the Act prescribes a mechanism under subsection (2) of section 50C for making a reference to the DVO to determine fair market value of the property. The reasons for such a mechanism is that stamp duty fee is only 4.95% (herein Gujarat) on the total sale consideration, which is a small amount and can be borne by any vendor/vendee. But for the purpose of Income Tax Act, the liability would enhance multi fold, and due to this reason, mechanism has been provided in the Act for the assessee to demonstrate that the value received by him was far less than one adopted for the purpose of stamp duty valuation. For this, he can make a request to the AO under section 50C(2) for making a reference to the DVO. It is pertinent to observe that the assessee entered into an agreement to sell on 8.2.2010. The AO has not disputed this agreement. The assessee has received payment in pursuance of this agreement through account payee cheque. Let us take a situation where a vendee fails to get the sale deed executed. The assessee being vendor has a remedy for filing a suit for specific performance under the Specific Relief Act....
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....ch consideration under section 48 of the Income-tax Act. The scope of section 50C was extended w.e.f. A.Y. 2010-11 to the transaction which were executed through agreement to sell or power of attorney by inserting the word "assessable" along with words "the value so adopted or assessed". Hence, section 50C is now also applicable in case of such transfers. The present provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement. A later similar provision inserted by way of section 43CA does take care of such a situation. 6.2 It is therefore proposed to insert the following provisions in section 50C: (4) Where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of th e....
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....e same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration. It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property. 30 These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years." 17. If we take all these aspects in their settings as a whole, then it would indicate that earlier whenever an assessee disputed adoption of sale equivalent to the amount on which stamp duty is paid, then reference to the DVO is made under section 50C(2). Normally, as observed earlier, when a sale agreement was executed, payment was received in part performance of the agreement, then vendor would not get anything more than the amount agreed in the sale agreement. There may be a time gap between execu....
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....2, but the full value of consideration is to be equivalent to the amount on which stamp duty was payable on 8.2.2010." 11. In the case of M/s. Lahiri Promoters (supra), the ITAT, Visakhapatnam Bench by following the decision of the Hon'ble Supreme Court in the case of Shri K.P. Varghese vs. ITO (131 ITR 597) has held as under:- "12. Thus, by executing the sale deed in June, 2005, the assessee has only completed the contractual obligation imposed upon it by virtue of the sale agreement. Since the process of sale has been initiated from the date of sale agreements, in our opinion, the character of the transaction vis-a-vis Income Tax Act should 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 sec....
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....sideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.] Following third proviso shall be inserted after the second proviso to sub-section (1) of section 50C by the Finance Act, 2018, w.e.f. 1-4-2019 : From the reading of the above, it is clear that the date of agreement of sale and the date of execution of sale deed is different, where the amount of consideration or part thereof has been received by way of account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer, the date of agreement has to be considered for....
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....t as on16.11.2010 Since there was substantial time gap between the sale agreement and the sale deed, there is a possibility of increase in the market rate. In the instant case, the assessee had obtained the market value certificate as on 16.11.2010 from the Joint Sub Registrar vide certificate dated 27.05.2015 for the same door No.2-4-34 and it was Rs. 16,000/- per sq.yard as on 16.11.2010. Subsequent to the execution of the sale document also the assessee has obtained the guideline value for the same municipal number of 2-4-34 and the market value as on 18.04.2011 was at Rs. 12,000/- per sq.yard. The District Registrar fixed the market rate at Rs. 26,000/- as against the guide line value of Rs. 12,000/- or Rs. 16,000/- as per their own records without giving reason for deviating the SRO value or the market value fixed as on 16.11.2010 as agreed by both the parties. On 08.06.2017 also, the assessee has obtained the market value certificate from Joint Sub Registrar, Registration and Stamps Department of Govt. of Andhra Pradesh which was certified that the value of the vacant land at Door No.2-4-34 was Rs. 12,000/- as on 28.02.2011. The Ld.AO brushed aside the evidence produced by th....