TaxTMI 
TaxTMI 
2008 (2) TMI 447
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....e time of hearing and also borne out by records are that the assessee individual owned a property No. 63/2/C The Mall, Kanpur, U.P., measuring 1863.10 metres, along with 7 others, which they wanted to transfer to M/s KAN Constructions & Colonizers (P) Ltd., for an apparent consideration of Rs. 2,34,00,000, by an agreement dt. 20th Sept., 2001, which was registered on 28th Nov., 2001. The implementation of the said agreement required "No Objection Certificate" (NOC) from the Appropriate Authority under the IT Act, 1961, in terms of s. 269UC(1), contained in Chapter XX-C of the Act, and accordingly, before registration Of the agreement deed, vide case No. RK-126, the assessee and others filed application in Form No. 37-I duly filled in, under Chapter XX-C, before the Appropriate Authority, Lucknow. NOC to the transferors for execution of the instrument in favour of the transferee was granted by the Appropriate Authority vide its order dt. 3rd April, 2002, after obtaining a valuation report from the DVO, which presumably did not say that the sale consideration as mentioned in the agreement for sale was understood. The property was also partly Nozul (leasehold) and to a greater extent ....
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.... Act), made a fresh reference to the DVO for valuing the property at the time of its sale and that the DVO determined, the fair market value (FMV) of the property (50 per cent undivided land and building) at Rs. 3.73 crores. Finally, in the assessment order passed on 31st March, 2006, the AO took the full value of consideration of the property sold at Rs. 3,34,42,244 by applying the provisions of s. 50C and computed capital gains on that basis. 5. On behalf of the assessee, three-fold arguments have been made against adoption of the full value of the property at Rs. 3,34,42,244, which are as follow: 5.1 Firstly, it has been argued that for all practical purposes, the property was transferred on 20th Sept., 2001, when the agreement for sale was executed. It has been contended that instead of drawing up an agreement for sale, the property could have, very well, been transferred on that very date or immediately thereafter, had the legal requirements of getting the sanction (permission) of the Appropriate Authority in terms of Chapter XX-C of the IT Act, 1961, not been there. Thus, the assessee was debarred from entering into the transaction (of actual sale of the property) under a l....
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....settled that the main test for determining the taxable event is that on the happening of which the charge is affixed The taxable event is that which on its occurrence creates or attracts the liability to tax." 5.3 The learned counsel for the assessee also wanted to rely on the discussions made by Kanga & Palkhiwala at p. 190 (last para) of their famous treatise on Income-tax Laws. (Vol. 1) to the effect that in case of capital gains tax, it is the law which was there at the time of transfer which should be followed. 6. On the other hand, the learned Departmental Representative has relied on the following judgments (some of which are found to be non-existent) in support of his contention that the law prevailing on the first day of the assessment year should be taken into consideration: (i) CIT vs. Isthmian Steamship Lines (1951) 20 ITR 572 (SC); (ii) 60 ITR 921 (non-existent); (iii) 191 ITR 83 (non-existent); (iv) Tea Estates India Ltd. vs. CIT (2000) 241 ITR 778 (Mad), holding that the law in force as on 1st April of the assessment year would be applicable for allowability of expenses. (v) CIT vs. Venkateswara Hatcheries (P) Ltd. (1999) 153 CTR (SC) 105 : (1999) 237 ITR 174 ....
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.... asset got somewhat delayed and the question of operability of s. 50C crept in. The learned counsel for the assessee has submitted in this connection that the very purpose of the erstwhile Chapter XX-C and s. 50C of the IT Act 1961 was the same, viz. prevention of undervaluation of assets in the matter of their transfers and underpayment of capital gains tax thereby and s. 50C was meant to replace the erstwhile Chapter XX-C. However, due to certain factors beyond the control of the assessee, an overlapping period of 3 (three) months viz. from 1st April, 2002 to 30th June, 2002 (from which date Chapter XX-C lost its operation) came in the picture during which period, both the provisions remained in force. In any case, it has been pointed out that the amount of apparent consideration as mentioned by the assessee in the agreement for sale of the property was not only approved by the Appropriate Authority by granting sanction for the transaction, but also strictly adhered to by the assessee and others in the final sale transaction. In view of this factual position, it has finally been submitted that it would be gross injustice to the assessee if his case be considered to be subject to ....
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....50C came into effect from 1st April, 2003. Hence, it would cover in a general manner the entire 'previous year' 1st April, 2002 to 31st March, 2003. The legislature certainly did not want that both the penal provisions should exist side by side. However, due to some misunderstanding somewhere, there was an overlapping period for three months, viz. from 1st April, 2002 to 30th June, 2002 and due to the misfortune of the present assessee, his case became target of both the provisions and that too not because of any fault on his part but on account of the delay on the part of Appropriate Authority to grant NOC to the proposed sale agreement. It is also a fact that ultimately, the sale was carried on at the price as mentioned in the agreement for sale in respect of which NOC had been granted by the Appropriate Authority. We also find that even the ultimate sale of the property also took place in May, 2002, when the provisions of Chapter XX-C were still operative. Hence, in our considered view, during the overlapping period, only the earlier restrictive provisions of Chapter XX-C would be applicable and not the provisions of s. 50C introduced later. Furthermore, this is the case of tran....
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....e direct that the amount of consideration as mentioned in the agreement of sale, which was ultimately approved by the Appropriate Authority by granting NOC to the assessee and others and also acted upon in the final sale transaction, should alone be taken into consideration for computation of capital gains. In other words, the computation of capital gains as shown by the assessee is being directed to be taken into account. 10. The following additional ground has been taken up by the assessee: "The AO erred and CIT(A) wrongly confirmed action of the AO in having referred valuation of the property at 63/2/C The Mall, Kanpur for valuing cost of acquisition at the fair market value as on 1st April, 1981 although the appellant had already furnished approved valuer (report in) respect of valuation." 11. The additional ground being purely legal in character and the decision on the said ground not requiring any material outside the materials already on record, the same has been admitted and is being deliberated upon as below. 11.1 It has been argued before us in this connection by the learned counsel for the assessee that the prerequisite conditions for referring the valuation of a pro....