AMENDMENT of S. 50C ALLOWING RELIEF IS CURATIVE AND RETROSPECTIVE MADRAS HC – also speedy justice by Tribunal and High Court.

[DEV KUMAR KOTHARI]

Subject matter and judgment in this study are:

Section 50C of the Income Tax Act 1961 particularly the proviso relating to relaxation to consider date of agreement instead of date of registration of conveyance deed for the purpose of valuation by stamp authorities.

Judgment reported as  2020 (10) TMI 517 - MADRAS HIGH COURT - THE COMMISSIONER OF INCOME TAX, CHENNAI. VERSUS SHRI VUMMUDI AMARENDRAN in T.C.A.No.329 of 2020 Dated: - 28 September 2020 and judgments referred to therein.

Section 50C

In implementation of S.50C it was found that many times assesses faced undue hardship and difficulties when agreement to sell a property was executed in earlier years and transfer took place in later years. During the intervening period price of property has increased but the vendor is bound to perform agreement and can claim only the agreed consideration. To remove such difficulties, a proviso was inserted to apply provision in a manner that in such cases the fair market value as per stamp authorities as on the date of agreement can be considered as deemed consideration instead of fair market value adopted for assessment of stamp duty. The proviso also provided some safeguards and check and balances to ensure that only in genuine case of prior agreements, this proviso will apply and cannot be applied when there is lack of bona fide.

The amendment was made on recommendation of committee constituted for rationalization and simplification of provisions. The amendment was also with a view to rationalize provisions of S.50C. Though amendment was specifically stated to be w.e.f. 01.04.2017 that is assessment year 2017-18. However, considering the purpose of amendment

    In the case in study, the Madras High Court has held that the amendment was rightly applied in the given assessment year of 2014-15 by the CIT(A) and confirmed by Tribunal to hold that the proviso was applicable retrospectively.

Dates from assessment to judgment of High Court:

1. Return of income  was filed on 28.09.2014
2. the assessment was completed under Section 143(3) of the Act vide order dated 29.12.2016.
3. The assessee filed an appeal before the Commissioner of Income Tax (Appeals)-6, Chennai [CIT(A)]. The appeal was allowed by order dated 25.07.2019.
4.  The Revenue preferred an appeal before the Tribunal which was dismissed vide order dated 27.02.2020,
5. Judgment of the High Court is dated: - 28 September 2020

On perusal of the dates we find that there was delay in assessment (27 months from filing of ROI). Then it took about 31 months in filing and disposal of appeal before the CIT(A).

 In case of second appeal before Tribunal we find  that it took only seven months in filing and disposal of appeal before Tribunal.

In process of filing of appeal before High Court and disposal of the same by honorable High Court  also took only seven months.

This shows that revenue was prompt in filing of appeal before Tribunal and High Court and honorable Tribunal and honorable High Court both acted very promptly. This also shows that if government department act properly, they can work more speedily and effectively. There are good number of people to do work.

Assessments and first appeals can also be disposed more speedily. However, we find that generally the departmental work are completed just few days before limitation and it there is scope for condonation of delay, there are delays in filing of appeals with petition for condonation of delay. This results in more burden on courts.

Decision in the judgment:

While confirming the order of ld. CIT(A) and honorable Tribunal, honorable High court has held that the proviso inserted is curative and thus apply to earlier years ( from the date when provision intended to be cured came into force). Salient features are analyzed below:

1. Case on hand is very straight forward case.
2. There is an Agreement for Sale, agreeing to sell the property at ₹ 19 Crores and a sum of ₹ 6 Crores has been received as advance sale consideration through banking channels (demand draft). There cannot be any doubt  and in fact no doubt was  expressed by the AO.
3.   The proviso to Section 50C(1) deals with cases where the date of the agreement, fixing the amount of consideration and the date of registration for the transfer of the capital assets 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.
4. The amendment by insertion of proviso seeks to relieve the assessee from undue hardship.
5. Conditions laid down in such proviso stand satisfied.
6. Therefore, the Court held that there cannot be  hesitation to hold that the proviso to Section 50C(1) of the Act should be taken to be retrospective from the date when the provision exists.

Well settled legal position about retrospectivity:

It is well settled by several judgments of the Supreme Court in relation to several provisions that an amendment which is to remove difficulties or anomalies or doubt or incongruity are retrospective in nature and need to be applied from the date when the provision which caused such hardship came into force. The amendment can be by way of insertion of a new clause or provision or explanation or  proviso, etc.) . The  principle ''lex prospicit non respicit'' meaning that the law look forward and not backwards is general rule of interpretation.

However, in case any provision relating to taxation, which have some doubts, ambiguity or hardship can be rectified to remove such doubts, hardships etc.by way of amendment.  If an amendment to that effect is made, it should be applied retrospectively to ensure that such doubts, difficulties, ambiguity is removed from inception and any taxpayer does not suffer due to such lacking in original provision (prior to amendment).

Request for proper amendments:

Therefore, while drafting such amendments, it is desirable that the legislator should specifically mention that the amendment shall apply from original date. Unfortunately, we find that the amendments are mentioned to have effect prospectively, causing litigation. There are large number of cases on such issues. If an amendment is stated to be effective from particular date, the original  tax authority is duty bound to read the same as such. However, on appeals such relief are allowed by holding amendment as retrospective. Therefore, to remove scope of unnecessary litigation, it is requested to concerned authorities and team who work on drafting amendments to ensure that such amendments are mentioned to have effect from the original date from which the provision came into force.