TMI Blog2010 (6) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... ual consideration received was understated in the sale deed. The purpose of introduction of section 52(2) earlier and section 50C w.e.f. 1.4.2003 are for the purpose of achieving similar objectives. In the instant case also, the assessee herein has fulfilled a contractual obligation on 30-6- 2005, which the assessee is bound by law to carry out as per the sale agreement entered in March, 2003. Whether there was any under statement of actual consideration at the time when the sale agreements were entered into ? - 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- -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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was confirmed by Ld CIT(A). Hence the assessee is in appeal before us. 4. The assessee herein, by way of two sale agreements entered on 27.03.2003, agreed for the sale of the impugned properties for ₹ 29,31,000/- and ₹ 30,70,000/- respectively. At the time of entering into the agreements, the assessee had received advance of ₹ 11,000/- and ₹ 12,00,000/- from the vendees, being two brothers named V.Jayakanth and V.V.Kameswara Rao. Shri V.V.Kameswara Rao left India for further studies in 2002 and returned back to India in May, 2005 after the demise of his brother Shri V.Jayakanth, another vendee who expired on 20.5.2005. During the stay of V.V.Kameswara Rao in India, the impugned properties were registered in his favour by the assessee firm. According to the assessee, the delay between the dates of agreement and the sale deed was for reasons beyond the control of the assessee. According to Ld AR, both the vendees were regular Income tax assessees and the advance payments made as per Sale agreements were duly declared in their respective return of income. 5. The Ld AR has moved a petition for admission of an additional evidence consisting of a certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being a legal fiction created by the statute, is applicable to the impugned transactions and accordingly prayed for the confirmation of the orders passed by the tax authorities. 7. In the rejoinder, Ld AR submitted that the details of payment of advance have been declared by the vendees in the return of income filed by them and in that regard, he invited our attention to the copies of the return of income compiled in the paper book. 8. We have heard the rival contentions and carefully perused the record. The issue agitated before us revolves around section 50C of the Act. For the sake of convenience, we extract the section 50C(1) below: 50C (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority ) for the purpose of payment of stamp duty in respect of such transfer, 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 trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would apply only where the consideration for the transfer is under- stated and hence it would have no application in the case of a bonafide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. For the sake of convenience, we extract below the relevant observations of the Hon ble Apex Court on the rule of interpretation and the logical conclusion: 5. Now, on these provisions the question arises as to what is the true interpretation of s.52, sub-s.(2). The argument of the Revenue was, and this argument found favour with the majority judges of the Full Bench, that on a plain and natural construction of the language of s.52, sub-s.(2), the only condition for attracting the applicability of that provision was that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeded the full value of the consideration declared by the assessee in respect of the transfer by an amount of not less than 15% of the value so declared. Once the ITO is satisfied that this condition exists, he can proceed to invoke the provision in s.52, sub-s.(2), and take the fair market value of the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create. Keeping these observations in mind we may now approach the construction of s.52, sub-s. (2). 6. The primary objection against the literal construction of s.52, subs,(2), is that it leads to manifestly unreasonable and absurd consequences. It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well recognized rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature. Take, for example, a case where A agrees to sell his property to B for a certain price and before the sale is completed pursuant to the agreement and it is quite well known that sometimes the completion of the sale may take place even a couple of years after the date of the agreement the mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation of s.52, sub-s (2), and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation. It is now a well-settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even do some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction; Vide Luke vs. IRC (1963) AC 557 : (964) 54 ITR 692(HL). The Court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision. We think that, having regard to this well recognized rule of interpretation, a fair and reasonable construction of s.52, sub-s (2), would be to read into it a condition that it would apply only where the consideration for the transfer is understated or, in other words, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of K.P. Varghese, supra the Hon ble Apex Court contemplated a situation, by way of an example, where the completion of sale took place after a couple of years after the date of agreement. In this connection it is pertinent to extract the relevant observations of the Hon ble Supreme Court, at the cost of repetition, as the said example contemplated by the Hon ble Apex Court is squarely applicable to the facts of the present case. There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature. Take, for example, a case where A agrees to sell his property to B for a certain price and before the sale is completed pursuant to the agreement and it is quite well known that sometimes the completion of the sale may take place even a couple of years after the date of the agreement the market price shoots up with the result that the market price prevailing on the date of sale exceeds the agreed price, at which the property is sold, by more than 15% of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would fine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the government is legitimately entitled to, by pumping in black money. Thus we can see that the purpose of introduction of section 52(2) earlier and section 50C w.e.f. 1.4.2003 are for the purpose of achieving similar objectives. 11.3 In the instant case also, the assessee herein has fulfilled a contractual obligation on 30-6- 2005, which the assessee is bound by law to carry out as per the sale agreement entered in March, 2003. Now the next question that requires to be addressed is whether there was any under statement of actual consideration at the time when the sale agreements were entered into. The assessee has placed a copy of the certificate dated 16.4.2010 issued by the Jt. Sub Registrar, Visakhapatnam by way of additional evidence. According to the said certificate, the market value of the impugned property located at Allipuram Ward was ₹ 5000/- as on 26.3.2003. According to Ld AR, the sale value agreed to by the parties, as per the sale agreement entered into on 27-03- 2003 was more than the market value fixed by the Jt. Sub Registrar at the time the sale agreement was entered into. Thus according to Ld AR, there is no understatement or suppression of actual c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
