TMI Blog2008 (11) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... by SVA in case declared sale consideration is less than valuation made by SVA. Sec. 50C thus creates a legal fiction and its effect has to be given to the extent fiction is created but not more. Also, we notice that s. 54F has been placed subsequently to ss. 45, 48 and 50C clearly indicating that legislature intended to apply the provisions of s. 54F and alike sections subsequent to application of ss. 45, 48 and 50C unless so expressly provided in subsequent sections. There is no reason to take a different view than what is expressed in Jitendra Mohan Saxena's case [ 2007 (7) TMI 361 - ITAT LUCKNOW-B] . In the present case, sale consideration shown by the assessee in respect of four plots as mentioned above is less than the valuation done by Stamp Valuation Officer and there is no claim by the assessee before the AO that such valuation by SVA is less (sic-more) than the fair market value of the plots under transfer, the AO has no option but to adopt the valuation made by SVA as full value of consideration in place of sale consideration shown by the assessee and calculate chargeable capital gains accordingly. As a result, we do not find any reason to interfere in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of s. 50C(1) of the Act. 8. Because on a proper interpretation of the provisions of s. 50C(1) it would be found, that the working of long-term capital gains as arrived by the assessing authorities is not only erroneous but is misconceived. Because in any case the addition of Rs. 17,61,773 under the head capital gains is not in accordance with the provisions of law for- (i) Charge of tax under s. 45(1) where fair market value is not contemplated as is deemed under s. 50C. (ii) Import of the expression 'profits and gains arising from transfer' under s. 45(1) means the real gain and the sum beyond the real contractual obligation value cannot be profit or gain. (iii) The full value of consideration as envisaged under s. 50C will not accrue because the special meaning of the expression 'full value of the consideration' is expressly for s. 48 only. The fair market value ascertained under s. 50C as far as it is more than the contractual value of transfer, is never accrued or received under s. 45(1) which is the charging section/provision. (iv) The charging s. 45 does not extend the levy of tax on capital gain beyond the 'profits and gains arising from the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in s. 50C(2) is "may" which bounds the AO to make the reference to the DVO and thereafter adopt the valuation of capital asset on the basis of valuation done by the DVO or by SVA. Since the capital asset was not referred to the DVO, the valuation adopted as per SVA would be legally incorrect. The learned CIT(A), after referring the matter back to the AO for his comments on the submissions made by the assessee, confirmed the decision of the AO in following words: "7. I have carefully considered the rival submissions made. The special provision for full value of consideration in certain cases as spelt out in s. 50C(1) of the IT Act are very clear, that where the consideration received or accruing as a result of the transfer by an assessee of a capital assets, being land or building or both, is less than the value adopted or assessed by any authority of State Government, (referred to as SVA) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purpose of s. 48, be deemed to be the full value of consideration received or accruing as a result of such transfer. Wherever the sale consideration is less than the value adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed in ground No. 9 above. He further emphasized that once assessee has claimed exemption from capital gains by investing as per s. 54F then capital gains would not arise and therefore, provisions of s. 50C could not be invoked. In other words, the submission of the learned Authorised Representative is that wherever an assessee has claimed exemption under ss. 54B, 54D, 54E, 54EA, 54F........... then there is no occasion to charge capital gains and therefore, provisions of s. 45 cannot be invoked as no capital gains could be computed. Once charging section fails substituting sale consideration by valuation as per SVA would not arise. He referred to the words "save as otherwise provided in ss. 54, 54B....." used in s. 45 to emphasize that if there is investment as per those sections then there will not be any profit and gains arising from the transfer of capital asset and therefore, substitution of sale consideration by valuation as per SVA would not arise. The learned Authorised Representative also submitted that s. 50C only provides taxing of capital gains on notional or artificial income. Whereas s. 45 provides taxing of capital gains on real capital gains and not on artifici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 45 will fail and so s. 50C. He submitted that the provisions of s. 45 remain intact and in place even where assessee has made investment as per ss. 54, 54B.... 54F.... etc. Sec. 54F only provides method of computation of capital gains and does not provide exemption from charging s. 45. He submitted that if an assessee does not invest full consideration into a new asset then he would be charged capital gains as per calculations laid down in s. 48 and in those sections capital exemption from capital gains is available only to the extent such investment is made by the assessee in new asset. Where part investment is made in new asset then capital gains would be charged with respect to the sale consideration not invested. According to him, the provisions of s. 54, 54B etc. follow charging s. 45 and charging s. 45 does not follow those exempting sections. The learned Departmental Representative then referred to the argument of the learned Authorised Representative about real sale consideration and submitted that merely because assessee does not get opportunity to invest difference between notional sale consideration as per s. 50C(1) and sale consideration shown by the assessee the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n "and" is not there but a semi-colon is placed between the two clauses which only indicates that the two clauses are in continuation to each other and therefore, conditions laid down in both of them are required to be satisfied together. In other words, the assessee has to claim before the AO that valuation as per SVA exceeds the fair market value of the capital asset under transfer and further that such valuation is not in dispute before any appellate authority under Stamp Duty Act. If we accept the argument of learned Authorised Representative that both the clauses should be read independently and in other words, should be read as separated by conjunction "or", then its effect would be that cl. (a) will become otiose and only on valuation as per SVA not being disputed before appellate authorities under Stamp Duty Act, the AO will have to refer the property to the DVO without comparing the valuation as per SVA with the fair market value. As per this argument, the assessee has only to show that valuation as per SVA is undisputed before their appellate authorities. It will be enough for the AO to refer the property to the DVO. In other words, there is no occasion for the AO to appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue is less than the valuation as per SVA, he may also decide against such reference to the DVO. That is why the word used by the legislature in s. 50C(2) is "may". It cannot mean "shall" because if it is made mandatory to refer every claim of the assessee to the DVO then application of mind by the AO about such claim would become redundant and the word "may" would lose its significance. Therefore, we reject the contention of the learned Authorised Representative that in every case where valuation as per SVA is not challenged under Stamp Duty Act then AO has to necessarily refer the property to the DVO without there being any claim to this effect and without there being any material submitted by the assessee to show that fair market value of the property is less than the valuation as per SVA. 10. Much emphasize has been laid by learned Authorised Representative on the effect of semi-colon which separates cls. (a) and (b) of s. 50C(2). Semi-colon is a mark for co-ordination. Its function is to show relationship between elements of a sentence. A full stop might break or make the relationship absurd. It co-ordinates the two clauses in the same section or sub-section though these cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT vs. Budur Thippaiah (1976) 103 ITR 189 (AP), held that punctuation should not ordinarily be ignored, while interpreting the Indian statutes; but any interpretation relying on punctuation should not result in any absurd result, so as to defeat the very object of the statute. Comma or punctuation cannot control the meaning of the section and so would be the effect of semi-colon. 15. A little different view was taken in the case of Mahendrakumar Ishwarlal Co. Ors. vs. Union of India Ors. (1973) 91 ITR 101 (Mad), wherein the Hon'ble Madras High Court restricted the role of punctuation while interpreting the provisions of IT Act, 1961. It is held that while enacting Indian IT Act meticulously to punctuate the provisions and the sections contained therein, it would not be inappropriate if punctuation of a particular provision is also taken into consideration for the purposes of interpreting the relevant provisions on the principles of contemporaneo exposition. However, in the case of CET vs. T.S. Krishna (1970) 78 ITR 541 (Mad), it was held that punctuation is no part of an enactment and has a limited part to play when the language employed by the legislature is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions as mentioned in cl. (a) and cl. (b) of s. 50C(2) should be cumulatively satisfied. Thus, the argument of the learned Authorised Representative based on interpretation of semi-colon between cl. (a) and cl. (b) that if either of the conditions as mentioned in cl. (a) and cl. (b) are satisfied then AO has to refer the property to the DVO is required to be rejected. 19. The learned Authorised Representative has emphasized on word "may"' used in s. 50C(2) after cls. (a) and (b). According to him. it is mandatory and therefore, AO is required to refer the property to the Valuation Officer. Usually, word "may" provides a discretion to the AO and that discretion has to be exercised on fulfillment of conditions laid down in the statute. Thus, wherever "may" defines certain conditions casting an obligation on the assessee to fulfill those conditions, and thereafter a duty is imposed on the statutory authority to take certain actions as provided in the statute then fulfillment of those obligations becomes imperative before the statutory authority takes the action which is statutorily required to be taken by him. The difference between use of words "may" and "shall", in our considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion done by SVA. In contrast to this, in s. 50C the word "may" is used enabling the AO to refer the valuation of the capital asset to the DVO subject to the obligations fulfilled by the assessee as laid down in cls. (a) and (b). 22. The third argument of the learned Authorised Representative is that once the assessee has invested in property as mentioned in s. 54F then charging s. 45 will fail and therefore, provisions of s. 50C(1) cannot be invoked. His argument is based on the interpretation of the phrase "save as otherwise provided in ss. 54, 54B........" as mentioned in s. 45. For the sake of convenience, we refer to s. 45(1) as under: "45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in ss. 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place." 23. The phrase "save as otherwise provided in ss. 54, 54B........" only carves out an exception and does not whittle down or overcome charging section as contained in s. 45. Sec. 45 provides a gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains will be made. It is not a case that merely because provisions of s. 54F are applicable to an assessee entire capital gains would be saved and therefore, no capital gains would be chargeable. Thus, saving under s. 54F depends upon investment in new asset of net consideration received by the assessee on sale of old asset. The quantum of net consideration is the result of transfer of the old asset and charge of the capital gain is only on the old asset. Investment in new asset does not and cannot nullify or take away the case from charging s. 45. Charging s. 45 comes into play the moment there is transfer of capital asset and there is profit and gains arising from such transfer. Thus, first it is s. 45 which comes into operation then it is s. 48 which provides computation of capital gains and thereafter it is s. 54F which saves capital gains to the extent investment in new asset is made. 25. Once s. 45 comes into operation as a result of transfer of capital asset resulting into profits and gains the question of determining net consideration for the purposes of computing capital gains arise thereafter. This is provided in s. 48. It enables the AO to reduce expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec. 145 also provides estimation of income by AO under certain circumstances when he has rejected the books of account. There also no real income flows to the assessee and he also does not have any opportunity to claim any deduction/exemption as provided under IT Act, 1961 particularly in Chapter VI-A in respect of additional income so estimated by the AO. Merely because the income is assessed more than what the assessee has declared, and further because he did not get opportunity to invest that surplus for claiming exemption or deduction like in Chapter VI-A, it could not be held that such additional estimated income or deemed income could not be taxed. Estimation of income is a statutory phenomena under IT Act and the AO resorts to such estimation of income irrespective of the fact whether real money flows to the assessee or not, in respect of such additional income assessed. The two do not have any co-relation i.e., estimation of income cannot be held invalid merely because there is no real flow of money and assessee did not get opportunity to invest it in claiming deduction/exemption. In fact, if we accept such interpretation as advanced by the learned Authorised Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DVO then he has to compare such valuation with the valuation done by SVA. If valuation made by the DVO is less than the valuation by SVA such lesser value will be adopted in place of sale consideration shown by the assessee. (v) Where valuation done by the DVO is more than the valuation done by SVA then valuation done by SVA will be adopted as full value of consideration in place of sale consideration shown by the assessee. 31. There is no reason to take a different view than what is expressed in Jitendra Mohan Saxena's case. In the present case, sale consideration shown by the assessee in respect of four plots as mentioned above is less than the valuation done by Stamp Valuation Officer and there is no claim by the assessee before the AO that such valuation by SVA is less (sic-more) than the fair market value of the plots under transfer, the AO has no option but to adopt the valuation made by SVA as full value of consideration in place of sale consideration shown by the assessee and calculate chargeable capital gains accordingly. 32. As a result, we do not find any reason to interfere in the order of the learned CIT(A) and the same is, therefore, confirmed. 33. In the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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