TMI Blog2010 (3) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... te writ, order or directions under article 226 of the Constitution of India, calling for the records and proceedings of demand notice dated October 23, 2008, issued by respondent No. 4 under the Stamp Act and to quash and set aside the same being exhibit A hereto. (aa) Section 50C of the Income-tax Act, 1961 be held and/or declared as ultra vires the articles of the Constitution of India." 2. A few facts may be set out. The petitioner is a co-operative society, which is the owner of the land on which stands a building, which they have allowed Ankur Realty Private Limited, Mumbai, to develop and sell under the development agreement. The agreement was sought to be registered as required under the provisions of the Bombay Stamp Act, 1958 (hereinafter referred to as "the Stamp Act"). In terms of the First Schedule entry 5(ga) of the Stamp Act, the agreement if relating to giving authority or power to a promoter or a developer, by whatever name called, for construction on, development of or, sale or transfer (in any manner whatsoever) of, any immovable property, the duty chargeable is the same as is leviable on a conveyance under clause (b), (c) or (d), as the case may be, of ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins tax as available under section 54 of the Act and as such section 50C is not in consonance with other provisions of the Act resulting in illegal and unreasonable discrimination without any justification. Section 55A provides for reference to the Valuation Officer for ascertaining the fair market value of the capital asset. Therefore, when there is a provision prescribing valuation to be assessed by the Valuation Officer, no additional purpose will be served by introducing section 50C of the Act. It is submitted that what can be checked and controlled is evasion of tax and the remedy should be proportionate and same cannot partake of the nature of confiscatory measure. Section 50C is a draconian provision which is in absolute contrast to the objects and purposes of the Income-tax Act, 1961. (D) That the Income-tax Act, 1961 is a law made under entry 82, Schedule VII, List I of the Constitution of India. As such considering sections 4 and 5 of the Act, which contemplate levy or tax upon all income and by no stretch of imagination the meaning and scope of "total income" be substituted by "the valuation assessed by the stamp valuation authority for the purpose of stamp duty". Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how could section 50C to that extent declare such valuation as the income of the assessee. It discloses no reasonable classification or intelligible differentia to justify the operation of section 50C of the Act and is therefore violative of article 14 and article 300A of the Constitution of India. It is a direct infringement upon the fundamental right to carry on any occupation or trade as guaranteed under article 19 of the Constitution of India and in the process it violates article 300A of the Constitution of India. (J) "Market value" is defined under the Bombay Stamp Act under section 2(na). The market value or the stamp duty determined upon any instrument of transfer does not connote the consideration received upon such transfer and therefore adopting the stamp duty valuation as the income or consideration received by the assessee as declared under section 50C of the Act is wholly misconceived and the same is not in consonance with the scheme of the Income-tax Act. The Central enactment in terms of section 50C is superior to the State Act and provisions of the Central enactment depending upon the outcome under the State Act, must be held as unconstitutional and ultra vire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to an order passed under section 31 of the Bombay Stamp Act on a reference made by the developer under section 31 of the Bombay Stamp Act for determination of the stamp duty payable. Against that order, there is a remedy available under section 53 of the Stamp Act. On this count itself the petition ought not to be entertained. 9. The stamp duty, it is set out, has been correctly levied under Schedule I article 5(ga) at the rate of 1 per cent. on the market value. The market value of the property in relation to any property which is the subject of the instrument is the price of the property which such property would have fetched if sold in the open market or consideration stated in the instrument, whichever is higher. After considering various aspects, it was held that the sum total of all the development agreement comes to Rs. 15 crores, on which the stamp duty of 1 per cent. has been calculated and has been levied and accordingly demanded. Thus the consideration to be received by the society under the agreement in terms of money has been taken to be the market value of the property. 10. For the purpose of discussion, we may gainfully reproduce sections 45, 48 and 50C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act . . . (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer." 11. A perusal therefore reveals that under section 50C the value adopted by stamp valuation authority or assessed for the purpose of section 48, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer. Apart from that under sub-section (2) where the assessee claims before any Assessing Officer that the value adopted or assessed, exceeds the fair market value of the property as on the date of transfer and the value so adopted by the stamp valuation authority has not been disputed by any appeal or revision or no reference has been made before any authority, court or High Court, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g tax. 13. With that we will now consider the various arguments advanced at the Bar. It may be mentioned that the petition as earlier filed, apart from the bald averments that section 50C of the Income-tax Act be declared as ultravires, no grounds to that effect were raised which have been subsequently pleaded by way of an amendment. Additional prayer clause has also been included to challenge the demand notice dated October 23, 2008 issued by respondent No. 4 under the Stamp Act and to set aside and quash the same. 14. In so far as prayer clause (a), as now substituted by the amendment is concerned, we are clearly of the opinion that as the developer had sought a reference on which the competent authority under the Stamp Act had given the valuation and pursuant thereto paid the duty as also the penalty imposed, that challenge will not be available to the petitioner in this petition as there is no longer a demand notice to be complied with. 15. We shall therefore confine ourselves to consider prayer clause (aa) by which it is prayed that section 50C of the Income-tax Act be declared as ultra vires the Constitution of India. Learned counsel on behalf of the petitioner ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been received and that is the point of time on which the income has to be assessed. It therefore, cannot be the case that the assessee would not be entitled to the benefit of exemption. It also cannot be said that such a classification would be arbitrary or unreasonable and/or discriminatory. Section 50C has been specifically introduced with a view to prevent evasion of tax and under-valuation of the transaction. It is in that context that section 45, section 48 and section 50C must be read. The classification, therefore, is in respect of an identifiable group of assessees. Both classes have to pay capital gains tax. In so far as section 50C is concerned, it pertains to a class of capital assets being land or building. We therefore do not find that the classification as being unreasonable and consequently discriminatory considering the object being, to tax the income arising from capital gains. Those grounds enumerated earlier, therefore, have no merit and are consequently rejected. 18. We may next deal with the argument that the Income-tax Act is a law made under entry 82, Schedule VII, List I of the Constitution of India and consequently the valuation assessed by the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Valuation Officer. However, before the report was received, the assessment was done by taking the value of the land as determined for stamp duty. The petitioner had filed the petition challenging the vires of section 50C of the Act which was dismissed. The assessee approached the Supreme Court which rejected the special leave petition and directed the petitioner to approach the authority by keeping open the question of vires of the provisions. This judgment, in our opinion, could be of no assistance as the only issue left open for consideration was the vires of the Act. 22. It is not the case of the petitioner that the valuation could not have been done under the provisions of the Bombay Stamp Act, 1958 and/or that the Collector acted contrary to law in levying stamp duty under Schedule I article 5(ga). Even otherwise as noted earlier, in the process of assessment it will be open to the assessee to invoke the provisions of section 66 by asking on the Assessing Officer to refer the matter to the Valuation Officer and that would be within the jurisdiction of the Valuation Officer. We are in agreement with the view taken by the Madras High Court in K. R. Palanisamy [2008] 306 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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