TMI Blog2012 (3) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... f the present case. Determination of value for the purpose of section 50C - Stamp value authority versus Registered Valuer - Value determined by Stamp Valuation Officer at Rs.33,76,391 - by registered value 13,88,000 - Held That:- After going through these reasons, we are of the view that if the valuation of this property is taken to Rs.20 lakhs instead of Rs.33,76,391/- or shown by Registered Valuer that will meet ends of justice. Though the valuation of Registered Valuation Officer is on some authentic method but there can be some shortcomings also. The AO has not referred the matter to DVO whereas he should have referred the matter to the DVO for taking valuation from him so that both the valuation can be compared. It is a matter of small addition. Therefore, we are not inclined to send the matter to the file of the AO for referring the matter to the DVO for the purpose of ascertaining actual market value. Accordingly, we direct the AO to adopt valuation of this property at Rs.20 lacs for the purpose of capital gains. We order accordingly. - ITA No. 135/JP/2011 - - - Dated:- 3-1-2012 - SHRI R.K. GUPTA, SHRI N.L. KALRA, JJ. Appellant by : Shri Sanjeev Jain, AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not applicable as held by various Courts and Tribunal Benches. These contentions of the assessee were not accepted in view of the observation of the ld. CIT(A) that amendment to section 50C was made w.e.f. 01.10.2009, which is clarificatory in nature and is applicable prior to the date of amendment. Now the assessee is in appeal here before the Tribunal. 4. The assessee filed details written submissions and were also explained in the appellate proceedings. The attention of the Bench was drawn on various documents placed in the paper book. Attention was drawn on copy of agreement, copy of request letter by the buyer by which the assessee was requested to hand over the possession before the sale deed, as the buyer wants to start construction and development on the plots purchased. Thereafter, the possession was handed over. The letter of the same was placed on record. The work was allotted to the contractor and letter of contractor alongwith bill are also placed on record. Thereafter, the sale deed was executed. Accordingly, it was requested that the provisions of section 50C of the Act, are not applicable. 5. On the other hand, the Ld. DR placed reliance on the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04-10-2006 i.e. Transfer of Property u/s 2 (47) (v)) Value per valuation report of Registered Valuer Rs. 11,06,63,000/- (As on 04-10-2006 i.e. Transfer of Property u/s 2 (47) (v)) Registration of Sale Deed Date : 08-01-2007 Sale Proceeds as per Sale Deed Rs. 13,81,00,000/- Value assessed by Stamp Valuation Authority Rs. 18,30,80,376/- (As on 08-01-2007 Registration of Sale Deed) Transfer of Property on 04-10-2006 : 1. The assessee entered into an agreement on dated 07-09-2006 with the buyer to sell the property for a total consideration of Rs. 13,81,00,000/-. However it is to be noted that the buyer had already paid a sum of Rs. 11.00 Lacs to the assessee towards purchase consideration prior to the execution of formal agreement as per their mutual understanding arrived at. 2. The buyer arranged for a standard penetration test for safe bearing capacity of the land. As a result of the test the buyer came to know that the sub soil of the land is very hard and rocky and would require a lot of time in excavation, being a very time consuming and slow process. The bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the commencement of proceedings u/s 143 (2) / (3) of the Act, clearly bore the fact that the possession of the property was transferred to the buyer in the month of October, 2006. 5. Thus, it is an established fact that the buyer was put in full possession of the property in question. He issued work orders and started construction work thereupon, incurred expenditure on it. Even the local news papers covered the event. The events gave rise to a situation whereby the registered ownership of the property was with the seller (assessee) whereas the possession or de facto ownership of the property was allowed to and being enjoyed by the buyer. 6. The assessing officer stated in his assessment order that some of the clauses of the sale agreement dated 07-09-2006 and deed of sale dated 08-01-2007 do not endorse the fact of possession being transferred on 04-10-2006. 7. As the sale agreement dated 07-09-2006 was executed prior to the handing over of possession, no mention could have been found in it regarding possession of the property being transferred to the buyer on dated 04-10-2006. 8. As far as deed of sale dated 08-01-2007 is concerned, we should bear in mind the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments prove that possession of the plot was handed over by the appellant in 2006 to the buyer. Authenticity of these documents has not been challenged by the AO. However AO took the date of transfer as 08.01.2007 because the sale deed was registered on that date. (emphasis supplied) 11. It is to be appreciated that this transaction on dated 04-10-2006, involving the allowing of the possession to be taken or retained in part performance of the contract of the nature referred to in section 53 A of the Transfer of Property Act, 1882, amounted to transfer in terms of provisions of Section 2 (47) (v) of the I. T. Act, 1961. 12. Your kind attention is drawn to the provision of Section 2 (47) (v) of the Income Tax Act, 1961, which read as under : 2 (47) transfer, in relation to a capital asset, includes, - (v) any transaction involving the allowing of the possession of any immovable property to the taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) 13. In the case of CIT v. Rajasthan Mirror Mfg. Co. [2002] 125 TAXMAN 1 (Raj.) High Court of Rajasthan, Jaipur Bench held that transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per section 53A of Transfer of Property Act was rightly invoked; subsequent act of assessee in executing power of attorney and sale deeds executed by PA holder on basis of such power of attorney would not in any way alter status of the parties to agreement (Paper Book for Decisions : Page No. . .) In the case of Mrs. Bertha T. Almeida v. Income-tax Officer, Ward 24(1)(3) in the ITAT Mumbai Bench B [2011] 48 SOT 109 (MUM.) (URO), it was held that Whether even if legal title has not passed to transferee, transaction shall still be regarded as transfer where property is handed over in part performance of agreement (Paper Book for Decisions : Page No. . .) 18. In the case of Sureshchandra Agarwal v. Income-tax officer, Ward 20(3)(3) in the ITAT Mumbai Bench F [2011] 15 taxmann.com 115, it has been held that Amendment made in section 53A of Transfer of Property Act, 1882, by which requirement of registration of transfer deed has been indirectly brought on statute need not be applied while construing meaning of 'transfer' with reference to section 2(47) (Paper Book for Decisions : Page No. . .) 19. In the case of V. Ramchandra Construction (P.) Ltd. v. Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 transfer. 25. In the present case, on the date of transfer i.e. on 04-10-2006 sale deed was not registered with the Stamp Valuation Authority, hence no value was adopted or assessed by the Stamp Valuation Authority. Accordingly the provisions of section 50 C (1) of the I. T. Act, 1961 are not applicable to this case as the provisions do not cover the transactions which are not registered with the stamp valuation authority on the date of transfer. 26. In Navneet Kumar Thakkar v. ITO (2008) 19 (II) ITCL 27 (Jd-Trib) : (2008) 298 ITR 42 (Jd-Trib) : 110 ITD 525 (Jd-Trib), while applying ratio laid down by Supreme Court in CIT v. Amarchand N. Shroff (1963) 48 ITR 59 (SC) and CIT v. Mother India Refrigeration Industries (P) Ltd. (1985) 155 ITR 711 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the possession to the buyer against part performance. The transfer would constitute a full and complete transfer in terms of provisions of section 2 (47) (v) of the I. T. Act, 1961. 30. The transaction enabling enjoyment of immovable property to the buyer is also squarely covered under the provisions of section 2 (47) (vi) of the I. T. Act, 1961 and it amounted to transfer on dated 04-10-2006, despite the fact that the sale deed was not registered on that date. 31. Once a property is transferred, the capital gains tax liability arises, as it happened on dated 04-10-2006 in the case of the assessee. 32. As the sale deed was not registered on the date of transfer i.e. 04-10-2006, the provisions of section 50C are not applicable to the case of the assessee. Our view point stands fully confirmed by the explanatory memorandum to the Clause 25 of the Finance Act, 2009, as stated above. 33. The amendment carried out in the Section 50C to extend its scope to the transactions which are not registered with the Stamp Valuation Authority on the date of transfer has been made applicable in relation to transactions undertaken on or after 01-10-2009. Risk Factors : 34. There were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the decision of Honorable Visakh- Tribunal in the case of M. Siva Parvathi Ors. v. ITO (2011) 7 ITR 468, wherein it was held that the assessee herein have fulfilled a contractual obligation in October, 2004, which they are bound by law to carry out as per the sale agreement entered in August, 2001. Since the final registration of the sale is only in fulfillment of the contractual obligation, the logical conclusion is that the provisions which do not apply at the time of entering into the transaction initially would not also at the time the transaction is completed. Registration of Sale Deed : 37. The sale deed of the property was subsequently registered on 08-01-2007, after a time lag of more than 3 months. As already explained, in the meanwhile there had been an steep upward revision in Land Rates by the District Level Committee to be applicable w.e.f. 20-11-2006, the value adopted / assessed by the Stamp Valuation Authority on the basis of the revised rates was Rs. 18,30,80,376/- on the date of registration i.e. 08-01-2007. (Paper Book Sr. No. E 10, Page No. 107-108) 38. But at the cost of repetition, we would like to emphasize that the registration of sale deed, subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that possession of the plot was handed over by the appellant in 2006 to the buyer. Authenticity of these documents has not been challenged by the AO. However AO took the date of transfer as 08.01.2007 because the sale deed was registered on that date. (emphasis supplied) 46. The Ld. CIT (Appeals) has rightly accepted the fact of possession of the property being handed over to the buyer by the appellant on dated 04-10-2006. When this fact is admitted, transfer is completed in terms of the provisions of section 2 (47) (v), so it is erroneous on the part of the AO to take the date of transfer as 08-01- 2007. 47. The Ld. CIT (Appeals) has rejected the first argument of the assessee that the provision of Section 50C are not applicable to his case by stating in his order (Page No. 11, Para 3.5) that the amendment to section 50 C as mentioned above clearly indicates that the intention of legislature was to cover all such transactions. The amendment has been made only with a view to plug loop hole existing in the earlier provision. I therefore held that AO has rightly invoked the provisions of section 50 C in this case. 48. The Ld. CIT (Appeals) has also stated in his order ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. [Explanation 2. For the purposes of this section, the expression assessable means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] 54. Hence it is incorrect to say on the part of the Ld. CIT (Appeals) that there is no provision u/s 50 C for taking the value of property as on 04-10-2006 as full value of consideration. There has been incorporated specific amendment in the section to take the assessable value as on the date of transfer as deemed to be the full value of the consideration. As per the amended provisions, in the present case, the assessable value means the price which the stamp valuation authority would have adopted or assessed, if it were referred to such authority for the purpose of the payment of stamp duty on dated 04-10-2006. That price works out to Rs. 13,83,28,063/- (based on prevalent DLC rates) (Paper Book Sr. No. E 9, Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on 20.11.2006/agreement to sale on 7.9.2006, yet long term capital gain is liable to be taxed in the year 2007-08, as sale deed was executed on 08.01.2007. There is no dispute raised by the assessee to assess long term capital gains in pursuance of agreement to sale is without any legal sanction as long term capital gains arising to the assessee on the sale has to be assessed only in assessment year 2007-08. Finally, it is also submitted that finality of sale is attained on execution of sale deed. Therefore, long term capital gain can be assessed on execution of sale deed. Regarding valuation report filed with the paper book, it was submitted that the same has no basis, as the same is not supported by comparable cases or sound reasoning. The assessee has also filed the rejoinder in response to written submissions and para-wise reply has been given in the rejoinder. 6.2. We have considered the written submissions of both the parties and rejoinder of the assessee alongwith the order of the AO as well as the order of CIT(A) and various case laws. This is an undisputed fact that the agreement to sale was executed on 07.09.2006 for a total consideration of Rs.13,81,00,000/-. The b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. Under the Income Tax Act, it has been mentioned that any transaction, whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. 6.3. The Hon ble Gujarat High Court in the case of CIT vs. Hormasji Mancharji Vaid (2001) 118 Taxman 276 (Guj)/(FB) has clearly held that when the transfer of document is executed and the property passes and merely because there is no registration certificate, the state coffers should not suffer. If the view is propounded that only on registration the act of transfer will be complete, then in that case, if the document is not registered, though the assessee will be enjoying the property, he will say that is not liable to pay the tax. But that is not the intention of the legislature. The word transfer as indicated in the income tax act is required to be considered and not sale as indicated in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the land on the basis of sale agreement and want to save themselves from the valuation to be adopted by the Stamp Valuation Authority. Accordingly, from 01.10.2009 even if the land is transferred through the agreement, provision of section 50C is still applicable. However, these provisions are not applicable on the facts of the present case because the transfer, was already made much before the date of amendment, made to section 50C. So taking into consideration this aspect that the sale agreement was much before the date of sale deed execution and the possession was already given on 4.10.2006 before the sale deed execution, which was executed on 08.01.2007. Therefore, we hold that the provision of section 50C(1) are not applicable on the facts of the present case. Accordingly, we direct the AO to recomputed the capital gains by taking the sale consideration as per sale agreement dated 07.09.2006.s 7. Ground No.2 which relates to confirming the addition of Rs.6,92,130/- u/s 50C(1) of the Act, in respect of Property No.2 - AMC No.8/278 = 6283, Karakka Chowk, Ajmer. The assessee sold this property as per sale deed at Rs.13 lakhs. The value assessed by Stamp Valuation Officer at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty in question could not be assessed on the basis of prevailing rate valuation of the property sold should be assessed @ 50 % of the prevailing market rate (copy enclosed). (E 24) (l)The assessee also obtained valuation reports from the registered valuer. The registered valuer s report, based on income capitalization method, clearly mentioned that the building is rented out and the rent is fairly maintainable and no tenant can be evicted, nor rent enhanced except under the provisions of the Rent Control Act. Another valuation report based on distress market value clearly stated that the part property was rented out for Rs. 800/- per month for more than 50 years. Secondly commercial shops in existence were neither approved by A.M.C. Ajmer not built by the owner of the property. Tenants converted themselves rented portion into commercial. These reports were submitted by the assessee in support of his contention. (copy enclosed). (E 25) (ii) We would like to draw your kind attention to relevant portions of the provisions of Section 50C of the Income Tax Act, 1961, which read as under : [Special provision for full value of consideration in certain cases. 50C. (1) Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y (v) The value so adopted or assessed by the stamp valuation authority has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court. (vi) Hence the assessing officer was required to refer the valuation of the property to a Valuation Officer in terms of the provisions of section 50 C (2) of the I. T. Act, 1961. (vii) However the assessing office ignored the submissions made by the assessee by stating that provisions of section 50 C in unambiguous terms make it binding upon the A. O. of calculate capital gains adopting the value taken by the sub registrar for the purpose of stamp valuation and proceeded to finalize the assessment by taking the value adopted by the stamp valuation authority as deemed sale consideration. But this is only half truth. The A. O. simply ignored the another part of the provisions of section 50 C which gave a right to the assessee to stake a claim that he is not in agreement with the value adopted or assessed by the stamp valuation authority. (viii) Your kind attention is drawn to the decision of Hon. ITAT Jodhpur Bench in the case of Meghraj Baid v. Income-tax Officer [2008] 23 SO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92,130/- made by the A. O. needs to deleted. The value as per valuation report obtained by the assessee from the registered valuer i.e. Rs. 12,78,000/- and the value as per sale deed is Rs. 13,00,000/-. Hence the higher of the two values i.e. Rs. 13,00,000/- should be adopted for the purpose of calculation of capital gains. The assessee s share being 1/3rd of such capital gain, it should be calculated accordingly. (xv) Please note that the fair market value of the property is Rs. 12,78,000/- (distress market value) or Rs. 13,88,000/- (Rent Income Capitalisation Method), based on valuation reports obtained from the registered valuer. (Copy of valuation reports enclosed) 5.2 Argument of the appellant is not acceptable. As mentioned earlier section 50 C is a deeming provision and AO is therefore justified in taking the value of this property on the basis of value taken by sub-registrar for stamp duty purpose. AO has mentioned in the assessment order that valuation made by sub-registrar for the purpose of stamp duty was not challenged by appellant. Addition of Rs. 692130/- is in order and the same is confirmed. Ground No. 3 is thus dismissed. 9 On the other hand, the Ld. DR plac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
