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TMI Blog2012 (3) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... e property situated at A.S.C. Road, Soni Colony, Anand Nagar, Vaishali Nagar, Near Ana Sagar, Ajmer, was sold as per agreement for Rs.13,81,00,000/-. But sub-registrar taken the value of this property at Rs.18,30,80,376/-. The AO by invoking the provisions of section 50C(1) made an addition of Rs.1,49,93,459/-. The AO has clearly held that the provisions of section 50C(1) are mandatory and as per this section, the sale consideration has to be adopted as adopted by the Stamp Valuation Officer. Accordingly, he rejected the contention of the assessee. He has passed a detailed order for this reason. The case laws relied upon by the assessee were found distinguishable by the AO. Detailed submissions have been filed by the assessee before the ld. CIT(A), which have been tabulated at pages 3 to 14. Thereafter, the Ld. CIT(A) after discussing the issue in detail has given his finding in paras 3.1 to 3.7 and held that the provisions of section 50C are applicable. The Ld. CIT(A) also observed that amendment to section 50C was made w.e.f. 01.10.2009, which extends the scope of section 50C to include transactions, which are not registered with stamp duty valuation authority and executed throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o amended provisions of section 50 and various other case laws. It will be useful to reproduce the written submissions filed on behalf of the assessee so that all the facts and observations of both the authorities can be assessed easily. "Ground of Appeals No. 1 : The Learned C.I.T. (Appeals) has erred in law as well as on the facts of the case in confirming an addition of Rs. 1,49,93,459/- u/s 50 C (1) of the I.T. Act, 1961 in the case of Property No. 1 - Christian Ganj, Anasagar Circular Road, Ajmer, deeming the value assessed by the stamp valuation authority on the date of registration of sale deed as full value of consideration whereas the said property had been transferred before registration of sale deed by allowing the possession to be taken or retained by the buyer in part performance of a contract as well as by enabling the enjoyment of it. Brief facts of the case are as under : Property No. 1 - Christian Ganj, Anasagar Circular Road, Ajmer. (Assessee is co-owner, having 1/3rd share in above property.) Agreement to Sale &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time in excavation, being a very time consuming and slow process. The buyer requested the seller vide its letter dated 30-09- 2006 to hand over the possession of the said land. They stated that in order to give speed to their project and gain on the lost time, they wished to start excavation work immediately. They also wanted to put a temporary site office and dig a bore well. They promised to keep the land guarded all the time. 3. As per request of the buyer, the assessee allowed the possession of the property to the buyer on dated 04-10-2006 against part payments received. The buyer was enabled enjoyment of the property since thereafter. 4. The fact, that the possession of the property was allowed to the buyer on 04-10-2006 and the buyer was in full enjoyment of the possession of the property since thereafter, can be verified from the following documentary and / or other external evidences (Paper Book Sr. No. E - 4, Page No. 48-67) : (a) Bill of Professional charges of M/s Kshitiz Engineers India, Jaipur, dated 25-09-2006, who have conduced standard penetration test for safe bearing capacity for and on behalf of the buyer. (b) Letter of the buyer dated 30-09-2006, request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-01-2007 is concerned, we should bear in mind the following : (a) The clauses in the sale deed are generally stereotyped. In a majority of the cases, the transfer of property and registration of sale deed takes place at a same point of time and the clauses of the deed are generally written accordingly. However in the case of the assessee, these two even took place at a different point of time, though the fact was not specifically mentioned in the sale deed due to oversight / clerical error. (b) The fact that the possession was handed over on dated 04- 10-2006, was making no difference as far as registration of deed of sale with the stamp valuation authority under the provisions of Transfer of Property Act, 1882 is concerned. This clerical error therefore remained unnoticed. (c) The Schedule of Section 3 of The Rajasthan Stamp Act, 1998, Entry No. 24, contains a provision of supplementary instrument to correct clerical errors in any instrument chargeable with duty and in respect of which proper duty has been paid (copy enclosed). What is emphasized here is that nothing much should be read in this clerical error, which can otherwise be easily rectified. (E - 12) (d) However th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Rajasthan, Jaipur Bench held that transfer will be complete for purpose of income-tax even in absence of registration of sale deed provided possession has been handed over and consideration has been paid. ((Paper Book Sr. No. E - 6, Page No. 72-76) 14. We would also like to bring your kind attention to the provision of Section 2 (47) (vi) of the Income Tax Act, 1961, which read as under : "2 (47) transfer, in relation to a capital asset, includes, - (vi) 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." 15. The conditions as stipulated by section 2 (47) (vi) of the I. T. Act, 1961 were also fulfilled in the present case. The buyer was put in full enjoyment of the immovable property by an arrangement with the seller. The buyer has started construction work on the property. It has also put his sign board on the property. It is a simple proposition to understand. No one can start construction work on any im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andra Construction (P.) Ltd. v. Assistant Commissioner of Income Tax, Circular 4(1) in the ITAT Agra Bench (Third Member) [2011] 11 taxmann.com 415, it has been held that section 2(47)(v) contemplates a transaction which has direct and immediate bearing on allowing possession to be taken in part performance of contract of transfer; it is at that point of time that deemed transfer will take place (Paper Book for Decisions : Page No. ........) 20. The determination of date of transfer is of much importance as far as capital gains liability is concerned. Classification of capital gain as Long Term vis a vis Short Term is based upon period of holding i.e. period starting from Date of Acquisition and ending on Date of Transfer. 21. Similarly while charging Interest u/s 234 C of the I. T. Act, 1961, due consideration is given to the date of arising of capital gain liability. 22. In the case of CIT v. Podar Cement (P.) Ltd., [1997] 92 Taxman 541 (SC) it was held that "owner" for the purpose of section 22 of the I. T. Act, 1961 is a person who is entitled to receive income in his own right and as such where a property is handed over to a purchaser to enjoy fruits of that property by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frigeration Industries (P) Ltd. (1985) 155 ITR 711 (SC) Jodhpur Bench of Tribunal held that where transfer of property was through agreement which was not registered with the stamp duty authority, the provision of section 50 C is not applicable. (Paper Book Sr. No. E - 8, Page No. 96-105) 27. We would also like to draw your kind attention to the Explanatory Memorandum to the Clause 25 of the Finance Bill, 2009, which read as under : (Paper Book Sr. No. E - 11, Page No. 109-111) Provisions for deemed valuation in certain cases of transfer The existing provisions of section 50 C provide that where the consideration received or accruing as a result of the transfer of capital asset, being land or building or both, is less than the value adopted or assessed by an authority of a State Government (stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for computing capital gain. However the present scope of the provisions, does not include transactions which are not registered with stamp duty valuation autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-2009. Risk Factors : 34. There were certain risk factors also associated with the property, mainly being, in process acquisition move by the U.I.T. Ajmer. The copies of clippings of local news paper are enclosed herewith, endorsing our view point (Paper Book Sr. No. E - 12, Page No. 112- 115) : (a) Dainik Navjyoti, Dated 13-10-2006. (b) Dainik Bhasker, Dated 13-10-2006. (c) Rajasthan Patrika, Dated 13-10-2006. (d) Dainik Navjyoti, Dated 02-11-2006. (e) Dainik Bhasker, Dated 02-11-2006. (f) Rajasthan Patrika, Dated 02-11-2006. (g) Dainik Bhasker, Dated 03-11-2006. (h) Dainik Navjyoti, Dated 04-11-2006. (i) Dainik Bhasker, Dated 04-11-2006. (j) Rajasthan Patrika, Dated 04-11-2006. 35. Hence, the assessee claimed before the Assessing Officer that the value assessable as per prevalent area rates for the purpose of payment of stamp duty exceeds the fair market value of the property as on the date of transfer i.e. 04-10-2006. The valuation report obtained from the registered valuer was submitted by the assessee in support of his contention. The report clearly stated the fact that there was a threat of acquisition in process moved by U.I.T. Ajmer to acquire entire land as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of sale deed, subsequent to transfer, is of no significance and it should not, in any way, affect the tax liability of the assessee, as existed on 04-10-2006 i.e. date of transfer of property. 39. Transfer of property and registration of deed of sale are two distinct events which may or may not take place at the same time. In the assessee's case these two events took place at different point of time. It is only a co-incidence that these two events happened in one assessment year. 40. To put it differently, even if the sale deed was registered in any subsequent assessment year or it was not registered at all, no difference it would have make as far as the capital gains liability is concerned. The assessee still would have been liable to pay capital gains tax even in the case of non-registration of sale deed. Assessment Order by The Assessing Officer : 41. The assessing officer however ignored the facts that the buyer was allowed possession of the property on dated 04-10-2006. The assessing officer thus ignored the provisions of Section 2 (47) (v) of the I. T. Act, 1961. He erroneously deemed the value assessed as on 08-01-2007 as full value of consideration when the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his order (Page No. 12, Para 3.16) "There is no provision u/s 50 C for taking the value of property as on 04-10-2006 as full value of consideration. Therefore second argument of the appellant that for invoking the provisions of section 50 C, date of transfer shall be taken as 04- 10-2006 is not acceptable." 49. The Ld. CIT (Appeals) has deemed in his wisdom that the amendment in the section 50 C has been made with a view to plug loop hole existing in the earlier provisions and therefore he treated it as retrospective and applicable to the present case. He however by mentioning "all such transactions" has accepted the fact that the property in question was transferred without registration of documents. 50. Sir, The amendment in section 50 C has been made by the Finance (No. 2) Act, 2009 to take effect from 1st October, 2009 and shall accordingly apply in relation to transactions undertaken on or after such date. Hence in our view it is not proper to treat the amendment as retrospective. 51. In the case of Asstt. CIT & Anr. V. Pravin V. Gandhi (2011) 38 (II) ITCL 311 (Mum 'C'-Trib) it was held that amendment brought to section 50 C wherein the word 'or assessable' inserted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. E - 9, Page No. 106). 55. Accordingly the second argument of the appellant that as the date of transfer of the property is 04-10-2006, the provisions of section 50C, if at all were to be made applicable in his case, should be made applicable taking the assessable value as on 04-10-2006 as deemed to be the full value of consideration, ought to have been accepted by the Ld. CIT (Appeals). However he has chosen to reject the second argument of the appellant as well. 56. It is another fact that the value assessable as on 04-10-2006 i.e. Rs. 13,83,28,063/- also exceeds the fair value of the property in view of the risk factors as discussed hereinbefore. Relief claimed in Appeal : 57. Sir, the case of the assessee is not that he is not liable to pay tax on transfer of property, but he should not be made liable to pay tax on the basis of the provision of the law which in fact is not applicable in his case. In the present last, section 50 C, as it existed at that time, was clearly not applicable to the case of the assessee, The amendment in the section was made w.e.f. 01-10-2009 to cover such type of transactions, even if it is deemed retrospective, as the Learned C.I.T. (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-. The buyer requested to hand over the possession of the land because it wanted to start construction work and development. The custodian with whom the possession of the property was lying handed over the possession. The buyer entered into a contract of development. The development bill was raised. All these facts have been narrated at page 1 of the written submissions filed on behalf of the assessee and reproduced somewhere above in the order. From these facts, it is amply proved that requirement of provisions of section 2(47)(v) of the Act, has been satisfied as the possession of the plot is given on 4.10.2006. The sale deed was executed on 08.01.2007. The possession of land was already handed over. The work was started already. Ample proof has been placed on record, which has been seen by us. The bill has been raised by M/s. Kshitiz Engineers India, Jaipur, dated 25.09.2006, who have conduced standard penetration test for safe bearing capacity for and on behalf of the buyer. The custodian of the property i.e. M/s. M.I.C. Pvt. Ltd. has handed over the possession by letter dated 02.10.2006, a copy of which is placed at page E- 4/50. Letter of work contract is also placed at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated in the Transfer of Property Act. 6.4. In various other cases, decided by the Hon'ble High Courts and various Benches of the Tribunal, has given similar findings. Some of the cases have been mentioned in written submissions on pages 5 & 6, which are reproduced somewhere above in this order. 6.5. We further noted that even under section 50C(1), it is clearly mentioned that 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........ From the language of section 50C it is also proved that property should be transferred. In the present case, the date of transfer is 04.10.2006. The sale agreement was entered on 07.09.2006. The sale consideration is not less than the DLC rate prevalent at that time, that was Rs.2500 to Rs.3000 per yd. The sale deed was executed on 08.01.2007 on the basis of DLC rates prevalent at that time, which were modified by the appropriate authority by letter dated 20.11.2006 much after the sale agreement and possession handed over. Therefore, in our considered view, once the possession was already given on the basis of sale agreement then provision of section 50C(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer at Rs.33,76,391/- The valuation prepared by the Registered Valuer was at Rs.12,78,000/- by another method adopted by Registered Valuer of this property at Rs.13,88,000/-. However, the AO adopted the value for the purpose of capital gains t Rs.33,76,391/-. The Ld. CIT(A) has confirmed the action of the Assessing Officer. The contention of the assessee that the provisions of section 50C(2) are to be taken into consideration by which it has been clearly held and exception has been provided to the assessee that if assessee is not agreed with the valuation adopted by the Stamp Valuation Authority then it can be challenged in view of section 50C(2) of the Act, for the reason that provisions of section 50C are deeming provision, therefore valuation adopted by Stamp Valuation Authority has to be taken only. Accordingly, the order of the AO was confirmed. 8. The assessee has filed detailed written submissions before the ld. CIT(A). Similar written submissions have been filed before us also, which are as under: "(xlvii) The property situated at AMC No. 8 / 278 = 6 / 283, Karakka Chowk, Ajmer was sold for Rs. 13,00,000/- whereas the Stamp Valuation Authority assessed the value at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 transfer. (2) Without prejudice to the provisions of sub-section (1), where- (a) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JODH.) (URO) wherein it was held that in case Assessing Officer does not agree with explanation of assessee with regard to lower consideration disclosed by him, he should refer matter to DVO for getting its market rate established as on date of sale to arrive at correct sale consideration. (copy enclosed) (E - 26) (ix) The tribunal also opined that the word 'may' used in this sub-section signifies that in case learned Assessing Officer is not satisfied with the explanation of the assessee, he 'should' refer the matter to the DVO for the mentioned purpose. (Copy of decision enclosed). (x) However the A. O, did not refer the valuation to the valuation officer, despite fulfillment of the conditions as stipulated u/s 50 C (2) (a) and 50 C (2) (b) of the I. T. Act, 1961. Hence the valuation report obtained by the assessee from the registered valuer should have been taken as basis for assessing the capital gains. (xi) The assessing officer also did not accept the value as per valuation report submitted by the approved valuer. The action of the assessing officer by neither referring the valuation to the valuation officer nor accepting the valuation as per valuation report submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ordersof the AO and the CIT(A). 10. After considering the order of the AO and the CIT(A) and the written submissions, we are of the considered view that the assessee deserves to succeed in this ground in part. It is stated that property sold by the assessee was rented out for more than 50 years and was in possession of old tenants at the time of execution of sale deed. Hence, it can be reasonably inferred that such property shall not fetch prevalent market value when sold in the market as compared to the other property which has not been subjected to such limiting factors. Further, various reasons have been assigned in the written submissions. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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