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2016 (3) TMI 27 - PUNJAB AND HARYANA HIGH COURT

2016 (3) TMI 27 - PUNJAB AND HARYANA HIGH COURT - [2016] 386 ITR 97 - Capital gains - applicability of provisions of Section 50C - transfer u/s 2(47) - Determine the nature of the capital gains/loss on renunciation of right to subscribe for additional shares/debentures - Held that:- The provisions of section 50C are attracted to the sale of land in question made by the assessee - Arrears of dividend received by dealer of shares after the purchase of shares alongwith such arrears is of capita .....

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h the rights offer and therefore, in order to determine the nature of the capital gains/loss on renunciation of right to subscribe for additional shares/debentures, the crucial date is the date on which such right to subscribe for additional shares/debentures comes into existence and the date of transfer i.e. renunciation of such right. - Decided against the assessee - ITA No. 62 of 2011 - Dated:- 14-1-2016 - MR. AJAY KUMAR MITTAL AND MRS. RAJ RAHUL GARG, JJ. For The Appellant : Mr. Ravish Sood, .....

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bunal has erred in law by failing to appreciate that as the 'Pre-amended' deeming provisions of Section 50C of the Income Tax Act, 1961 (i..e. those as were available on the statute upto 30.9.2009) did not take within its purview 'Agreement to Sell', therefore the authorities below were in error in computing the 'Capital gains' in the hands of the appellant firm by applying the provisions of Section 50C? 2. A few facts relevant for the decision of the controversy involved .....

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30.5.2005. As per the said agreement to sell, the appellant firm was to vest the legal title of whole of the aforesaid property vide two sale deeds in favour of the purchaser. Pursuant to the said agreement, the appellant firm executed sale deed as on 27.12.2004 in the financial year 2004-05 and pursuant whereto absolute internal and external rights, right to passage alongwith title as regards part of the land measuring 6 kanals 1 marla 4 sarsai out of the said land stood vested in favour of th .....

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Income Tax (Appeals) [CIT(A)]. Vide order dated 21.8.2009, Annexure A.2, the CIT(A) partly allowed the appeal sustaining the findings of the Assessing Officer with regard to applicability of the provisions of section 50C of the Act to the appellant firm. Still not satisfied the assessee filed appeal before the Tribunal. The Tribunal vide order dated 30.4.2010, Annexure A.3 partly allowed the appeal upholding the findings recorded by the CIT(A). Hence the instant appeal by the assessee. 3. Learn .....

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of the Tribunal submitted that the rate of registering authority was much more. 5. We have heard learned counsel for the parties. We do not find any infirmity in the order of the Tribunal and as a consequence there is no merit in the submissions of learned counsel for the assessee-appellant. 6. Finance Act, 2002 effective from 1.4.2003 inserted Section 50C in the Act. The said section as inserted at the relevant time reads thus:- 50C. Special provision for full value of consideration in certain .....

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onsideration 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 refere .....

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ply 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. Explanation.-xxxxxxxxxxxxxxxxxxxxxxxxxxxx (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 .....

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ority shall be deemed to be the full value of the consideration in terms of Section 48 of the Act. 8. Sub section (2) of Section 50C of the Act provides that without prejudice to the provisions of sub section (1) and in a situation where the assessee claims before the Assessing Officer that the value adopted or assessed by the Stamp Valuation authority under Section 50C(1) exceeds the fair market value of the property as on the date of the transfer; and the value so adopted or assessed by the St .....

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ction 50C(2) and enacts that where the value determined under Section 50C(2) exceeds the value adopted or assessed by the Stamp Valuation authority referred under Section 50C(1), in that eventuality, 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. 10. The provisions of Section 50C of the Act are deeming provisions for the purposes of taxing the difference between the apparent consideration .....

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apital gains in real estate transactions - 37.1 The Finance Act, 2002 has inserted a new Section 50C in the Income Tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. 37.2 It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp .....

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before any authority or court, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income tax Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed f .....

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ed the capital gains in respect of the appellant firm by invoking the deeming provisions of section 50C of the Act by adopting the segment rate of ₹ 22 lacs i.e. rates adopted by the stamp valuation authority at the time of executing the sale deed as the deemed sale consideration and calculated that the capital gains was shown short by an amount of ₹ 17,64,189/-. On appeal, the CIT(A) held that as per provisions of Section 50C of the Act, if the value estimated by the Assistant Valua .....

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pital gain. The Tribunal upheld the findings recorded by the CIT(A). The relevant findings recorded by the Tribunal read thus:- 11(10) A bare perusal of the above reproduced documents clearly reveals that a single agreement to sell was executed on 3.11.2004 in respect of sale deeds executed by the assessee in respect of ¼ share and ¼ share on 27.12.2004 and 10.5.2005 respectively. A perusal of the conveyance deed registered on 10.5.2005 reveals the possession of the land in questio .....

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es not fall under section 2(47)(v) of he Act as contended by the assessee. 11(11). In this context, the relevant para 4 of the assessment order is reproduced hereunder, wherein the AO recorded the findings that possession of the land was given to the purchaser on 10.5.2005: 4. I have carefully gone through the written submissions filed by the assessee and the various judgments cited therein. The judgments cited by the assessee relate to the period when the provisions of section 50C of the Income .....

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session of land to the purchaser has been given today i.e. 10.5.2005 and it is not the case of the assessee that the possession has earlier been given to the purchaser. The fact that only some advance money has been received as per agreement dated 3.11.2004 have no effect. Thus, the provision of section 50C is clearly applicable to the facts of the case and valuation adopted by the State Government is the value of consideration received. The assessee has not produced any evidence regarding the d .....

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.2005. Hence this evidence is created after thought and it has no value in the eyes of law so far as the value of property sold vide registration deed 10.5.2005, for a consideration of ₹ 22,00,000/- on account of deeming provisions as per section 50C of the Income Tax Act, 1961 although the sale rate was shown at ₹ 12,00,000/- as per registry. Therefore, the contention of the assessee has no force and is not acceptable. 11(12). From the above, it is clear that the AO recorded finding .....

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e assessee that land in question stands transferred within the meaning of section 2(47)(v) of the Act is not legally and factually tenable. The land in question does not fall within the definition of transfer as contemplated under section 2(47) of the Act. Accordingly, the capital gain is to be charged from the date of registration of the said deed, as the possession was given to the vendee only on that date. 11(13) The learned counsel for the assessee placed reliance on the judgment of Hon' .....

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in his own right and as such where the house property is handed over to purchaser to enjoy fruits of that property by the contractor/builder, the purchaser is to be treated as 'owner' of the property for the purpose of section 22 even though no registered documents as required under Section 54 of the Transfer of Property Act or the Registration Act are executed. In the present case as discussed earlier, the assessee has not handed over the possession, to the purchaser, as is evident fro .....

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l owner nor legal owner. Legal owner in this case vested in the purchaser of the land, on the registration of the sale deeds on 10.5.2005. Further, the sale agreement does not speak handing over of the possession to the purchaser of the land. In view of this, facts of the case relied upon by the learned counsel for the assessee, in the case of CIT vs. Podar Cement Pvt. Limited (supra) are different and distinguishable. Thus, ratio of this case is not applicable to the facts of the present case. .....

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wner - in the context of section 22 owner is person who is entitled to receive income in his own right - Section 22 does not require registration of sale deed - Amendment of section 27 by Finance Act of 1987 is classificatory in nature - Income Tax Act, 1961 - ss 22, 27 - Indian Income Tax Act, 1922. Interpretation of taxing statutes - Construction which takes into account changes since provision was enacted - Construction beneficial to assessee in case of ambiguity - Rule against retrospectivit .....

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th retrospective effect from 1.4.1962. According to the said explanation, the term transfer is defined to include and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights h .....

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der the expression transfer as envisaged under Section 2(47) of the Act. On the said premises, it was urged that the agreement of sale was executed on 3.11.2004 in the financial year 2004-05 relating to assessment year 2005-06 and therefore, no addition could be made for the assessment year in question i.e. 2006-07. It may be noticed that as the assessee itself had claimed capital gains in the return filed for the assessment year 2006-07 on the basis of the sale deed dated 10.5.2005, it would no .....

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