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M/s Guru Dashmesh Rice and General Mills Versus Commissioner of Income Tax III, Ludhiana

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

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 capital nature and the same cannot be assessed to tax under section 10 or se .....

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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, Advocate For The Respondent : Mr. Rajesh Katoch, Advocate Ajay Kumar .....

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mended' 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 as narrated in the appeal may be noticed. The appellant firm was runn .....

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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 the purchaser. During the financial year 2005-06 relevant to the assessm .....

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.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. Learned counsel for the appellant assessee raised two-fold submissions to a .....

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uch 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 cases.- (1) Where the consideration received or accruing as a result o .....

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thout 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, .....

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ence 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 consideration received or accruing as a result of the transfer. 7. Su .....

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ms 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 Stamp Valuation authority under Section 50C (1) has not been disputed in .....

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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 in the instrument of transfer and the valuation done for the purpose o .....

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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 duty in respect of such transfer, the value so adopted or assessed sha .....

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uation 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 for stamp duty purposes, the Assessing Officer shall not adopt such fai .....

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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 Valuation Officer (AVO) is more than that as per the collector rates, the l .....

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he 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 question has been handed over to the vendee on 10.5.2005 i.e. the date of reg .....

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see. 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 Tax Act were not applicable and as such these judgments are not appli .....

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nd 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 dispute of valuation adopted by the registering authority of the State .....

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e 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 that the possession of the said land was handed over to the purchaser .....

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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'ble Supreme Court in the case of CIT vs. Podar Cement Pvt. Limited and .....

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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 from the sale agreement dated 3.11.2004, reproduced above. The possession .....

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ser 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. Moreover, the Hon'ble Supreme Court, has rendered the decision in .....

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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 retrospectivity not applicable to declaratory provisions. 12. In view of the above d .....

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on, 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 has been characterized as being effected or dependent upon or flowing f .....

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t. 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 not be open for the assessee to now challenge its assessability in the a .....

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