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Sri Tummala Vidyapal Reddy Versus The Income Tax Officer, Ward-1, Nizamabad

2016 (5) TMI 628 - ITAT HYDERABAD

Application of provisions of Section 50C on the transaction entered by assessee by way of sale of agricultural land - Held that:- As far as the facts are concerned, there is no dispute that assessee had purchased the property way back in 1984 but failed to mutate the property in his favour in the Revenue records. Assessee purchased only Acr1.20 cents of land from Shri K. Joseph Reddy, however, Shri Mundla Narayana Reddy, Proprietor, Sudha Enterprises has purchased more land, about four acres, vi .....

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re directed to seek remedy before the Civil Court. This order was issued in 15th March 2008. Subsequently, an appeal was filed before the Joint Collector by Mr. Mundla Narayana Reddy. In those proceedings, a compromising memo was undertaken wherein it is clearly stated that the respondent (assessee) has received an amount of ₹ 5 Lakhs and executed a registered sale deed bearing Document No. 8799/2008 dt. 26-07-2008 in favour of the Managing Partner of Sudha Enterprises, transferring his ri .....

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e the authorities, the fact is that assessee had indeed settled the issue by accepting the consideration of ₹ 5 Lakhs and parted with the claim of ownership on the said property. The record indicates that assessee is not complete owner of the property as in the Govt. records Shri Mundla Narayana Reddy was already shown as owner of the property and continues to be in possession of the property by virtue of registered sale deed in his favour dt. 26-08-1996. In view of this, we agree with the .....

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mi Naidu, DR ORDER Per B. Ramakotaiah, A. M. This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-VI, Hyderabad dated 17-10-2014. The issue in this appeal is with reference to the application of provisions of Section 50C of the Income Tax Act [Act] on the transaction entered by assessee by way of sale of agricultural land on 26-07-2008. 2. Assessee has raised as many as six grounds and filed additional grounds of appeal also. In the course of arguments, Ld. .....

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nsaction for handing over the possession was placed before us. The only recital in Clause-2 in page No.2 indicates that property was handed over in 2000. Since this is a fact which require fresh examination, the legal grounds cannot be entertained. Therefore, additional Ground No. 1 is rejected. 4. Additional Ground No. 2 is similar to the other grounds on the issue of invoking the provisions of Section 50C(1), accordingly, the same is allowed to be considered. Thus, the material grounds require .....

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hat the possession over the land was handed over much earlier to the actual date of sale. Additional Ground: 2. The learned First Appellate Authority failed to appreciate the fact that the vide doc No. 8799/08 dt. 26-07-2008 the appellant had only surrendered his disputed rights and hence the provisions of sec 50C are not applicable to the facts of the case . 5. Briefly stated, during the year under consideration, assessee has entered into a sale deed on 26-07-2008 in with one Mundla Narayana Re .....

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e become final. 6. Coming to the main contention on invoking the provisions of Section 50C, as assessee has entered into a sale agreement for a value of ₹ 5 Lakhs and the registered sale deed indicate the market value at ₹ 45 Lakhs, AO invoked the provisions of Section 50C. It was the submission of assessee that the sale deed executed on 26-07-2008 does not represent the actual transfer of the property but it only confirms the proper title over the property in favour of Shri Mundla N .....

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entered into in the revenue records by way of mutation. c) In the meantime, Sri M.Narayana Reddy, son of late Sri Subbaiah, purchased the property 26-08-1996 through Regd. Sale deed No.5258/96 and paid consideration to Sri K.Joseph Reddy. Sri K.Joseph Reddy, in turn, registered the property in favour of Sri M.Narayana Reddy, who got the property mutated in his name and got necessary entries made in the revenue records. He proceeded to construct a compound wall and took possession of the propert .....

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continued to be in possession of the property. f) Realising that the promised sum can not be recovered from Sri M.Narayana Reddy, the assessee filed a petition before the Mandal Revenue Officer for mutation of the property in his favour. The MRO vide order No.A/631/97 dated 31/10/1997 rejected the request for mutation in the assessee's favour. g) The assesseerthereafter approached the Dy.Collector. The Dy.Collector held that the issue is a Civil litigation and that such Civil litigation can .....

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d take a longer time to fight the civil litigation. The fact that the property was in possession of Sri M.Narayana Reddy also was considered by the assessee. In the meantime, Sri M.Narayana Reddy approached the assessee and promised to pay the compensation as agreed to in the year 2000. Accordingly, the balance of amount was paid by Sri M.Narayana Reddy during the year under consideration. However, with a view to get absolute title in his favour, Sri M.Narayana Reddy required the assessee to exe .....

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er remanding the matter to the AO and after considering the submissions of assessee, partly accepted with the contentions but ultimately did not agree with the objection of invoking the provisions of Section 50C. Ld. CIT(A) s order in para 6.2 & 6.3 are as under: 6.2 Perused the submissions of the appellant as regard to the facts of the case and the applications of the provisions of Section 50C, as to such facts. As could be seen from the facts of the case, the appellant acquired the propert .....

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was that the sale deed dated 26.07.2008 was only towards the transfer of claim, whereas the real possession was given in year 2000 only, because of civil disputes and petitions were made before Revenue Authorities, as the transferee Mr. Narayana Reddy did not pay the consideration of ₹ 5,00,000/- as promised. However, the property was transferred to Mr. Narayana Reddy as a final settlement and registered the property on 26.07.2008 and shown to have received the consideration of ₹ 5, .....

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ter was indicative of involvement of civil disputes. 6.3 Though there is some strength in the argument of the appellant, it is not enough to support his cause. In this case, facts are not clear, as regard to the compromise formula of handing over the possession of land to Mr. Narayana Reddy and the consideration decided for it, since no written agreements were furnished in this regard. It is also not known how Mr.Narayana Reddy, who is shown to have been in possession of the land, agreed to pay .....

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d to be make believe and there is no strength in the argument of the appellant. Further, the assessee never appeared to have argued / requested for valuation of the property as per the provisions of Section 50C(2) during the assessment proceedings. Further, as per the facts that were emerged as per the order of RDO, RR- Dist(East), the appellant was entitled for the title/ownership over land, being the original buyer of the land and was advised to move the courts for enforcing the said rights. H .....

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e transferor of the immovable property, is 'less than the market value. In this case, the transfer of property established to have taken place on 26.07.2008, where the appellant failed to establish that transfer has taken place in the year 2000, as claimed by him, and as such the provisions of Section 50C are applicable to the transaction dated 26.07.2008, in terms of Section 2(47) of the IT.Act. Accordingly, it is reasonable to hold that provisions of Section 50C are applicable to this case .....

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registered in favour of Mr. Mundla Narayana Reddy and referred to the compromise memo filed with Joint Collector in Appeal No. 3341/2008. It was submitted that the transaction was concluded by way of compromise formula in which assessee has surrendered his claim for title for a value of ₹ 5 Lakhs and since the same cannot be considered as building or land provisions of Section 50C are not applicable. He relied on the Co-ordinate Bench decision in the case of D. Anitha in ITA No. 394/Hyd/20 .....

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ased only Acr1.20 cents of land from Shri K. Joseph Reddy, however, Shri Mundla Narayana Reddy, Proprietor, Sudha Enterprises has purchased more land, about four acres, vide the registered deed dt. 26-08-1996, got his name entered in the Pahanis in 1999 itself and is in continuous possession of the land. Assessee filed a petition before Special Grade Dy. Collector for mutating the land in his favour. The Ld. Dy. Collector while recording that assessee has prior claim over the land having been re .....

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8377; 5 Lakhs and executed a registered sale deed bearing Document No. 8799/2008 dt. 26-07-2008 in favour of the Managing Partner of Sudha Enterprises, transferring his right of ownership. 10.1. Thus, it is clear that even though the sale deed is stating that assessee had full ownership and transferred in favour of Shri Mundla Narayana Reddy, what actually transpired between the parties and the claims made before the authorities is that assessee has a title over the property but not complete own .....

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s owner of the property and continues to be in possession of the property by virtue of registered sale deed in his favour dt. 26-08-1996. In view of this, we agree with the contentions that assessee has transferred only a right of ownership but not the land and building. 11. Similar facts were considered in the decision of the Co-ordinate Bench decision in the case of D. Anitha in ITA No. 394/Hyd/2014 / 373/Hyd/2014 dt. 24-12-2014 (supra), wherein assessee was also not the owner of the property .....

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duly paid, while registering the relevant agreement. The value adopted for the purpose of payment of stamp duty thus was not disputed by the relevant parties, including the assessee. The learned CIT(A), however, held that the assessee was not the owner of the property and since she had only limited rights over the property, which was also encumbered, the market value of the property as taken for the purpose of payment of stamp duty could not be adopted as the sale consideration by applying the .....

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h asset, the value adopted by any authority of State Government for the purpose of payment of stamp duty cannot be taken as full value of consideration by applying the provisions of S.50C, as rightly held by the learned CIT(A). We, therefore, uphold the impugned order of the learned CIT(A) on this issue as well, and dismiss the appeal filed by the Revenue . 11.1. Not only that, in the Co-ordinate Bench decision in the case of Atul G. Puranik Vs. ITO [132 ITD 499], it was considered as under: The .....

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consideration shown to have been received or accruing on the transfer of an asset, being land or building or both, is less than the value adopted or assessed or assessable by stamp valuation authority, the value so adopted etc. shall, for the purposes of section 48, be deemed to be full value of consideration received or accruing as a result of such transfer. This section has been inserted by the Finance Act, 2002 with effect from 1-4-2003 with a view to substitute the declared full value of co .....

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d or assessable by the stamp valuation authority shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such a transfer. Two things are noticeable from this provision. Firstly, it is a deeming provision and secondly, it extends only to land or building or both. It is manifest that a deeming provision has been incorporated to substitute the value adopted or assessed or assessable by stamp valuation authority in place of consid .....

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eming fiction under sub-section (1) shall be activated to substitute such adopted or assessed or assessable value as full value of consideration received or accruing as a result of such transfer in the given situation. It is a settled legal proposition that a deeming provision cannot be extended beyond the purpose for which it is enacted. It is thus clear that a deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of .....

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period of sixty years, which right was further assigned to P' in the year in question. It is axiomatic that the lease right in a plot of land are neither land or building or both' as such nor can be included within the scope of 'land or building or both . The distinction between a capital asset being 'land or building or both' and any 'right in land or building or both' is well recognized under the I.T. Act. Section 54D deals with certain cases in which capital gain .....

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prevails under the Wealth tax Act, 1957 also. Section 5(1) at the material time provided for exemption in respect of certain assets, Clause (XXXii) of section 5(1) provided that 'the value as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in land or building or any asset referred to in any other clauses of this sub-section) forming part of an industrial undertaking shall be exempt from tax. Here also it is wor .....

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