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TMI Blog2016 (7) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax (Appeals) erred in upholding the action of the Assessing Officer in taxing Long Term Capital Gains of Rs. 16,44,413/- computed without claiming indexation @ 20% as against 10% as provided in proviso to sec. 112 of the LT. Act and directing the Assessing Officer to allow indexation of the cost of acquisition of the capital asset. This ground is taken notwithstanding the fact that a rectification application has been filed before the Hon'ble CIT (Appeals). 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the computation of long term capital gains on sale of inherited property viz. Roshan Villa at Rs. 15,74,215/- by making his own valuation u/s 50C without referring the matter to the valuation officer and without deducting the cost of acquisition and thereby upholding the Protective Assessment made by the Assessing Officer failing to appreciate that such a course of action is not backed by any of the provisions of the law. 2.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in failing to appreciate that the capital gains ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority of the state government, referred to as "stamp valuation authority" and that the valuation opinion of a registered valuer cannot be adopted. b. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that, for the purpose of arriving at the full value of consideration, the valuation as given by the "stamp valuation authority", i. e. Rs. 26,83,044/- has to be adopted. 3. Withdrawal of Grounds We have to further state that we would like to withdraw the following grounds of appeal since the Assessing officer has given relief on the below mentioned grounds in his order u/s 154 subsequent to filing of this appeal. 1. Ground No. 1 - Taxing long term capital gains of Rs. 16,44,413/- computed without claiming indexation @20% as against 10%, as provided in proviso to section 112 of the Income Tax Act, 1961. 2. Ground No. 2.5 - Rejection of claim for exemption u/s 54 EC of the Income Tax Act, 1961 amounting to Rs. 8,00,000/-. 3. Ground No. 2.6 - Not granting set off for long term capital loss of Rs. 40,138/- (on redemption of mutual fund) and short term loss of Rs. 210/- on sale of shares - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited by the assessee as well as his brothers and sisters. Subsequently , the said property was sold to one Sabir Y. Nirban and Mrs. Naseem S. Nirben for a consideration of Rs. 25 lacs on 16th January, 2009. However, no registered document has been entered into and the property has been sold , on as is where basis. The A.O. observed that apparently the property was sold at a lower rate than the market price and the assessee has made the transaction by selling the property only on a piece of paper without registering the same. The assessee submitted that since no formal registered document has been executed, the provisions of section 50C of the Act are not attracted to this transaction. The assessee was show-caused as to why the said property may not be valued as per market rate and the difference amount be added to income and taxed u/s 50C of the Act. In reply thereof, the assessee submitted that since no agreement has been executed on stamp paper and the property has not been registered, the provisions of section 50C of the Act are not applicable. In support, the assessee relied on the decision of the Tribunal, Mumbai Bench in the case of Shingar India Pvt. Ltd. v. ITO in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of the section, made the addition on protective basis in the year under consideration and held that in the year of registration of the property, the assessment made in the instant assessment year will be considered. The A.O. referred the matter to stamp duty valuing authority to ascertain stamp duty value of 'Roshan Villa' on relevant date of sale and made the addition based upon the value as submitted by stamp valuing authority on the basis of value as per ready reckoner during the relevant period of sale. However, since the property was not registered , the stamp valuing authorities expressed their inability to value the cost of the building constructed on the property. Since, the whole property could not be valued by the Stamp valuing authorities , the valuation report submitted by the assesse of a Government registered valuer namely M/s Anmol Sekhri Consultants Pvt. Ltd. vide their valuation report dated 15-10-2011 whereby the said registered valuer valued the land at Rs. 80 per square meters and the building at Rs. 100 per square feet as on 01-04-1981 was also considered by the AO. The stamp valuing authorities valued the land @ Rs. 780 per square meters on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )12,13,602/- which is detailed as under:- Sale consideration (Total) Rs. 25,00,000 Less: Cost of acquisition Rs. 10,55,184 as per Valuation report which was indexed to Rs.61,41,171/- (i.e. Rs. 10,55,184 x 582/100 Rs. 61,41,171/- Rs.(-)36,41,171/- Assessee's share is 1/3rd Rs.(-) 12,13,602/- The A.O. arrived at capital gain of Rs. 15,74,215/- by taking recourse to Section 50C of the Act whereby the AO calculated the land value at Rs. 26,83,044/-, and value of the superstructure at Rs. 45,39,600/- based on the value as on 1st April, 1981 as per the assessee valuer's report and adjusted with cost inflation index to arrive at the total value of the property as on date of transfer at Rs. 72,22,644/- which was considered as full value of the sale consideration for arriving at the capital gains by invoking the provisions of section 50C of the Act. Hence, it was submitted that the A.O. erred in adopting the full value of the sale consideration as Rs. 72,22,644/- without referring the property for valuation to the Valuation Officer which was mandatorily required u/s 50C(2) of the Act. It was submitted that the value of the property as per the land rate given by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 1937. The mother of the assessee expired on 3rd October, 2005 and after her death, the property was inherited by the assessee as well as his brothers and sisters as co-owners. The property was sold on 16th January, 2009, however, no formal registered document had taken place, hence, section 50C of the Act is not applicable. The A.O. has made protective addition in the hands of the assessee and the learned CIT(A) has confirmed the same. No substantive addition is made in the hands of the assessee . The ld. Counsel further submitted that the A.O. has referred the matter to the Stamp Duty Valuation Authority who valued the land at Rs. 26,83,044/- , while they have expressed their inability to value the building as the said property was not registered. The assessee has given the valuation as per the Government approved valuer to work out the cost of acquisition as on 1-4- 1981. Addition has been made by taking the value of land as per the stamp duty officer and the building has been valued as on 1-4-1981 and then indexation was applied to determine full value of consideration which is not permissible under the Act. It is further submitted that no deduction has been given for the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r after such date." 11 The ld. D.R. relied on the orders of the authorities below and submitted that the A.O. has made the addition on protective basis and no substantive addition has been made. 12. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee has sold the property namely 'Roshan Villa' , which is situated at Matheran. The said property was owned by the assessee's mother since 1937. The property consist of land and an building/ structure thereon. The mother of the assessee expired on 03-10-2005 and the property devolved on the assessee and his brothers and sister under inheritance in line of succession whereby the assessee has 1/3rd share in the said property 'Roshan Villa' . The said property was not transferred /mutated to the legal heirs i.e. the assessee and his brothers and sisters after the death of their mother on 03-10-2005. The property was sold by the assessee and co-owners for total sale consideration of Rs. 25,00,000/- on 16-01-2009 on as is where basis. The property's possession was immediately handed over to the buyer by the sellers i.e. the assessee and other co-owners while no docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act as amended by Finance Act , 2009 is reproduced hereunder : " [Special provision for full value of consideration in certain cases. 50C. (1) 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, is less than the value adopted or assessed [or assessable] 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 [or assessable] 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 20a[or assessable] 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 20a[or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney. 23.2 With a view to preventing the leakage of revenue, section 50C is amended, so as to provide that where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both is less than the value adopted or assessed or assessable by an authority of State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain. 23.3 Further, Explanation 2 has been inserted in the sub-section (2) of the section 50C, so as to clarify the meaning of the term "assessable". 23.4 Applicability - These amendments have been made applicable with effect from 1st October, 2009 and will accordingly, apply in relation to transactions undertaken on or after such date." Thus, with effect from 1-10-2009, even if the property is not registered , the same was brought within the ambit of provisions of Section 50C of the Act. The AO could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after its acquisition at his cost. In our considered view all such un-paid and outstanding liabilities such as outstanding municipal taxes , transfer, registration and mutation charges and costs with respect to the said property 'Roshan Villa' in favour of the assessee and co-owners , with which the property was saddled with on the date of sale on 16-01-2009, and which the buyer agreed to assume and discharge the same as his liabilities after acquisition of property 'Roshan Villa' needs to be added to the sale consideration value of Rs. 25,00,000/- to arrive at full value of consideration to determine long term capital gains arising from the sale of the property. We would like to give an example to explain the same say for example , one property is worth Rs. 100 lacs and there is a loan outstanding of Rs. 40 lacs against the said property. The buyer agrees to pay Rs. 60 lacs to the seller for acquiring the said property and agrees to discharge loan against the said property directly after acquisition . Then, the full value of the consideration of the property will be Rs. 100 lacs being Rs. 60 lacs paid by the buyer to the seller and Rs. 40 lacs will be added being loan outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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