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2017 (5) TMI 298 - ITAT AHMEDABAD

2017 (5) TMI 298 - ITAT AHMEDABAD - TMI - Addition with the aid of section 50C(1) - Held that:- The alleged agreement/MOU was executed on 5.7.2007. This memorandum contains that sale consideration would be calculated at the rate of ₹ 1195/- per sq.meter. The vendee has paid an amount of ₹ 20 lakhs by cheque bearing no.366815 dated 12.4.2007 and amount of ₹ 12 lakhs through account payee cheque on 23.5.2007. Thereafter schedule of payment has been given in para-2 of the memorand .....

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AO for re-adjudication. The ld.AO shall call for a report from the DVO as contemplated in section 50C(2) and the ld.DVO shall keep in mind any encumbrance created on the property by virtue of the alleged execution of the agreement. In this way, first grievance of the assessee is allowed for statistical purpose. - Disallowance out of cost of transfer while computing capital gain - Held that:- CIT(A) has remitted this issue for re-verification and reconsideration. No interference is called for .....

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AL YADAV, JUDICIAL MEMBER: Assessee is in appeal before the Tribunal against order of ld.CIT(A)-V, Vadodara passed for the Asstt.Year 2008-09. 2. Though the assessee has taken four grounds of appeal, but his grievance revolves around a single issue viz. the ld.CIT(A) has erred in confirming addition of 57,85,829/- which was added by the AO with the aid of section 50C(1) and addition of ₹ 2,01,389/- which was added by making a disallowance out of cost of transfer while computing capital gai .....

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tion at ₹ 2,39,78,200/-. Thus, the AO has observed that as per section 50C(1), value of the sale consideration would be deemed equivalent to the amount on which stamp duty was paid by the assessee while transferring the capital assets. In other words, the capital gain would be computed under section 48 by taking into consideration the value of the property determined for the purpose of stamp duty valuation. In this way, the ld.AO has made an addition of ₹ 57,85,829 (i.e. ₹ 2,39 .....

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received total sale consideration. Therefore, the transfer has taken place on 6.7.2007. The assessee has not received any amount over and above one stated in this MOU. The ld.counsel for the assessee contended that the Tribunal has recently considered a similar issue in the case of Shri Dharamshibhai Sonani Vs. ACIT, IT No.1237/Ahd/2013 wherein the Tribunal has observed that provisos to section 50C authorize the assessee to opt stamp duty valuation on the date of agreement, is a clarificatory am .....

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ssue to the file of the DVO as per section 50C(2) of the Income Tax Act. This exercise has not been carried out, and therefore, orders of the ld.Revenue authorities are not sustainable. 5. On the other the ld.DR relied upon the orders of the Revenue authorities. He contended that except a bald statement of agreement executed on 6th July, no document was produced by the assessee. Similarly, this agreement is not registered agreement. 6. We have duly considered rival contentions and tone through t .....

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e Tribunal in the case of Shri Devendra J. Mehta (supra) reads as under: 7. We have duly considered rival contentions and gone through the record carefully. Section 48 of the Income Tax Act provides mode of computation of capital gain. It contemplates that income arising under the head capital gains shall be computed by deducting from the full value of the consideration received or accruing, as a result of the transfer of the capital assets the following amounts, viz. (a) expenditure incurred wh .....

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of section 48, be deemed to be the full value of the consideration. In other words, full consideration mentioned in section 48 is to be replaced by the consideration on which value of the property was adopted for the purpose of payment of stamp duty. 9. Sub-Section (2) of section 50C further contemplates that in case assessee alleges that stamp duty valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then, the AO may refer the valua .....

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lip;…. (iva) ………. (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or 10. The case of the assessee is that he had executed an agreement to sell on 31.3.2008 and handed over the possession to the vendee, therefore, the transfer within the meaning of section 2(47)(v) was complete, and .....

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r section 53A of 1882 Act. The amendments have been made to sections 17 and 49 of the Indian Registration Act, 1908. It is pertinent to take note of section 17(1A) as well as Section 49 of the Registration Act. 17.(1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Relat .....

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any transaction affecting such property or conferring such power, unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.] 11 .....

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ing already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against th .....

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which was taken in part performance of the contract. He was able to protect his possession even after expiry of limitation to bring a suit for specific performance. But after the amendment effected in the Registration and Other Related Laws Amendment Act, 2001, it has been provided that though a contract accompanied by either of possession or executed in favour of a person in possession is compulsorily registerable under section 17(1A) of the Registration Act, 1908, if he failed to register suc .....

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n-registered contract could not be enforced. The transfer within the meaning of section 2(47) of the Income Tax Act would complete, if possession is protected. Therefore, we do not find any merit in the second fold of submissions raised by the ld.counsel for the assessee. 13. It is also pertinent to observe that in the case of Dharamshibhai Sonani Vs. ACIT, though the Tribunal has made an observation that proviso appended to section 50C recognizing the date on which agreement was entered into fo .....

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made observation. In the present case, agreement was entered into on 31.3.2008. Not a single paisa was paid on that date. It was transfer somewhere in the month of December, 2008. Agreement was without any consideration, but a promise of consideration was there. Therefore, the assessee cannot draw benefit from the order of the Tribunal in the case of Dharamshibhai Sonani Vs. ACIT (supra). As pleaded by the ld.CIT-DR, the assessee himself has recognized the sale in the Asstt.Year 2011-12 when de .....

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xt fold of dispute is whether alternative contention of the assessee for remitting the matter to the DVO under section 50C(2) ought to be rejected by the ld.CIT(A), and the full sale consideration on which stamp duty was paid could only be adopted for the purpose of computing long term capital gain. As discussed earlier, sub-section 2 of Section 50C contemplates that in case the assessee has alleged that value adopted by stamp valuation authority exceeds fair market value of the property as on t .....

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Act for the assessee to demonstrate that actual value received by him was far less than the one adopted for the purpose of stamp duty valuation. Now in the present case, it to be seen that the assessee has entered into an agreement to sell on 31.3.2008. The time limit for filing a suit for specific performance under the Specific Relief Act has been provided in the Indian Limitation Act, and this limitation is three years from the date of agreement. In case the vendee refused to get sale deed re .....

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ed in favour of the transferee/vendee. When such right is created in favour of the vendee, vendor is restrained from selling the said property to someone-else, because vendee in whose favour the right in persona is created has legitimate right to enforce specific performance of the agreement, if vendor for some reason is not executing sale deed. Thus, by virtue of agreement to sell, some right is given to the vendee by the vendor. It is an encumbrance on the property and considering this aspect, .....

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ile determining the FMV of the property. Considering these aspects, we deem it appropriate to set aside the issue to file of the AO for re-adjudication. The ld.AO shall refer the matter to the DVO as contemplated under section 50C(2) of the Income Tax Act, 1961. The ld.DVO shall determine fair market value of the property on the date of sale deed, but keep in mind the encumbrance over the property by virtue of agreement. The ld.AO shall determine the long term capital gain thereafter. Accordingl .....

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