TMI Blog2018 (9) TMI 1696X X X X Extracts X X X X X X X X Extracts X X X X ..... date of transfer of asset - Held that:- Board has issued a circular whereby it has laid down that such assessee would be entitled for exemption. Circular bearing no.359 dated 10.5.1983 says As the section contemplates investment of the net consideration in specified assets for a minimum period and as earnest money or advance is a part of the sale consideration, the Board have decided that if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of asset, the amount so invested will qualify for exemption under section 54E. We allow this ground of appeal and direct the AO to grant exemption under section 54EC - ITA No. 2767/Ahd/2016 - - - Dated:- 26-9-2018 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER For The Assessee : Shri Deepak R. Shah, AR For The Revenue : Shri Mudit Nagpal, Sr.DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-5, Vadodara dated 24.8.2016 passed for the assessment year 2013-14. 2. Registry has raised an objection that appeal is barred by 184 days. However, the ld.couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the case of the assessee is that jantri value for the purpose of section 50C should be taken up as applicable on 8.2.2010. The ld.AO rejected this contention of the assessee, he took into consideration the sale value at ₹ 3,94,48,890/- and computed long term capital gain. 5. Dissatisfied with the assessment order, the assessee carried the matter in appeal before the ld.CIT(A). But the ld.CIT(A) concurred with the conclusion of the AO. The ld.CIT(A) further recorded that transfer of an immovable property completes when sale deed is being executed. The assessee is also offering long term capital gain the Asstt.Year 2013-14, which is the year in whose accounting year the sale deed has been registered. Otherwise, the assessee should have offered capital gain in the accounting year when date of agreement i.e. 8.2.2010 falls. In other words, the ld.CIT(A) proceeded to take note of circle rate at the point of time when the sale deed was executed. 6. Before us, the ld.counsel for the assessee reiterated contentions as were raised before the Revenue authorities. He pointed out that vide Finance Act, 2016 w.e.f. 1.4.2017 a proviso to section 50C has been appended which conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 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 valuation of the capital asset to the Valuation Officer. Sub-clause (v) of Section 2(47) has a direct bearing on the controversy. Therefore, it is pertinent to taken note of this clause. It reads as under: Section 2 . . . . . . . . . . . . . . . . ( 47) transfer , in relation to a capital asset, includes,- ( i) to (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 11. Before taking cognizance of any argument, it is pertinent to take note of Registration and other related Laws, Amendment Act, 2001 which has brought about radical changes in the rights flowing on the basis of the agreement executed in part performance of the contract under 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 sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. 13. A perusal of section 53A of the TPA would indicate that it provides a protection to transferee to retain his possession 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 such contract, then, he would not be able to protect his possession or any benefit conferred by section 53A of the TPA. Proviso appended to section 49 of the Indian Registration Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 50C for making a reference to the DVO to determine fair market value of the property. The reasons for such a mechanism is that stamp duty fee is only 4.95% (herein Gujarat) on the total sale consideration, which is a small amount and can be borne by any vendor/vendee. But for the purpose of Income Tax Act, the liability would enhance multi fold, and due to this reason, mechanism has been provided in the Act for the assessee to demonstrate that the value received by him was far less than one adopted for the purpose of stamp duty valuation. For this, he can make a request to the AO under section 50C(2) for making a reference to the DVO. It is pertinent to observe that the assessee entered into an agreement to sell on 8.2.2010. The AO has not disputed this agreement. The assessee has received payment in pursuance of this agreement through account payee cheque. Let us take a situation where a vendee fails to get the sale deed executed. The assessee being vendor has a remedy for filing a suit for specific performance under the Specific Relief Act. The time limit to file a suit for specific performance has been provided in Indian Limitation Act, which is three years. In such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which were executed through agreement to sell or power of attorney by inserting the word assessable alongwith words the value so adopted or assessed . Hence, section 50C is now also applicable in case of such transfers. The present provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement. A later similar provision inserted by way of section 43CA does take care of such a situation. 6.2 It is therefore proposed to insert the following provisions in section 50C: ( 4) Where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement. ( 5) The provisions of sub-section (4) shall apply only in a case where the amount of consideration or a part thereof has been rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property. 30 These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years. 17. If we take all these aspects in their settings as a whole, then it would indicate that earlier whenever an assessee disputed adoption of sale equivalent to the amount on which stamp duty is paid, then reference to the DVO is made under section 50C(2). Normally, as observed earlier, when a sale agreement was executed, payment was received in part performance of the agreement, then vendor would not get anything more than the amount agreed in the sale agreement. There may be a time gap between execution of agreement to sell and execution of sale deed. In between if circle rate is being enhanced, then he would like to challenge adoption of higher sale value on the strength of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.CIT(A) has erred in not granting deduction/exemption under section 54EC of the Act amounting to ₹ 50 lakhs. 20. Brief facts of the case are that after agreement to sell the assessee has received sale consideration from the vendee. He has made investment in NHAI bonds and claimed deduction under section 54EC. The ld.AO has observed that such investments were made before the registration of sale deed, and therefore, he is not entitled for the exemption. The issue is, whether investment made from the advance received on sale of capital asst will qualify for grant of exemption under section 50EC or not. Board has issued a circular whereby it has laid down that such assessee would be entitled for exemption. Circular bearing no.359 dated 10.5.1983 reads as under: CIRCULAR : NO. 359 [F.NO. 207/8/82-IT(A-ll)], DATED 10-5-1983 1. Section 54E provides for exemption of long-term capital gains if the net consideration is invested by the assessee in specified assets within a period of six months after the date of such transfer. A technical interpretation of section 54E could mean that the exemption from tax on capital gains would not be available if part of the considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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