TMI Blog2021 (12) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh cheques only. Therefore, the proviso of section 50C(1) will clearly apply here. Therefore, the assessee s net sale consideration shall be considered as ₹ 25,25,000/- for the computation of capital gains as it is immaterial that whether reference of the agreement is included in the sale deed or not because it is evident from the payments received by the assessee by way of cheques, which proves that there was genuine agreement made for the sale/purchase of the property. As decided in SHRI VUMMUDI AMARENDRAN [ 2020 (10) TMI 517 - MADRAS HIGH COURT] AO could not have based his finding solely relying upon the guideline value especially when the Assessing Officer is not a person who is computing stamp duty under the provisions of Indian Stamp Act on the Deed of conveyance - AO could not have based his finding solely relying upon the guideline value especially when the Assessing Officer is not a person who is computing stamp duty under the provisions of Indian Stamp Act on the Deed of conveyance - Decided in favour of assessee. Exemption u/s 54F on the construction of new asset - AO has accepted construction value of ₹ 16,26,000/- for three individual houses, but, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT (Appeals) erred in not considering the various judicial precedents, which have upheld the law that several units of houses constructed near to each other would constitute a single residential house for the purpose of section 54F. 5. Any other ground, if any, will be submitted at the time of hearing with the kind permission of the Hon'ble Income Tax Appellate Tribunal. 2. Briefly the facts of the case are that there was a search u/s 132 of the Act in the case of M/s M.G. Brothers Automobiles Pvt. Ltd. on 25/07/2008, in which documents related to the assessee with reference to the purchase and ale of land was found and seized. The Assessing Officer had issued notice u/s.153C of the Act on 24.09.2009 for the Asst. Year 2007-08. The return of income was filed in response to the notice issued u/s.153C admitting income of ₹ 4,87,403/- on long term capital gains. 2.1 The appellant had sold a land admeasuring 5409 sq. yds. in Santosh Gardens sale deed executed on 29.01.2007 for ₹ 25,25,000/-. The Assessing Officer had noticed that the value of the property as per Section 50C of the Act is ₹ 41,91,000/-. The appellant was asked to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of Income on 30th March 2009 with acknowledgement number 297 with the office of the ACIT, Central Circle, Tirupati. The appellant had filed his Return of Income with a Total Income of ₹ 4,87,403/- and had paid a tax of ₹ 90,686/-. A copy of the Return of Income along with the Statement of Computation of total Income is herewith enclosed in the paper book (Pg 11 12) 4. The Total Income of the appellant consisted entirely of the capital gains arising on sale of agricultural land at Survey No. 523, Pudipatla Village, Chittoor District with an extent of 1.11 acres. The appellant had offered a sale consideration of ₹ 25,25,000 and reduced ₹ 4,25,410 towards indexed cost of acquisition and ₹ 16,12,187/- towards exemption under Sec 54F. 5. The appellant had entered into an unregistered agreement on 6th August 2006 for sale of his agricultural land to Mis M.G. Brothers Automobiles Private Limited for a consideration of ₹ 25,25,0001-. A copy of the Sale agreement is herewith enclosed in the paper book (Pg 13-15). 6. In pursuance with the above agreement, the appellant received the following amounts in the following manner. A c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k (Pg 57-61). 10. The Ld. AO, however disagreed with the Computation of the appellant and made the following additions to the returned income. a) Actual Sale consideration received amounting to ₹ 25,25,000/- which was offered as sale consideration under Sec 48, was replaced by the Ld. AO with ₹ 41,91,000/- being the market value of the land as on the date of sale. However, for the purpose of computation the Ld. AO took ₹ 41,41,900/- (by mistake) and made an addition of₹ 16,16,900/- b) Sec 54F deduction was ignored for two blocks of residential houses and was allowed only on the cost of construction of one block of house. This resulted in an addition of ₹ 11,25,857/-. 11. The Ld. AO completed the assessment on 9th December 2010 with an addition of ₹ 27,42,757/- and raised a demand of ₹ 9,43,630/-. 12. The appellant filed an appeal before the Ld. CIT(Appeals), Vishakapatnam. The Ld. CIT(Appeals), Vishakapatnam upheld the Order of the Ld. AO and issued his order on 21st March 2018. For Ground No.2: 13. The Ld. AO and the Ld. CIT(Appeals) have erred in adopting the SRO value on the date of Sale d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement ie, on 6th August 2006 and not on 29th January 2007. Also under Sec 50C, the market value of the property on the date of transfer cannot be considered as Sec 50C was amended to take the assessable value only prospectively from 01.10.2009 onwards. As there was no assessed market value on the date of the agreement, sale consideration can only be ₹ 25,25,000/-. So further addition on account of Sec 50C cannot arise. 20. Even if the market value of the property as on the date of Sale agreement is taken, the same is ₹ 8,50,000/- per acre on 18th October 2006. The same was ₹ 5,00,000/- per acre on 24th May 2006. The appellant has sold his land in acres to the seller. Hence the SRO value to adopted should only be in acres. The documents evidencing the SRO rate during the time of the sale agreement are herewith enclosed in the paper book (Pg 30-56). 21. Also, the issue of Sec 50C cannot be invoked for transfer of immovable property taking place in pursuance of an un-registered agreement has been upheld in the following cases. Navneet Kumar Thakkar Vs ITO 298 ITR AT 42 (Jodhpur) Asst CIT Vs Mrs N. Meenakshi 319 ITR AT 262 (Madhas) (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so shall apply only in a case where the amount of consideration or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of agreement for transfer. 29. The details of consideration paid to the appellant by the seller and the mode of payment are already given in point no. 6 above. 30. The appellant had received part of the consideration of ₹ 5,50,000/- vide cheque no. 754963 drawn on Andhra Bank and the same is also reflecting in the Bank statement. 31. The Ld. CIT(Appeals) and the Ld. DCIT have not considered the sale agreement itself as the same is not registered. However, as seen from the above text of the proviso, the statute nowhere insists the sale agreement to be registered. 32. Hence, the appellant has fully complied with the first and second proviso to Sec 50C and the appellant is eligible to claim the SRO value on the date of the agreement. 33. Several judicial pronouncements stated that the first and second proviso to Sec 50C are curative in nature and hence have to be applied retrospectively with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the house has three door numbers. Yet there is a common passage and common kitchen. So the three residential blocks constitute one house. 44. In Commissioner of Income Tax Anr Vs D. Anand Basappa 309 ITR 329 (Kar) (2009), it was held that the expression a residential house should be understood in a sense that the building should be of residential house and 'a' should not be understood to indicate a singular number - That apart, the apartments purchased by the assessee are situated side by side and the builder has effected modifications of the flats to make it as one unit. The fact that the flats were found to be occupied by two different tenants is no ground to hold that the apartment is not one residential unit. 45. In ITO Vs Ms Sushila M Jhaveri 109 TTJ 299 (Mum) (SB) (2007) it was held that where more than one unit are purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen etc then it would be a case of investment in one residential house and consequently the assessee would be entitled to exemption. 46. In several judicial pronouncements given below, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities. It is observed that the CIT(A) has considered the net consideration of ₹ 41,41,000/- (which is the value given by SRO) in respect of computation of capital gains and the value mentioned in the sale deed for the transaction of the property is ₹ 25,25,000/-, which has not been disputed by any of the authorities. From the detailed written submissions of the ld. AR of the assessee as cited supra, it is clear that the agreement was made for the sale of property on 06/08/2006 through cheque No. 754963 drawn on Andhra Bank for ₹ 5,50,000/- and paid cash of ₹ 50,000/- also and the subsequent payments received through cheques only. Therefore, the proviso of section 50C(1) will clearly apply here. Therefore, the assessee s net sale consideration shall be considered as ₹ 25,25,000/- for the computation of capital gains as it is immaterial that whether reference of the agreement is included in the sale deed or not because it is evident from the payments received by the assessee by way of cheques, which proves that there was genuine agreement made for the sale/purchase of the property. The said agreement is placed at page no. 13 to 15 of the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Asstt. CIT [2010] 326 ITR 245 to support the contention that the Assessing Officer was justified in treating the value adopted by the stamp valuation authority as the deemed sale consideration received/accruing as a result of transfer. Reliance was also placed on the decision of the Hon'ble Supreme Court in R. Sai Bharathi v. J. Jayalalitha [2004] 2 SCC 9, with regard to the effect of the guideline value fixed by the Government. As pointed out by us, the assessee sought to take the benefit of the proviso inserted to Section 50C of the Act. It is no doubt true and as clarified by the CBDT vide Circular No. 3 of 2017 dated 20-1-2017 that the amendment to Section 50C would start effect from 1-4-2017 and will accordingly apply from assessment year 2017-18 and subsequent assessment years. However one important factor which needs to be noted is that amendment seeks to relieve the assessee from undue hardship caused on account of the computation of higher rate of capital gains. 7. Before we proceed to consider as to whether proviso inserted in Section 50C of the Act has to be read retrospective or prospective, we need to point out that the Assessing Officer did not doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that in any event, if for the purpose of the Stamp Act, guideline value alone is not a factor to determine the value of the property, its worth will not be any higher in the context of assessing the true market value of the properties in question to ascertain whether the transaction has resulted in any offense so as to give a pecuniary advantage to one party or other. 8. Thus, the Assessing Officer could not have based his conclusion solely based on the guideline value which has been held to be only a prima facie rate prevailing in the area to ascertain the true or correct market value and it is not the last word on the subject of market value but only a factor to be taken note of. As pointed out earlier, the genuinity of the transaction done by the assessee was not doubted and the receipt of advance was through banking channel by way of a demand draft. 9. Therefore, in our considered view the Assessing Officer could not have based his finding solely relying upon the guideline value especially when the Assessing Officer is not a person who is computing stamp duty under the provisions of Indian Stamp Act on the Deed of conveyance. Having observed so we need to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it has to given retrospective operation from the date of insertion of the said proviso i.e., with effect from Assessment Year 2005-06. It was pointed out that the purpose of the amendment made by the Finance Act 2010 is to solve the anomalies with the instrument of section 40(a)(ia) of the Act, caused to the bona fide tax payer. It was further held that the amendment even if not given any operation retrospectively, may not materially to be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assesses having substantial turnover and equally huge expenses and necessary cushion to absorb the effect; however a marginal and medium tax payer who work at low gross product rate and when expenditure becomes subject matter of an order under section 40(a)(ia) is substantial, can suffer severe adverse consequence if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Thus, the amendment made by the Finance Act 2010 being curative in nature was held to be retrospective in operation. In the above decision, the Hon'ble Supreme Court took note of the fact that the statutory amendment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a capital asset being land or building on both, the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation of capital gains. The Income-tax Simplification Committee (Easwar Committee) has in its first report, pointed out that this provision does not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Act i.e. When an immovable property is sold as a stock-in-trade. It is proposed to amend the provisions of section 50C so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration. It is further proposed to provide that this provision shall apply only in a case where the amount of consideration referred to therein, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ambattur Clothing Co. Ltd. (supra) cannot be applied with the facts and circumstances of the case on hand. 18. Mr. T. Ravikumar, learned counsel is right in a submission that the observations made by the Tribunal qua the decision of the Honble Supreme Court in Vatika Township (supra) is incorrect. In fact we find that the Tribunal did not assign any reasons as to why the decision in Vatika Township do not apply to the facts of the case. In fact the decision in Vatika Town Ship should be referred for the purpose as to when a Statute can be treated to be clarificatory and when not?. The legal principle laid down therein ought to have been taken note of by the Tribunal. Therefore, the Tribunal may not be fully right in stating that the judgment in Vatika Township (supra) will not be applicable to the facts as the judgment needs to be looked into to consider the legal principle of retrospectivity, retro activity or prospectivity. In any event, the ultimate conclusion arrived at by the Tribunal confirming the above order passed by the CIT(A) cannot be found faulted with. The above judgment is squarely applicable to the facts of the case in hand and, therefore, following ..... X X X X Extracts X X X X X X X X Extracts X X X X
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