TMI Blog2021 (1) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, Bangalore. Being so, the argument of the ld. DR is that MoU is not suggesting any payment so as to apply the proviso to section 50C, thus it is deemed retrospective in nature. In our opinion, as held by the Madras High Court in the case of Vummudi Amarendran [ 2020 (10) TMI 517 - MADRAS HIGH COURT] , proviso to section 50C(1) is retrospective in nature applicable from AY 2014-15. Further part of the consideration has already been passed through MoU as enumerated above. It cannot be said that no consideration is paid on the date of MoU. This finding of the lower authorities is not proper. Accordingly, we hold that proviso to section 50C(1) by the Finance Act, 2016 is retrospective and also the assessee proved that the 2nd proviso to section 50C(1) is satisfied since the assessee has paid a part of sale consideration on the date of such MoU dated 8.4.2013. In view of this, we hold that the guidance value has to be computed as prevailing on the date of MoU dated 8.4.2013. Appeal of assessee allowed. - ITA No. 1322/Bang/2019 - - - Dated:- 5-1-2021 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER Appellant by : Shri S. Parthasarathi, Advo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (A) ought to have accepted the submissions of the appellant and ought to have directed the Assessing Authority to determine the registerable value as on 8.4.2013 u/s.50C of the Act for the purpose of determination of capital gains. 9. The learned Commissioner (A) ought to have appreciated the amendment to Sec.50C by insertion of proviso by Finance Act, 2016 is only a clarificatory and was applicable to even to the relevant assessment year and accordingly the value of balance sale consideration as on 8.4.2013 ought to have been adopted for the determination of capital gains. 10. On the facts the learned Commissioner (A) ought to have accepted the submission made by the appellant and ought to have held that no capital gains was liable to be taxed in the relevant year or in the alternative for the purpose of determination of capital gains in the value of sale consideration was liable to be adopted u/s.50C as on 8.4.2013. 11. The learned Commissioner (A) erred in not allowing the cost of improvement claimed by the appellant while computing the capital gains. 12. Without prejudice, the determination of capital gains is excessive, arbitrary and unrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter referred to as Developer ) for an extent of 3 Acres and 22 Guntas out of which 2 Acres and 22 guntas owned by the assessee and his son at Sy No.22/2A and the balance of 1 Acre of his daughters. The assessee also executed a registered General Power of Attorney dated 01-03-2013 in favour of the Developer for the purpose of development on the said land. The Developer commenced the construction of the built-up area on obtaining necessary approvals. The GPA executed in favour of the Developer empowered the Developer to enter into Agreement to Sell or Part with the built-up area falling to the share of the Developer. 8. The Developer owned a Commercial Building generally known as BREN ZION (hereinafter referred to as Property 'B) , situated at Varthur Road, White-field sub-division, Mahadevapura, Bangalore measuring 1,61,503 square feet of built-up area and 87,120 square feet of land. The Developer had let-out the commercial property referred supra on lease to M/s. Trent Hypermarket Limited and M/s. Trent Limited and had received a refundable lease deposit of ₹ 19,69,00,000/-. 9. The assessee, before the completion of construction of the super built-up area in the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -A of the Transfer of Property Act, 1882 read with Section 2(47)(v) of the Act and to such extent income ought to have been assessed in the AY 2013-14. (ii) Alternatively, the date of transfer of Property is to be considered as on 08-04-2013 being the date of MOU as the Developer was put in possession of the Property 'A' and the guidance value of Property 'A' is to be considered as sale consideration for computation of capital gains. (iii) Alternatively, since the delivery of possession was complete on 08-04 2013, the date of transfer of property is to be considered as on 08-04 2013 being the date of MOU and the guidance value of Property S' as on 08-04-2013 is to be considered as sale consideration after deducting an amount of ₹ 14,00,00,000/- paid by the appellant and ₹ 19,69,00,000/- lease deposit considering the amendment made to the provisions of Section 50C by the Finance Act, 2016. (iv) The cost of acquisition and improvement is to be considered judiciously. 13. It was submitted that an advance of ₹ 2,50,00,000/- was already paid by cheque and liability to the extent of ₹ 19,69,00,000/- was taken over as on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down therein stands fulfilled. 18. The Developer has started construction which itself is selfexplanatory that the was acted upon. Under Section 2(47)(v), any transaction involving allowing possession to be taken over or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act would come the ambit of Sec 2(47)(v). That, in order to attract Sec 53A the following conditiions need to be fulfilled. (i) There should be a contract for consideration; (ii) It should be in writing; it should be signed by the transferor; (iii) It should pertain to transfer of immovable property; (iv) The transferee should have taken possession of the properly; (v) The transferee should be ready and willing to perform his part of the contract. 19. The ld. AR submitted in the instant case, all the above are fulfilled to the extent of developer's share in Property 'A'. That even arrangements confirming privileges of ownership without transfer of title would fall under Section 2(47)(v). The assessee had made all arrangements to convey the Property 'A' to the Developer and consequentially, the 'transfer' h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the contract of conveyance by way of MOU will not hold water as it is not registered as per the requirements of 17 of the Registrations Act, 1908 and any conveyance of immovable property has to be effected only by way of registered document. 27. It is submitted that for the purposes of income-tax, a capital asset is said to been transferred when a person does any of the acts prescribed under the of Section 2(47) of the Act. If a person is put in possession of any immovable property, then such action would be regarded as transfer, regardless of the transfer of title deeds by way of a conveyance deed under any other law. The requirement of registration under the registrations Act and under the Transfer of Property Act, 1882 is only a procedural requirement. 28. The Hon ble Punjab Harayana High Court in the case of Sukhwinder Kaur Vs. Amar Singh AIR 2012 P H 166 PLR 241 has observed that as an agreement to sell does not create a right, title or interest to the property, hence an agreement not required to be registered and the same is an admissible as evidence in a suit for specific performance of the contract . 29. Also, the Hon'ble Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such unregistered document can however be used as an evidence of collateral purpose as provided in the proviso to Section 49 of the Registration Act. 3. A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration. 4. A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards. 5. If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose. To the aforesaid principles, one more principle may be added, namely, that a document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance. .. 16. The argument of learned counsel for the respondents with regard to Section 3(b) of 1963 Act is noted to be rejected. We fail to understand how the said provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect from 1.4.2017, it is only clarificatory in nature. 34. Assuming for argument sake though not conceding, if the date of transfer is considered to be the date of exchange deed, in such circumstances, the MOU would nonetheless be regarded as Agreement to Sell. The value or FMV as on Agreement to Sell (MOU in the instant case) is to be adopted and not the deed of sale (Exchange deed in the instant case). This is due to the reason that the assessee already contracted to transfer and the FMV is reasonably arrived at on such date. Unless there is a revision in the sale price originally agreed, there would be no extra benefit that the assessee would be deriving from transfer of the asset. The amendment made to the provisions of Section 50C of the Act by the Finance Act, 2016 by insertion of proviso clarifies and fortifies the contentions of the Appellant. The relevant portion of the law is reproduced below:- Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of capital asset are not the same, the value adopted or assessed or assessable by stamp valuation authority of the date of agreement may be taken f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e between the parties as on the date should be MOU i.e., 8.4.2013. In the circumstances, the proviso to Sec.50C is applicable even for the relevant year. In addition to the judgment of the ITAT, Vishakapatnam referred to supra the following judgments also supports the case of the assessee. 38. The ITAT, Bangalore has considered this issue in the case of N A Haris vs. Addl. CIT [188 ITD 517, Bangalore]. Similar ratio has been laid down by the ITAT, Ahmedabad in the case of Smt. Kundanben Ambalal Shah vs. ITO. The Hon'ble High Court Madras in the case of CIT vs. Sri. Vummudi Amarendran - TCA. No.329 of 2020 dt.28.09.2020 has held that the provisions Sec.50C is retrospective. 39. Thus. The ld. AR submitted that the guideline value to be adopted for determination of capital gains should be as on the date of MOU i.e., 8.4.2013. In the circumstances, it is submitted that the capital gains on exchange of the property is determinable only for the AY 2014-15 and the value or the transaction is required to be determine only in accordance with the guideline value as on 8.4.2013 for the purpose of computation of capital gains and the assessee having been adopted the same, the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee contends that he subsequently negotiated with the developer and on mutual agreement; they modified the contract i.e. the JDA. The Developer owned property named Bren Zion at Municipal No 2530/Survey No 42/5/Municiple No 21 of Munnekolalu in Varthur Road, Whitefield Sub-division, Mahadevapura Range, Bangalore measuring about site of 87,120 sq ft and building (thereafter together referred to as Schedule )3 property). The contract was modified by way of entering into a MoU dated 08.04.2013 whereby it was agreed between the parties thereto that schedule A and schedule B properties would be exchanged in accordance with the terms agreed upon in the MoU. vii. The assessee contends that deemed transfer has taken place on the date of MoU as per Section 2(47) of the Act. The assessee quoted provisions of Section 53A of the Transfer of Property Act, 1882 to reiterate his contention that the deemed transfer of Schedule A property has taken place on the date of MoU i.e. 08.04.2013. viii. The assessee contends that properties having been exchanged, the consideration for the same has be based upon the fair market value, which may be decided as per the guidance value determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso 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 39[or through such other electronic mode as may be prescribed40], on or before the date of the agreement for transfer: Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and 41[ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 was being made to remove undue hardship to the assessee or held to be retrospective. 12. The Hon ble Supreme Court in Kolkata Export Company took note of the earlier decisions on the same issue in the case of Allied Motors (P.) Ltd. v. CIT [1997] 91 Taxman 205/224 ITR 677, Whirlpool of India Ltd. v. CIT [2000] 245 ITR 3, CIT v. Amrit Banaspati Co. Ltd. [2002] 123 Taxman 74/255 ITR 117 (SC) and CIT v. Alom Enterprises [2009] 185 Taxman 416/319 ITR 306 and held that the new proviso should be given retrospective effect from the insertion on the ground that the proviso was added to remedy unintended consequences and supply an obvious omission. The proviso ensured rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sold as a stock-intrade. 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, 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. 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.'' 15. Taking note of the above Memorandum, it was pointed out that once a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as effective from the date on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 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 perspectivity. 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. 47. In the present case, admittedly there was MoU dated 8.4.2013 as per which payment has been made as follows:- WHEREAS the members of the First Party are not able to derive any income of whatsoever nature from the Schedule 'A' Property and they are not equipped with any experience in developing the Schedule 'A' Property or have command over funds for such large development and hence are on look out for disposal of the same to intending buyers And utilise from the proceeds realized by sale thereof for buying a commercial property yielding periodical income and also acquire certain apartments for their beneficial use and enjoyment. The Second Party is in the filed of Real Estate development of Properties and is on look out for suitable property for deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken the responsibility to discharge ₹ 19,69,00,000/- (Rupees Nineteen Crores Sixty Nine Lakhs Only) to the aforesaid Lessees viz., M/s.Trent Hypermarket Ltd., and M/s.Trent Ltd., in terms of the Lease Deed dated 12/09/2012 and thus the values of the Properties exchanged bear equal values. WHEREAS in view of the aforesaid agreement reached between the parties, the members of First Party have agreed to transfer Schedule 'A' Property in favour of Second Party by undertaking the liability and responsibility of discharging ₹ 19,69,00,000/- (Rupees Nineteen Crores Sixty Nine Lakhs Only) to the Lessees under the Lease Deed dated 12/09/2012 by making the following representations:- a) that the members of First Party are the sole and absolute owners of the Schedule -A' Property and their title to the Schedule -A' Property is good, marketable and subsisting and that none else have any right, title, interest or share therein and that cost of good title shall be that of members of First Party at all times and Schedule 'A' Property is free from encumbrances and claims including all claims by way of sale, exchange, mortgage, gift, inheritance, tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat have fallen due for payment upto date; 1) that the members of the First Party alone are fully liable and responsible for discharging the liability of ₹ 19,69,00,000/- (Rupees Nineteen Crores Sixty Nine Lakhs Only) refundable in terms of the Lease Deed dated 12/09/2012 to M/s.Trent Hypermarket Ltd., and M/s.Trent Ltd., without making the Second Party liable or responsible for the same; m) that the members of the First Party would on exchange of Schedule B Property comply with the obligations stipulated on the Lessors in the Lease Deed dated 12/09.2012 and promptly and diligently undertake with the said Lessees to refund the deposit aforesaid and sign and execute the required Deed of Attornment/Letters recognizing themselves as the Lessors under the Lease Deed in the place of the Second Party; 48. There was payment of ₹ 2,50,00,000 on 23.11.2011 by cheque No.259865 drawn on Vijaya Bank, Sarakki Branch, Bangalore. Being so, the argument of the ld. DR is that MoU is not suggesting any payment so as to apply the proviso to section 50C, thus it is deemed retrospective in nature. In our opinion, as held by the Madras High Court in the case of Vummudi Am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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