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TMI Blog2022 (1) TMI 1447X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Sec. 2(47)(v) of IT Act r.w.s.53A of the Transfer of Property Act had been satisfied and the 'transfer' for the purpose of capital gains has occurred in the FY: 2012-13 related to the assessment year 2013-14 and thus the capital gains was assessable only in the AY: 2013-14. 3. Without prejudice, the learned Commissioner (A) ought to have appreciated that the contemplated transfer u/s.2(47)(v) has occurred on the date of execution of MOU i.e., 8.4.2013 and accordingly the registerable value as on 8.4.2013 alone could be considered for computation of capital gains. 4. The learned Commissioner (A) erred in upholding the value as on 24.2.2014 being the date of registered Deed of Exchange for determination of capital gains. 5. The learned Commissioner (A) ought to have appreciated the value fixed for registration in the case of Exchange Deed was only a notional value for registration purposes and cannot be held to be the actual consideration for transfer of property. 6. The learned Commissioner (A) erred in holding that the MOU having not been registered, the valuation was not required to be determined as on the date of MOU for the purpose of Sec. 50C of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2014 declaring a total income of Rs. 2,02,59,920/-. In the return, he declared income from Capital gains on transfer of land to the tune of Rs. 1,95,75,979/-. The case of the appellant was selected for scrutiny and assessment u/s. 143(3) was concluded on 21.7.2016 declining to accept the capital gains declared by the assessee and determined the same at Rs. 8,85,77,941. 5. The assessee along with his family members inherited an immovable property bearing Sy.No.22/2A measuring 2 acres and Sy.No.22/ lE of 1 Acre 22 Guntas by way of Partition Deed dated 01.11.1983. The assessee further purchased land measuring 22 Guntas at Sy.No.33/ 1, situated at Kaikondarahalli Village, Varthurhobli, Bangalore East Taluk, on 17.03.1986. The total extent of land held by the assessee and his family members were 4 acres and 04 guntas. 6. By way of partition deed dated 24/03/2011 the assessee and his son have been allotted 2 Acres of land i.e., 1 Acre each for the assessee and his son situated at Sy. No.22/2A at Kaikondahalli Village, Bangalore. The assessee was also owning 22 Guntas which was purchased by him situated at Sy No.33/1 at Kaikondahalli Village, Bangalore. The entire extent of 2 Acres and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 'A' in favour of the Developer and in return, the Developer conveyed the Property 'B' to the assessee and his son. Property 'A' and 'B' were exchanged after payment of stamp duty on an assessable value of Rs .54,00,00,000/-. In accordance with the guideline value for the purpose of stamp duty, the Developer deducted tax at source under Section 194-IA of the Act to the tune of Rs. 54,00,000/- at the rate of 1%. The above narrated facts are not disputed by the AO. 11. The assessee while filing the return of income has computed the capital gains by taking guideline value as on 8.4.2013 being the Date of MOU in respect of Property -A" as sale consideration and determined the capital gains at Rs. 1,95,75,979. 12. The AO during the course of assessment proceedings, issued show- cause notice to the assessee asking to show-cause as to why the amount assessed for the purposes of stamp duty be considered as Sale Consideration for the purposes of computation of capital gains under the Act and also why the date of transfer be considered to be 24-02-2014 instead of 08-04-2013. The assessee in response submitted that the method and manner of computation of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y should be taken only on the date of registration of the exchange deed and not on the date of MOU which was not registered. He had referred to several cases to suggest that the JDA executed cannot be considered to be the date of transfer and the capital gains cannot be shifted to AY 2013-14. 16. Aggrieved, the assessee filed appeal before the CIT(Appeals). It was submitted that the capital gains had arisen in 2 years as follows:- Particulars Date of transfer A.Y. Remarks Sale consideration to be adopted 62% of the undivided share out of 1 Acre in Property 'A' offered for Joint Development 1.3.2013 2013-14 Deemed transfer by virtue of section 2(47)(v) Guidance value of 1 acre out of Property A to the extent of 62% as on 1.3.2013. Appellant's portion of the undivided share in Property 'A' 8.4.2013 2014-15 Date of MOU will be date of transfer by reason of actual possession. Guidance value of Property 'A' to the extent of assessee's share. 17. On execution of the JDA, such transaction is exigible to capital gains by operation of Section 2(47)(v) of the Act read with 53A of the Transfer of Act. 1882 as all the conditions laid down t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration is to be adopted considering the guidance value of land as on 01-03-2013 (i.e., the date of JDA) following the decision of the Tribunal referred to supra. 24. Without prejudice to the submissions made above, it is submitted that the date of MOU is to be regarded as date of transfer due to the following reasons:- (i) The Appellant has factually put the Developer in possession of the land attracting the provisions of Section 2(47)(v). (ii) The Appellant has contracted in writing by way of a Memorandum of Understanding dated 08-04-2013 to convey the property to the developer. 25. The AO in his order has not disputed about the Developer being in possession of Property 'A'. He has only stated that the possession given by virtue of JDA is conditional and permissive. Assuming for argument sake, possession was permissive, by execution of MOU, the conditions agreed initially stands vitiated and the conditions laid out in the MOU would come into operation. As agreed under the MOU, the Developer was put in possession of *A. as a part performance of the entire contract to transfer the property in favour of the Developer. 26. The AO has also held that the contract of conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an oral agreement of sale, the deed can be received in evidence making an endorsement that it is received only as evidence of an oral agreement sale under the proviso to Section 49 of 1908 Act. 12. Recently in the case of K.B. Saha and Sons Private Limited v. Consultant Limited!, (2008) 8 SCC 564 , this Court noticed the the following statement of Mulla in his Indian Registration Act, 7th Edition, at page 189:- " .... The High Courts of Calcutta, Bombay, Allahabad, Madras, Patna, Lahore, Assam, Nagpur, Pepsu, Rajasthan, Orissa, Rangoon and Jammu Kashmir; the former Chief Court of Oudh; the Judicial Commissioner's Court at Peshawar, Ajmer and Himachal Pradesh and the Supreme Court have held that a document which requires registration under Section 17 and which is not admissible for want of registration to prove a gift or mortgage or sale or lease is nevertheless admissible to prove the character of the possession of the person who holds under it ..." This Court then culled out the following principles:- "1. A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act. 2. Such unregistered document can h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the facts and circumstances of the case. Further, it is not disputed by the AO that the Developer was not in possession of the property. In these circumstances, all the conditions laid down in Section 53-A of the Transfer of property Act stands fulfilled along with the conditions of registration which the Hon'ble court has held it to be procedural. Due to all the legal elucidations made, it was prayed to hold that the transfer of Property 'A' has been effected on the date of MOU i.e., 08-04-2013 and the computation of capital gains is to made accordingly. 33. In fact the very fact that at the time of MOU the assessee has undertaken to absorbed liability of Rs. 19,69,00,000/- payable by the transferee and out of the consideration payable of Rs.14 crore, Rs .2.5 crore had already been paid which would go to show that the MOU had been acted upon to justify the application of Sec.53A of the Transfer of Property Act r.w.s. 2(47)(v) of the I.T .Act. Further, the first proviso to Sec.50C(1) of the Act would support the case of the assessee. Though the proviso was inserted by the Finance Act, 2016 with effect from 1.4.2017, it is only clarificatory in nature. 34. Assuming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Dharma Sibai Sonani Vs. DCIT in ITA No. 1237/ Ahd/ 2013 dated 30-09-2016 and held that the proviso to Section 50C of the Act is curative in nature and intended to remove an undue hardship to the assessee and accordingly given retrospective effect from 01-04-2003 i.e., the date effective from which Section 50C was introduced." 37. Especially when the genuineness of the MOU cannot be doubted, in fact the date of exchange it is clearly observed that the execution of the Exchange Deed is in pursuance of the MOU executed by the parties. Thus, the genuineness of the MOU is not challenged by the assessing authority. The mere fact that the said MOU was unregistered was of no consequence to apply the proviso to Sec. 50C when there is adequate proof for the performance in pursuance of the MOU. As stated earlier the unregistered agreement was permissible to consider as an evidence with the performance in pursuance of the agreement has been established when the agreement i.e., MOU which has also been considered in the Exchange Deed executed later it is clearly show that the agreement was in existence between the parties as on the date should be MOU i.e., 8.4.2013. In the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the issue:- i. The acquisition of a part of the property was through partition deed dated 01.11.1983 including land at Survey No. 22/1E, 22/2A at Kaikondarahalli Village, Varthur Hobli, Bangalore East Taluk. ii. The assessee further received properties vide partition deed dated 24.03.2011 which include 50% of the land at Survey No. 22/2A at Kaikondarahalli Village, Varthur Hobli, Bangalore East Taluk, measuring about two acres. iii. The assessee purchased on 17,03.1986, 22 guntas of land at Survey No. 33/1 at Kaikondarahalli Village, Varthur Hobli, Bangalore East Taluk. iv. The assessee entered, along with his Son, B J Ravichandra; into the JDA of the properties at Survey No. 22/2A and 33/1 at Kaikondarahalli Village, Varthur Hobli, Bangalore East Taluk (hereinafter together referred to as schedule A property) for developing a residential apartment project with a Developer named Bren Corporation. v. The assessee contends by mentioning sub-clause 1 of clause 2 of the JDA that the possession had been taken by the Developer as on the date of the JDA i.e. 01.03.2013. vi. The assessee contends that he subsequently negotiated with the developer and on mutual agreement; they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale consideration and the revised guidelines value effected on 12.8.2013 by the State Govt. cannot be considered on the basis of which the JDA was entered. The contention of the ld. DR is that there was no evidence to suggest that the assessee has satisfied the condition laid down in 2nd proviso to section 50C of the Act that there was no payment of any consideration vide MoU dated 8.4.2013, as such it cannot be applied and this came into effect from 1.4.2017 and the assessee's case is relating to AY 2014-15. 43. Now the first issue before us is whether the 1st proviso to section 50C is prospective or retrospective. Section 50C(1) reads as under:- "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 receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship. This was considered by the Madras High Court in CIT v. Vummudi Amarendran, 429 ITR 97 (Mad) wherein it was held as under:- "11. The Hon'ble Supreme Court in CIT v. Calcutta Export Co. [2018] 93 taxmann.com 51/255 Taxman 293/404 ITR 654, considered the question as to whether the amendment made by the Finance Act 2010 to Proviso of Section 40(a)(ia) of the Act is curative in nature 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective; In the report there is an extract of Memorandum explaining provisions of Finance Bill 2016 which reads as follows: ''Rationalization of section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property. Under the existing provisions contained in section 50C, in case of transfer of 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 am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o him by the purchaser was Rs. 19 crores and Rs. 6 crores was received as advance on the date of entering into the Agreement for Sale. However, the Assessing Officer disbelieved the same and applied the guideline value at Rs. 27 crores on the date when the Sale Deed was executed and registered. Therefore, in our considered view, the decision in 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 Hon'ble 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Second Party to refund to the Lessees under the Lease Deed dated 12/09/2012 the said sum of Rs. 19,69,00,000/- (Rupees Nineteen Crores Sixty Nine Lakhs Only) refundable to them in terms of the said Lease Deed. The Second Party, in consideration of acquiring Schedule 'A' Property in exchange as aforesaid, has agreed to transfer the Property described in Schedule 'B' herein free from all encumbrances with the obligation and liability of Rs. 19,69,00,000/-(Rupees Nineteen Crores Sixty Nine Lakhs Only) being the interest free refundable deposit to be refundable to Lessees under Lease Deed dated 12/09/2012 and the aforesaid exchange is based upon the mutually agreed values fixed by the parties to each of the Schedule 'A', and 'B' Properties. In order to equalize the values of the Properties exchanged, the members of the First Party agreed to pay the Second Party Rs. 14,00,00,000/- (Rupees Fourteen Crores Only) in the form of payment and undertaken the responsibility to discharge Rs. 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 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under the provisions of any act and the Schedule 'A' Property is free from all such proceedings; g) that there are no tenancy claims in respect of the Schedule -A' Property under the Karnataka Land Reforms Act, 1961; h) that the members of First Party do not hold land in excess of the Ceiling limit as prescribed under the Karnataka Land Reforms Act; i) that the Schedule 'A' Property is not a granted land to Schedule Caste and Schedule Tribes and there is no prohibition or bar or impediment for sale of the Schedule -A' Property to anyone else; j) that the members of First Party are not restrained, as on date under any statute, law or enactment or any order, verdict or judgment from dealing with or disposing of or parting with possession of the Schedule 'A' Property; k) that the members of First Party have paid the municipal property taxes, cesses and other statutory charges that have fallen due for payment upto date; l) that the members of the First Party alone are fully liable and responsible for discharging the liability of Rs. 19,69,00,000/- (Rupees Nineteen Crores Sixty Nine Lakhs Only) refundable in terms of the Lease Deed dated 1 ..... 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