TMI Blog2008 (2) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... isting on the date of transfer of the capital asset should be taken into consideration. From this angle also as well as from the angle of avoidance of double jeopardy, we hold that the assessee's case should be considered to be coming within the mischief of Chapter XX-C alone and not of s. 50C of the IT Act, 1961. Evaluating the structure as an existing one and having substantial value (as has been done by the stamp duty valuation authority) and including the same within the deemed consideration of the property transferred by the assessee does not seem to the correct thing to do. This has lead to a situation where the correlation between the property sold by the assessee and that considered by the stamp duty valuation authority gets missing. we are of the view that the adoption of the valuation as considered by the stamp duty valuation authority for the purpose of computation of the capital gains in the instant case, is improper and hence, requires to be rejected. We direct that the amount of consideration as mentioned in the agreement of sale, which was ultimately approved by the Appropriate Authority by granting NOC to the assessee and others and also acted upon in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amp duty authorities and the AO was informed of fair market value adopted under s. 50C where the Department had a right to pre-emptive purchase in lieu of the purchaser." 2. The brief facts leading to this appeal filed by the assessee, as narrated at the time of hearing and also borne out by records are that the assessee individual owned a property No. 63/2/C The Mall, Kanpur, U.P., measuring 1863.10 metres, along with 7 others, which they wanted to transfer to M/s KAN Constructions Colonizers (P) Ltd., for an apparent consideration of Rs. 2,34,00,000, by an agreement dt. 20th Sept., 2001, which was registered on 28th Nov., 2001. The implementation of the said agreement required "No Objection Certificate" (NOC) from the Appropriate Authority under the IT Act, 1961, in terms of s. 269UC(1), contained in Chapter XX-C of the Act, and accordingly, before registration Of the agreement deed, vide case No. RK-126, the assessee and others filed application in Form No. 37-I duly filled in, under Chapter XX-C, before the Appropriate Authority, Lucknow. NOC to the transferors for execution of the instrument in favour of the transferee was granted by the Appropriate Authority vide its orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee vehemently objects. However, it is required to be mentioned that before making the assessment, the AO, once more (a reference to the DVO had already been made by the Departmental authorities during the course of the proceeding under Chapter XX-C of the Act), made a fresh reference to the DVO for valuing the property at the time of its sale and that the DVO determined, the fair market value (FMV) of the property (50 per cent undivided land and building) at Rs. 3.73 crores. Finally, in the assessment order passed on 31st March, 2006, the AO took the full value of consideration of the property sold at Rs. 3,34,42,244 by applying the provisions of s. 50C and computed capital gains on that basis. 5. On behalf of the assessee, three-fold arguments have been made against adoption of the full value of the property at Rs. 3,34,42,244, which are as follow: 5.1 Firstly, it has been argued that for all practical purposes, the property was transferred on 20th Sept., 2001, when the agreement for sale was executed. It has been contended that instead of drawing up an agreement for sale, the property could have, very well, been transferred on that very date or immediately thereafter, had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the previous year relevant to asst. yr. 1973-74 (i.e. prior to 1st April, 1973) would not attract any capital gains. (iii) Goodyear India Ltd. us. State of Haryana (1991) 188 ITR 402 (SC) at p. 426-In this case, the Hon'ble Supreme Court held,-"It is well-settled that the main test for determining the taxable event is that on the happening of which the charge is affixed The taxable event is that which on its occurrence creates or attracts the liability to tax." 5.3 The learned counsel for the assessee also wanted to rely on the discussions made by Kanga Palkhiwala at p. 190 (last para) of their famous treatise on Income-tax Laws. (Vol. 1) to the effect that in case of capital gains tax, it is the law which was there at the time of transfer which should be followed. 6. On the other hand, the learned Departmental Representative has relied on the following judgments (some of which are found to be non-existent) in support of his contention that the law prevailing on the first day of the assessment year should be taken into consideration: (i) CIT vs. Isthmian Steamship Lines (1951) 20 ITR 572 (SC); (ii) 60 ITR 921 (non-existent); (iii) 191 ITR 83 (non-existent); (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration amount is concerned, there was no doubt with the Appropriate Authority, which is nothing but a wing of the IT Department. It has been pointed out that simply because of the delay in granting the sanction by the said authority, the actual process of sale of the asset got somewhat delayed and the question of operability of s. 50C crept in. The learned counsel for the assessee has submitted in this connection that the very purpose of the erstwhile Chapter XX-C and s. 50C of the IT Act 1961 was the same, viz. prevention of undervaluation of assets in the matter of their transfers and underpayment of capital gains tax thereby and s. 50C was meant to replace the erstwhile Chapter XX-C. However, due to certain factors beyond the control of the assessee, an overlapping period of 3 (three) months viz. from 1st April, 2002 to 30th June, 2002 (from which date Chapter XX-C lost its operation) came in the picture during which period, both the provisions remained in force. In any case, it has been pointed out that the amount of apparent consideration as mentioned by the assessee in the agreement for sale of the property was not only approved by the Appropriate Authority by granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions by the Department on the same ground of inadequacy of consideration for transfer of capital asset from two different angles, viz. acquisition proceedings by the Appropriate Authority and then again the application of the deeming provisions of s. 50C of the Act. Sec. 50C came into effect from 1st April, 2003. Hence, it would cover in a general manner the entire 'previous year' 1st April, 2002 to 31st March, 2003. The legislature certainly did not want that both the penal provisions should exist side by side. However, due to some misunderstanding somewhere, there was an overlapping period for three months, viz. from 1st April, 2002 to 30th June, 2002 and due to the misfortune of the present assessee, his case became target of both the provisions and that too not because of any fault on his part but on account of the delay on the part of Appropriate Authority to grant NOC to the proposed sale agreement. It is also a fact that ultimately, the sale was carried on at the price as mentioned in the agreement for sale in respect of which NOC had been granted by the Appropriate Authority. We also find that even the ultimate sale of the property also took place in May, 2002, when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as discussed by us above, we are of the view that the adoption of the valuation as considered by the stamp duty valuation authority for the purpose of computation of the capital gains in the instant case, is improper and hence, requires to be rejected. On the other hand, we direct that the amount of consideration as mentioned in the agreement of sale, which was ultimately approved by the Appropriate Authority by granting NOC to the assessee and others and also acted upon in the final sale transaction, should alone be taken into consideration for computation of capital gains. In other words, the computation of capital gains as shown by the assessee is being directed to be taken into account. 10. The following additional ground has been taken up by the assessee: "The AO erred and CIT(A) wrongly confirmed action of the AO in having referred valuation of the property at 63/2/C The Mall, Kanpur for valuing cost of acquisition at the fair market value as on 1st April, 1981 although the appellant had already furnished approved valuer (report in) respect of valuation." 11. The additional ground being purely legal in character and the decision on the said ground not requiring any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned judgment of the Gujarat High Court, the reference as made by the AO to the DVO in the matter of valuation of the asset (land) as on 1st April, 1981 be declared as illegal and hence, the valuation as made by the DVO in this regard he ordered to be inapplicable. 12. We have examined the facts of the case and also considered the legal position. We find that actually the AO considered the valuation as made by the registered valuer of the asset (land) transferred, as on 1st April, 1981 to be exaggerated and that is why he referred the valuation to the DVO. who actually made a lower valuation, which was again accepted by the AO and acted upon in the matter of computation of the capital gains on the transfer of the asset (land) under consideration. Hence, the provisions of s. 55A in the matter of making reference to DVO were not satisfied. The learned Departmental Representative has argued that the reference was made under s. 50C and not under s. 55A. His argument, however, cannot be accepted. A reference under s. 50C can be made only in respect of the valuation of the asset at the time of its transfer which has given rise to the occasion for levy of capital gains tax. Such refere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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