Krishna Enterprises vs. ACIT (ITAT Mumbai)

(i) The assessee sold certain flats during the year under consideration and also executed sale agreements for the same. The sale agreements were not registered, therefore, it was not possible to determine the stamp duty value as per provisions of Section 50C. However, the AO referred the matter to the DVO, who valued the four flats at Rs.2,07,51,130/- against declared sale consideration of Rs.1,96,,60,000/- by the assessee. Thus, there was a difference of Rs.10,91,130/- which amounts to approximately 5.5% of the amount actually declared as the sale consideration.

(ii) Circular No.5/10 dated 03/06/2010 reads as under:-

“The existing provisions of section 5OC provide that where the consideration received or accruing as a result of the transfer of a capital asset, being land or building or both, is less than the value adopted or assessed by an authority of a State Government (stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain. However, the present scope of the provisions does not include transactions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney.”

(iii) Thus, these amendments have been made applicable with effect from 1st October, 2009 and will accordingly apply in relation to transactions undertaken on or after such date. In the instant case, the transactions were entered during the financial year 2006-2007 i.e., 1st April 2006 to 31st March 2007 which is prior to 01/10/2009. Therefore, as per CBDT, circular provisions of Section 50C are not applicable in so far as sales deed so executed were not registered with the Stamp Duty Violation Authority.

(iii) We are also inclined to agree with learned AR Mr. Shashank Dandu that in view of the decision of Co-ordinate Bench in case of Rahul Constructions vs. DCIT (Pune) (Trib.) 38 DTR 19 (2010) ITA No.1543/Pn/2007 since the difference between the sale consideration of the property shown by the assessee and the FMV determined by the DVO under Section 50C(2) being less than 10 per cent, AO was not justified in substituting the value determined by the DVO for the sale consideration disclosed by the assessee.

(iv) We are also in agreement with learned AR that decision of Madras High Court in case of Sugantha Ravindran 353 ITR 488 is squarely applicable to the facts of the instant case where it has been held that since transfer was made prior to the amendment of Section 50C w.e.f. 1/10/2009, the provisions of section 50C would not be applicable.

(v) It was also argued by learned AR that the unregistered property was sold on 07/08/2006 which means, since the unregistered property was sold before the clarification was issued under Circular No.5/2010 dated 03/06/2010 where it clearly states that the scope of the provisions do not include transactions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney and hence the provisions of Section 50C will not be attracted since the sale is before 01/10/2009, which is the date on which the circular becomes applicable.