|CORAM:||B. Ramakotiah (AM), P. Madhavi Devi (JM)|
|SECTION(S):||45, 48, 50C, 56(2)(viib)|
|CATCH WORDS:||capital gains, stamp duty valuation|
|DATE:||November 27, 2015 (Date of pronouncement)|
|DATE:||January 13, 2016 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 50C: The stamp duty value on the date of agreement & not date of sale deed has to be taken. The nature of the property on the date of agreement has to be considered. Q whether proviso to s. 56(2)(vii)(b) is curative and retrospective left open|
(i) The issue is as to whether the date of agreement or the date of execution of sale deed has to be considered for the purpose of adopting the SRO value under S.50C of the Act. We find that this issue is now settled in favour of the assessee by the decisions of the Hon’ble Supreme Court in the case of Sanjeev Lal and Smt. Shantilal Motilal V/s. CIT(365 ITR 389) as well as decisions of the coordinate bench of this Tribunal at Visakhapatnam in the cases of M/s. Lahiri Promoters Visakhapatnam V/s. ACIT, Circle 1(1), Visakhapatnam (ITA No.12/Vizag/2009 dated 22.6.2010) and Moole Rami Reddy V/s. ITO (ITA No.311/Vizag/2010 dated 10.12.2010). It is therefore, now settled that the SRO value as on the date of agreement of sale has to be considered for the purpose of computation of capital gains.
(ii) In Sanjeev Lal & Smt.Shantilal Motilal (supra), though the issue was the date of transfer for the purpose of allowing the deduction u/s. 54 of the Act, the ratio laid down by the Apex Court that ‘by executing an agreement to sell in respect of an immovable property, a right in personam is crated in favour of the transferee/vendee and when such a right is created in favour of the vendee, the vendor is restrained from selling the said property to some one else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed”, is very much applicable to the case before us.
(iii) In the cases of Lahiri Promoters and Moole Ram Reddy (supra), the coordinate bench of the Tribunal at Visakhapatnam has considered the decision of the Apex Court in the case of K.P.Verghese (supra) to hold that the purpose of introduction of S.50C being to prevent undervaluation of the real value of the property in the sale deed, to avoid payment of tax or duty which the government is entitled to, the character of the transaction vis-à-vis Income Tax Act should be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into.
(iv) A transaction involving such immovable property in such prime locality of the city of Hyderabad and involving such financial implications would definitely not take place overnight. The purchaser would require time to verify the legal and clear title of the owners and also about the encumbrances on the property before proceeding to make the payment and get the sale deeds executed. All this would consume time and money. For this purpose, they would have negotiated with the owners about the sale consideration before embarking on this exercise, Therefore, it cannot be said that the transaction has been agreed to as well as executed on the same date. Thus, there had to be an agreement to sell, either oral or in writing.
(vi) The next question is the nature of the property for valuation under S.50C, because, according to the assessee, even if the date of registered sale deed is considered for determination of the fair market value under S.50C, the SRO value should be taken for residential area and not commercial area. He submitted that if the value of the residential area as on 1.4.2006 i.e. Rs.10,000 per sq. yard, is taken into consideration, the sale consideration received by the assessee was more than the SRO value and no addition was warranted. Therefore, the nature of the property as on the date of transfer attains importance. There cannot be any dispute that the nature of the property on the date of transfer/sale is to be considered.
(vii) As regards the reliance of the assessee on the proviso to S.56(2)(vii)(b) of the Act, we find that the said proviso has been brought into the statute by the Finance Act of 2013 with effect from 1.4.2014. The learned counsel for the assessee has relied upon the raito laid down judgment of the Apex Court in the case of Allied Motors P. Ltd. V/s. CIT(224 ITR 677), in support of the contention that the said proviso is curative in nature and is therefore, applicable retrospectively. He also relied upon the judgment of the Hon’ble Supreme Court in the case of Alom Extrusions Ltd. (319 ITR 306) for the proposition that where the amendments are curative in nature, they are effective retrospectively. However, on the legal principle, we have already held that the guideline value as on the date of agreement of sale is to be adopted. Therefore, the decision on this point would only result in an academic exercise. Therefore, this ground is not adjudicated at this stage.
i do not understand how AOs or the revenue is so very ignorant of the provisions of law. Can the government harass a tax payer is the serious question? can the government force a tax payer meet unnecessary litigation costs?,Obviously not in terms of art. 51A of the constitution in Part IV A.
in the circumstances, my view is honorable tribunal itself may impose costs on the revenue, and the liability be fixed on the relevant AO for his imprudent functioning, that way some fear is imposed on all AOs besides the revenue, if the revenue encourages these kinds of illegal activiities, the revenue be forced to pay liquidated damages to the assessees may be the twice the total tax amount charged on the assessee.
government does not mean it can misbehave in any way it likes?
Dr. Balachrishnan’s opinion is only one side of the coin. The other side is that the Assessment Orders are subject to Audit by Accountant General’s Office. If they find fault with the Assessing Officer and writes that the Revenue has lost so many lakhs or crores, the AO or his successors are bound to rectify the so called mistakes. Further, if the amount is large enough, the AO will have to face departmental action also. It is easy to find fault with somebody, but if you are in that position, you will also do the same thing.
SRO value has to be considered, do you need Auditor general audit has to examine. I wonder Mr. Ramachandran’s opinion. great Mr Ramachandran.
I was referring to the issues in general and not in respect of any case law in particular. In certain cases, the Audit finds fault with the AO’s action, which results in reopening the issues, just to be struck down by CIT(A)/ITAT/HC/SC and finally bringing the net result to zero. The AOs can again take a stand only in favour of Revenue which may be viewd by assessees as ‘harassing’, ‘imprudent’ etc.
Milton Friedman an economics Nobel Laureate rightly said , ‘Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government’, cannot be an exaggeration, if the revenue department officers behave as Ramachandran stated.
A society that puts freedom before equality will get a high degree of both, said Milton Friedman. He seems right, after all the government never learns , only people learn, said Milton Friedman, how true it is?