Material Research Instruments Vs ACIT (ITAT Mumbai)
Date of Agreement Prevails over Date of Registration: ITAT Applies Section 50C Provisos to Curb Notional Capital Gains
The Mumbai Bench of the Income Tax Appellate Tribunal partly allowed the assessee’s appeal in a reassessment for AY 2006-07, holding that stamp duty value as on the date of agreement, and not the date of delayed registration, must be adopted for computing capital gains under section 50C, where statutory conditions are satisfied.
The assessee had sold an inherited office property under an agreement dated 05.08.2005, receiving the entire consideration of ₹69.76 lakh through banking channels and handing over possession on the same date. Registration was carried out by the purchaser only in 2009, when stamp duty value had escalated to ₹1.17 crore. The Assessing Officer nevertheless adopted the higher stamp value of the registration year and also rejected the assessee’s valuation of fair market value (FMV) as on 01.04.1981, resulting in substantial long-term capital gains.
The Tribunal noted that the transfer was complete in substance in 2005, and the delay in registration was neither within the control of nor attributable to the assessee. Crucially, the Departmental Valuation Officer (DVO) determined the FMV as on 05.08.2005 at ₹71.06 lakh, closely aligning with the declared consideration. This confirmed that there was no understatement of consideration.
Interpreting section 50C along with its first and second provisos, the Tribunal held that once consideration is received through banking channels on or before the date of agreement, stamp duty value as on the agreement date must prevail. Adoption of a later stamp value would amount to taxing notional appreciation arising years after the transfer, which is impermissible.
On the issue of cost of acquisition, the Tribunal upheld adoption of the DVO-determined FMV of ₹12.52 lakh as on 01.04.1981, holding it to be a reasonable and balanced basis. The Assessing Officer was directed to recompute capital gains accordingly. The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
