ITAT KOLKATA BENCH ‘B’
Heilgers Development & Construction Co. (P.) Ltd.
versus
Deputy Commissioner of lncomc-tax, Central Circle-II, Kolkata
IT Appeal No. 1681( Kol.) of 2011
[ASSESSMENT YEAR 2008-09]
Date of Pronouncement- 22.02.2013
ORDER
Pramod Kumar, Accountant Member 3
By way of this appeal, the assessee has challenged correctness of learned Commissioner of Income Tax (Appeals)’s order dated 25th January, 2011, in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2008-09,on the following grounds :
“That the ld. CIT(A) erred in confirming the addition made on account of capital gain on the ground that the value determined by the Stamp Valuation Authority is higher than the sale consideration declared by the assessee. The same is wrong and need to be deleted”.
2. The relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noted that the assessee has sold commercial premises admeasuring 2,151.85 sq.ft. on 28.04.2008 for stated consideration of Rs. 1,39,87,025/-, and admeasuring 1,113.03 sq.ft. on 18.06.2008 for a stated consideration of Rs. 72,34,695/- whereas, on the date of registration of respective sale deeds, stamp duty valuation of these properties was Rs. 1,44,18,400/- and Rs. 79,02,300/- respectively. When Assessing Officer required the assessee to show cause as to why the stamp duty value of these properties’ not be adopted for the purpose of computing capital gains, it was submitted that “due to the long gap of 7 to 9 months between the date of agreement and date of conveyance, there has been an increase in market rate” and “considering that the percentage of increase in market value with reference to the consideration by the assessee is less than 10%…………. the net difference of Rs. 10,98,980/- should be ignored in computing the long term capital gain”. None of these submissions found favour with the Assessing Officer. He rejected these contentions and observed as follows :-
“The submission of the assessee has been considered. Firstly, the assessee could not bring on record that the market rate has, in fact, increased in the interim period between the date of agreement and date of conveyance in that case, an official confirmation of enhanced rates from the stamp valuation authority was necessary, which, the assessee could not produce in course of hearing of the case. Secondly, the provisions contained in section 50C clearly states that for the purpose of computing long term capital gains, where the consideration of transfer of the capital asset is less than the value adopted or assessed by the stamp valuation authority, the value so adopted by the stamp valuation authority shall be deemed to be the full value of consideration received or accruing as a result of computation in the circumstances, the consideration for transfer of the office spaces is considered as Rs. 22,320,700/- i.e. the value adopted by the stamp valuation authority, for computing income under the head long-term capital gains”.
3. Aggrieved, assessee carried the matter in appeal before the CIT (Appeals), but without any success. In a very erudite and detailed order, learned CIT (Appeals] confirmed the action of the Assessing Officer and observed as follows :-
4. I have carefully considered the submission of the appellant and have also perused the assessment order. The reasons based on which the addition has been made by the A.O. has been discussed in the submission of the appellant. The issue involved here is whether the AO has rightly taken the. value adopted by the Stamp Duty Authority as the full value of consideration instead of sale consideration declared by the assessee in respect of sale of shops. For considering the issue the relevant Section 50C(1) is required to be analysed. Section 50C(1) of the I.T. Act reads as under :-
(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 received or accruing as a result of such transfer.
4.1. The provisions of section 50C are clear and unambiguous. Where the sale consideration for a land or building or both is less than the value adopted or assessed by the stamp valuation authority the value so adopted by the stamp authority shall, for the purpose of section 48 be deemed to be the full value of consideration received or accruing as a result of such transfer. It is clearly apparent that this is a deeming provision and the operative word here is “shall”. Thus it gives no discretion to the AO. If the sale value received or accrued to the assessee is less than the value adopted by the Stamp Duty Authority, then the AO is bound to take the value adopted by the Stamp Duty Authority as the full value of consideration for the purpose of section 48. Some of the cases relied on by the appellant like – Dr. Ramesh Kumar Anand, Swamy Complex Pvt. Ltd. and Amit Estate Organiser are not applicable since they are factually different. These cases dealt with the difference between the value shown by the assessee and value estimated by the Valuation Officer of the Department, in the instant case, it is the valuation of the Stamp Duty Authority which is to be adopted as full value of consideration as per the provision of section 50C(1).
4.2. The appellant has also relied on the decision in the case of CIT v. Chandni Bhuchar [2010] 323 ITR 510 (Punj. & Har.). With due respect to the Hon’ble P&H High Court I find that the facts of that case are different from the case under consideration. In the case of Chandni Bhuchar the AO adopted the purchase price of the property at Rs.30,32,000/- as per the Stamp Duty Authority as against the purchase price disclosed in the sale deed at Rs. 17,06,700/-. Accordingly, the AO held that the assessee must have paid Rs. 13,25,300/- over and above the purchase price disclosed in the sale deed and made addition of this difference as unexplained investment u/s. 69B of the I.T. Act. Thus the case under consideration stands on a different footing than the one decided by the Hon’ble P & H High Court. For adding the amount u/s. 69B the AO is obliged to bring on record positive evidence indicating the fact that assessee has paid more money than what was disclosed in the purchase deed. But in the instant case, the AO is not obliged to adducing any more evidence other than the assessment made by the Stamp Authority for the purpose of computation of capital gains as the provision of section 50C(1) expressly mandates the AO to do so, in view of the above, I held that the AO has rightly taken the assessed value of stamp authority as the full value of consideration for the purpose of computation of capital gain and accordingly the addition is confirmed”
4. The assessee is not satisfied and is in further appeal before us.
5. Learned counsel’s attack on orders of the authorities below consists of two legal propositions. His first and basic contention is that where difference in stamp duty valuation vis-a-vis stated sales consideration is less than 15% of the stamp duty valuation, the provisions of section 50C cannot be invoked at all. It is contended that every valuation is at best an estimate, and therefore under valuation cannot be presumed when there is only a marginal difference between such an estimate and the apparent consideration declared in the sale document. Learned counsel submits that is that it was for this reason that Hon’ble Supreme Court, in the case of C.B. Gautam v. Union of India [1993] 199 ITR 530 had recognized a tolerance limit for pre-emptive purchase of property under Chapter XXC, at 15% of variation, even though no such tolerance band was prescribed in the statute. Relying upon certain observations made in well known commentary “Sampat Iyengar’s Law of Income Tax” (Volume ‘3; 10th Edition] at page 4362, it is submitted that by the same logic, i.e. employed by Hon’ble Supreme Court in Gautam’s case (supra), it may be similarly understood that section 50C is also subject to similar tolerance of marginal difference. The difference is valuation as per sale deed vis-avis as per stamp duty valuation being much less than 15% in the present case it is contended that the provisions of section 50C do not come into play at all if provisions of section 50 C are to be invoked even in cases where differences in stamp duty valuation and stated sales consideration are insignificant and marginal, it will create undue hardship to the assessee since, beyond any dispute and controversy, such small variations can be explained by several factors and need not necessarily indicate attempt to evade taxes. He thus urges to interpret the law in a fair and reasonable manner in accordance with the intent of legislature. The second proposition is that when there is substantial time gap between the date of agreement to sell and actual sales, the provisions of section 50 C cannot be invoked because the value of property at two materially different points of time cannot be compared to infer tax evasion. The very fact that these two points of time arc separated by long time gap makes the values on these two points of time uncomparable with each other. Learned counsel then points out that the date of sale deed execution was much later than the date of sale agreement inasmuch as while both the agreements to sell were entered into on 07.09.2007, the sale deeds were executed on 28.04.2008 and 18.06.2008 respectively. On these facts, his contention is that where registration is after a fairly long duration of agreement of sale, the parties are bound by the consideration specified in the agreement which cannot be compared with the stamp duty valuation at the point of time for execution of sales deed. For this reason also, according to the learned counsel, section 50C will have no application in the matter. Once again, references are made to the observations in Sampath Iyengar’s oft-quoted commentary and extracts are filed from the same.
6. None of these submissions, howsoever attractive as they may seem at the first blush, have legally sustainable merits.
7. When a provision for tolerance band is not prescribed in the statute, it cannot be open to us to read the same into the statutory provisions of section 50 C- no matter howsoever desirable such a provision be, even if that be so. What the provisions of section 50C clearly require is that when stated sales consideration is less than stamp duty valuation for the purposes of transfer, the stamp duty value will be subject to the safeguards built in the provision itself, taken as the sales consideration for the purposes of computing capital gains. Casus omissus, which broadly refers to the principle that a matter which has not been provided in the statue but should have been there, cannot be supplied by us, as, to do so will be clearly beyond the call and scope of our duty which is only to interpret the law is it exists. Hon’ble Supreme Court, in the case of Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 at has observed :
“We have given anxious thought to the persuasive arguments…., (which) if accepted, will certainly soften the rigour of this extremely drastic provision and bring it more in conformity with logic and equity. But the language of sections is clear and unambiguous. There is no scope for importing into the statute the words which are not there. Such interpretation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation. To us, there appears no justification to depart from normal rule of construction according to which the intention of legislature is primarily to be gathered from the words used in the statute. It will be well to recall the words of Rowlatt J. in, Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 (KB) at page 71, that: “…in a taxing Act one has to look at merely what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. “Once it is shown that the case of the assessee comes within the letter of law, he must be taxed, however, great the hardship may appear to the judicial mind to be”.
8. In any case, this Tribunal is itself a creature of the Income Tax Act and it cannot, therefore, be open to the Tribunal to deal with the question of correctness or otherwise of the provisions of the Income-tax Act. In Gautam’s case (supra), Hon’ble Supreme Court were in writ jurisdiction examining the validity of the provisions of Income-tax Act and, therefore, their powers of dealing with the provisions of the Income-tax Act were altogether different in scope and character. The observations made by Their Lordships in Gautam’s case, therefore, have no bearing on our decision on this issue. With regard to the observations made in Sampath Iyengar’s commentary, suffice to say that while this book was written in 1941 and last edited by the original authors several decades ago the provisions of section 50C are of rather recent origin and whatever comments have been made on the said section are essentially by a gentleman incharge of revising this classical commentary on income tax. With respect, we are not persuaded by his thoughts on this subject.
9. As for the question of, what has been described as, unambiguous scheme of the Income-tax Act and the need of a purposive interpretation in accordance with the said scheme, no doubt there was indeed a school of thought, propounded by a person no less than Lord Denning in the case of Seaford Court Estates Ltd. v. Asher (2 AER 155 @164 ), wherein it was observed that, “…when a defect appears, a judge cannot simply fold his hands and blame the draftsmanship, He must set out to work on the constructive task of finding the intention of parliament., and then must supplement the written word so as to give ‘force and life’ to the intent of the legislature…”, but this school of thought has been rejected by the subsequent English decision as also by decisions from our own Supreme Court. In this regard, we can do no better than to quote the following observations made by this very bench of the Tribunal over a decade ago, in the case of Tata Tea Ltd. v. CIT [2003] 87 ITD 356 wherein speaking through one of us (i.e. the Accountant Member), the Tribunal had observed as follows :
…It has been recognized by the Hon’ble Supreme Court, in the case of Petron Engineering Construction (P.) Ltd. v. CBDT AIR 1989 SC 501 that in respect to a matter provision of which may have been desirable but has not been really provided by the legislature, the omission can not be called a defect of the nature which can be cured or supplied by recourse to the mode of construction advocated by Lord Denning in Seaford Court Estates Ltd. case (supra).
9. As for the Lord Denning’s observations in the Seaford Court Estates Ltd. (supra), which have been heavily relied upon by the learned counsel, we wish to make same observations. The House of Lords itself, in a later judgment in the matter of Magor & St Mellons Rural District v. Newport Corpn. [1951] 2 All. ER 839, did not approve the proposition advanced by Lord Denning. It is interesting to note the articulate expressions of Lord Simonds, supporting the majority view and at page 841 of All England Report Volume 2 (1951), unequivocally and categorically rejecting Lord Denning’s theory on the relevance of intent of Legislature:
“My Lords, the criticism which 1 venture to make of the judgment of learned lord justice (Denning LJ) is not directed at the conclusion he has reached. It is after all a trite saying that on questions of construction different minds may come to different conclusions…. But it is on the approach of lord justice to which is a question of construction and nothing else. I think it desirable to make some comment, for, at a time when so large a proportion of the cases that are brought before the Courts depend on the construction of modern statutes, it would not be right for this House to pass unnoticed the propositions that the learned lord justice lays down ‘for the guidance of himself and presumably others…
…The part which is played in judicial interpretation of a statute by reference to the circumstances of its passing is too well known to need restatement…The duty of the Court in to interpret the words that the Legislature has used. Those words may be ambiguous, but, even if they are, power and duty of the Court to venture outside them on a voyage of discovery are strictly limited; see, for instance, Assam Railways & Trading Co. Ltd. v. Inland Revenue Commissioners (2) and particularly the observations of Lord Wright [1935] AC 458…
What the Legislature has not written, the court must write, and fill in the gaps. This proposition, which restates in a new form the view expressed by the lord justice in the earlier case of Seaford Court Estates Ltd. v. Asher (to which lord justice himself refers) cannot be supported.
… It appears to me to be naked usurpation of Legislative function in the thin guise of interpretation and it is less justifiable when it is guesswork with what material the Legislature would, if it had to discover the gap, have filled it in. If a gap is disclosed, the remedy lies in on amending Act…”
Lord Denning ‘s aggressive definition of the power of the Courts, so far as question of casus omissus is concerned, was severely criticized by Lord Simonds and other law lords in the above case. Lord Morton observed that “These heroics are out of place” and pointed of Lord Tucker “Your Lordships would be acting in a legislative rather than judicial capacity of the view put forward by Denning LJ were to prevail” (at page 850). As observed in Cross: Statutory Interpretation (2nd Edition, at page 45), the current tendency among English judges would appear to incline away from the Denning approach. These views are also echoed by Hon’ble Supreme Court of India from time to time. In the case of State of Kerala v. Mathai Verghese AIR 1937 SC 33, Hon’ble Supreme Court has taken a view that the court cannot reframe the legislation for the very good reason that it has no power to legislate. In Jumma Masjid v. Kodiamaniandra AIR 1962 SC 847, at page 850 Hon’ble Supreme Court referred to, with approval, Lord Loreburn’s observation, “We are not entitled to read words into an Act of Parliament unless clear reasons for it is to be found within the four corners of the Act itself.” Vickers Sons & Maxim Ltd. v, Evans [1910] AC 444 HL, at page 445. Lord Simonds rejection of Denning’s approach was cited, with approval, by Hon’ble Supreme Court in the case of Punjab Land & Development Corpn. v. Presiding Officer 1990 (3) SCR 111, at pages 153-54. We leave it at that.”
10. We also do not find any merits in assessee’s claim of undue hardships being caused to the taxpayers unless a tolerance band is read into the provisions of the section 50C and unless suitable adjustments are required to be made for long time gap between the date of agreement and actual sales. The safeguard built in section 50C does envisage a situation that whenever assessee claims that the fair market value of the property is less than the stamp duty valuation of the property, a reference can be made to the Departmental Valuation Officer and all these issues relating to valuation of the property – either on the issue of allowing a reasonable margin for market variations, or on the issue of making adjustments for agreements having been entered long ago, can be taken up, before the Departmental Valuation Officer and, therefore, subsequent appellate forums as well. The inherent flexibility in this course of action come to the rescue of the assessee particularly in the case of marginal differences but then instead (sic) of the assessee decided to question very application of Section 50C something which we find to be devoid’ of legally sustainable merits.
11. The appeal is dismissed.
