PCIT-6 Vs Modipon Limited (Delhi High Court)
New Delhi: The Delhi High Court has dismissed an appeal filed by the Principal Commissioner of Income Tax (PCIT-6) against Modipon Limited, affirming that tax additions made under Section 50C of the Income Tax Act, 1961, for Assessment Year 2005-06 were unjustified. The case centered on a land sale where the agreement to sell was executed and registered on May 27, 2004, but the final sale deed was registered on September 16, 2004. In the intervening period, the property’s circle rate increased by nearly 60%.
The Assessing Officer (AO) applied the higher circle rate from the sale deed date (September 16, 2004) to compute capital gains under Section 50C(1), leading to an increased tax demand. This decision was initially upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].
However, the Income Tax Appellate Tribunal (ITAT) ruled in favor of Modipon Limited, setting aside the AO’s additions. The ITAT’s decision was influenced by judicial precedents, including the Supreme Court’s ruling in Sanjeev Lal v. CIT (2014) 365 ITR 389 (SC) and the ITAT (Vizag) decision in M/s Lahri Promoters v. ACIT – ITA No.12/Vizag/2009. These cases generally support considering the agreement date for capital gains if substantial actions, like advance payments, have occurred.
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