Aroumougam Pragalanadane Vs DCIT (ITAT Chennai)
Chennai ITAT: Unregistered Agreement to Sell Does Not Bar Benefit of Section 50C Proviso
The Chennai ITAT allowed the assessee’s appeal and deleted the addition of ₹99,06,125 made under Section 50C. The assessment had been reopened due to a difference between the sale consideration of ₹94,00,000 and the guideline value of ₹1,93,06,125 on the date of registration. The assessee submitted that the property was sold pursuant to an agreement to sell dated 11.07.2013, under which the sale consideration had been fixed and received through RTGS before execution of the registered sale deed on 07.03.2017. The AO and the CIT(A) denied the benefit of the proviso to Section 50C on the ground that the agreement to sell was unregistered. The Tribunal held that the statutory conditions under the proviso to Section 50C were satisfied as the consideration was fixed under the earlier agreement and received through banking channels. It observed that the proviso does not require the agreement to sell to be registered and found that the registered sale deed itself recorded receipt of consideration through RTGS. Accordingly, the Tribunal held that adoption of the stamp duty value as on the date of registration could not be sustained and deleted the addition.
The Chennai ITAT deleted an addition of ₹99.06 lakh made u/s 50C, holding that the benefit of the provisos to section 50C cannot be denied merely because the agreement to sell was unregistered. The assessee had entered into an agreement to sell the property in July 2013 for ₹94 lakh and received the entire sale consideration through RTGS before execution of the registered sale deed in March 2017. However, the Assessing Officer adopted the stamp duty value of ₹1.93 crore prevailing on the date of registration and taxed the differential amount under section 50C. The CIT(A) upheld the addition on the ground that the agreement to sell was unregistered and the advance received had initially been reflected as an unsecured loan.
The Tribunal held that the first and second provisos to section 50C merely require that the sale consideration be fixed under an earlier agreement and that part or whole of the consideration should have been received through banking channels before the date of the agreement. Nowhere does the statute require the agreement to sell to be registered. It observed that an agreement to sell merely records contractual obligations and does not itself convey title. Therefore, courts cannot import a condition into the statute that the legislature has consciously omitted. Since the registered sale deed itself acknowledged receipt of the consideration through RTGS in terms of the earlier agreement, the statutory conditions stood fully satisfied.
The Tribunal further relied on the Madras High Court’s decision in CIT v. Vummudi Amarendran, which held that the provisos to section 50C are curative and retrospective, and its earlier decision in Ashok Kumar Muraka v. ITO. It also rejected the Revenue’s objection regarding the amount being initially reflected as an unsecured loan, observing that the true nature of the transaction must be gathered from the overall documentary evidence rather than the accounting nomenclature. Accordingly, it held that the stamp duty value as on the date of the agreement, and not the date of registration, was relevant for section 50C, deleted the addition of ₹99.06 lakh, and allowed the assessee’s appeal.
Cases Discussed:
- Ashok Kumar Muraka Vs. ITO [2025] 176 taxmann.com 189 (Chennai-Trib.)
- CIT v. Vummudi Amarendran [2020] 120 taxmann.com 171 (Madras)
FULL TEXT OF THE ORDER OF ITAT CHENNAI
