Brief of the case:
ITAT Held in ITO vs Tara Chand Jain that the amendment in sec 50C which inculcates word “assessable” would have prospective effect from the date of its insertion i.e from 01-10-2009 and would not have retrospective effect on the sale of property before 01-10-2009 so in the present case the assessee had sold the property rights in 2007 so sec 50C would not be applicable in the above case because limited rights could not be equated with the ownership of the land or building or both. The income tax cleary recognized the distinction between the land or building or any right in land under sec 50C of the act. Thus the act had given separate treatment to land, building and rights in the land.
Moreover as the assessee was only having limited rights in the land but the same was owned by state government. As sec 50C was applicable on the sale of land or building or both, so sec 50 would not be applicable in the above present case.
Facts of the case:
The assessee had sold a land through agreement to sale for Rs 74,91,000/- on 18-04-2007 In which assessee was having 50% share The land was not duly registered and no stamp duty was paid on the transaction. Therefore the ld Assessing Officer referred this property to Sub-Registrar, Sanganer-I, Jaipur for its valuation as on the date of transfer, for charging stamp duty on the above transaction. The Sub-Registrar, Sanganer-I valued the property at Rs. 6,97,66,620/- as on 18/04/2007 i.e. the date of transfer, on the basis of DLC rate, for the purpose of charging stamp duty on the above transaction. The ld Assessing Officer gave reasonable opportunity of being heard on this valuation made by the Sub-Registrar, Sanganer-I, Jaipur 5 ITA No. 566 & 578/JP/2012 ITO Vs Tara Chand Jain and proposed to adopt fair value of property U/s 50C at Rs. 6,97,66,620/- and also deduction U/s 54F was also proposed recomputed accordingly. The assessee filed objection before the Assessing Officer, which was forwarded to the Sub-Registrar for his comments. The Sub-Registrar again rejected the assessee’s objection and valued the property at Rs. 6,97,66,420/-. Assessee field an appeal because he was of the view that sec 50C would not be applicable as the property was sold on of 18-04-2007 but sec 50C came into force on 01-10-2009 so effect of sec 50C would be prospectively not retrospectively moreover assesse was not the owner of the land he was just having rights in the land.
Contention of the assessee:
Assessee was of the view that the word “ assessable “ in sec 50C came into force on 01-10-2009 but he had sold the property on 18-04-2007 when sec 50C was in force so sec 50c would not be applicable as it would be applicable prospectively not retrospectively. So the value adopted by the sub-registrar was not applicable in the present case.
Moreover assesse was of the view that he was just having rights in the land which was sold, its owner was state govt. so sec 50C was applicable when a person was owner of the land or building or both as the case may be. Sec 50C was not applicable on the rights on land. So AO was wrong in applying sec 50C in the present case.
Contention of the revenue:
Revenue was of the view that the Sub-Registrar had merely applied the market rate of the property, which was duly assessed by the DLC for determining the market value of the property for charging stamp duty. Hence the market value was duly assessed by the DLC for the purpose of charging stamp duty. Thus, it was incorrect to say that the market value of the property should be assessed when the transfer deed should be presented before the Sub-Registrar. The market value of the lands had already been assessed by the DLC. The Sub-Registrar had merely adopted the rate decided by the DLC for determining the market value of the land for charging stamp duty and when transfer deed is presented before him. The assessee and purchaser of the land did not present the sale deed before the Sub-Registrar, consciously and knowingly with motive to evade stamp duty on the transfer of the land and tax on capital gain accruing on such transfer as per the provisions of Section 50C of the Act. Thus the ld Assessing Officer taken full value consideration of half property at Rs. 3,48,83,310/- and finally he calculated the long term capital gain at Rs. 3,11,14,986/-.
Held by ITAT:
ITAT after relying on the case of CIT vs. R. Sugantha Ravindram, 352 ITR 488 that the word “assessable” is only prospective in nature and not applicable in respect of the transfer which had taken place prior to the insertion of word “assessable” in section 50C.
ITAT held that as the ownership of the land was with the state govt. and the assessee was having only limited rights. The income tax clearly recognized the distinction between the land or building or any right in land under sec 50C of the act. Thus the act had given separate treatment to land, building and rights in the land. Therefore sec 50C would be applicable to the transfer of land, building or both it would not be applicable to the right in land. In the present case, the assessee had only transferred the right in land for a valuable consideration, therefore, in the opinion of the Bench, the long term capital gain could not be calculated by invoking the deeming provisions provided under section 50C. Therefore we hold that section 50 C was not applicable to present case.
So ITAT had set aside this issue and directed AO to apply the provisions of income tax and also gave reasonable opportunity of being heard to the assessee after bringing of required evidence on record.