Section 50C should be applied only on the date of sale agreement and not on the date of actual registration of conveyance deed

Koduru Satya Srinivas & Anr. Vs ACIT (ITAT Vishakapatnam)

ITA No. 556 and 557/Vizag/2008

Dated- 02.07.2010

The solitary issue urged in these two appeals is that Whether the Learned CIT(A) is right in law in confirming the action of the Assessing Officer in invoking the provisions of section 50C in the case of both the assessees.

The facts relating to the issue are stated in brief. Both the assessees owned an immovable property located at No.54-11- 5, Gudadals, Vijayawada. Both the assessees sold the said property by executing separate conveyance deeds. Shri K.Satya Srinivas executed the document numbered as 3068/ 2005 for a value of Rs. 32,94,720/-, while Smt. Anupama executed the document numbered as 3067/ 2005 for a value of Rs. 32,94,720/-. Both the documents were registered on 25.08.2005. However, for the stamp duty purposes, the SRO determined the market value of the property that was executed by Shri K.Satya Srinivas at Rs. 55,11,000/-. Similarly the market value for stamp duty purposes was determined at Rs. 54,98,000/- in respect of the property executed by Smt. K.Anupama. For the purposes of computation of capital gains, the Assessing Officer adopted the value determined by the SRO, by invoking the provisions of section 50C. The said action of the Assessing Officer was confirmed by Learned CIT(A). Hence both the assessees are in appeal before us contesting the decision of the tax authorities.

The submissions of the assessees are that:-

(a) An agreement was entered on 04-6-2005 followed by an oral agreement on 19-5-2005, i.e. before the sale of said immovable property. As per this agreement, the selling rate was fixed at Rs. 2,750/- per Sq. yard.

(b) At the time of entering into the agreement, an advance amount of Rs. 3,30,000/- each was received by way of cheques by both the parties.

(c) As per the SRO certificate, the market value for stamp duty purposes was Rs. 2,750/- per Sq. yard as on 04-6-2005 and also on 7.2005. The selling value agreed to by the assessees is very much equivalent to the SRO rates as on the date of agreement.

(d) However, when the conveyance deed was actually registered on 8.2005, the SRO rates were revised upwards and the rate on that date was fixed at Rs. 4,500/- per Sq. yard.

(e) Since the conveyance deed was registered in accordance with the sale agreement and further the sale value is equivalent to the SRO rates  as on the date of agreement, the provisions of section 50C should be applied only on the date of sale agreement and not on the date of actual registration of conveyance deed.

Learned Authorised representative brought to our notice that this bench of the Tribunal has decided a similar issue in the case of M/s Lahiri Promoters in ITA No.12/Vizag/2009, vide its order dated 22.06.2010 in which it was held that applicability of the provisions of section 50C should be looked at only on the date of sale agreement.

In the cases before us also, there is no dispute that the assessees herein entered into sale agreements on 04-6-2005 and the sale value fixed on that date was equivalent to the SRO rates fixed for stamp duty The conveyance deed was registered on 25.08.2005, i.e. within a period of three months. Though the SRO rates had been raised upwards on that date, yet, as observed in the above cited case, the assessees herein have fulfilled a contractual obligation, which they are bound by law to carry out. Since the process of sale has been initiated from the date of sale agreement, we have held in the above cited case that the applicability of provisions of section S0C should be looked at only on the date of sale agreement. In the instant cases, the question of adoption of a higher value by invoking the provisions of section S0C on the date of sale agreement does not arise as the sale value fixed by the assessees was equivalent to the SRO value for stamp duty purposes.

In view of the foregoing discussions, we set aside the orders passed by Learned CIT(A) in the hands of these two assessees and direct the Assessing Officer to delete the addition made in the computation of capital gains in the hands of both the assessees.