Case Law Details
For the purpose of determination of capital gains according to section 50C market value of the property as on the date of sale deed or stamp duty value as on the date of agreement to sale: which has to be taken?
The Finance Act 2016, with effect from 1.4.2017, has inserted the following provisos to section 50C of the Income Tax Act, 1961(for short the Act’):
“Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:
Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.”
Recently, in Chalasani Naga Ratna Kumari, Visakhapatnam vs. ITO, Ward-3(2), Visakhapatnam [I.T.A.No.639/Vizag/2013, decided on 23.12.2016], an issue that came up for consideration before Visakhapatnam Bench, ITAT was in respect of adoption of value under section 50C of the Act, for the purpose of determination of capital gains. The A.O. adopted market value of the property under section 50C of the Act as on the date of sale deed for the purpose of computation of capital gains. The contention of the assessee was that stamp duty value as on the date of agreement to sale has to be considered, but not the stamp duty value as on the date of sale deed. The ITAT found force in the arguments of the assessee, for the reason that the assessee had sold the impugned lands by way of registered sale agreement dated 15.12.2007 for a consideration of 3,40,00,000/- and received an advance of 2,52,00,000/-. As on the date of agreement, the market value of the property for the purpose of payment of stamp duty was less than the consideration shown in the sale agreement. The said property had been conveyed through a registered sale deed on 1.9.2008 for a consideration of 3,40,00,000/-, whereas the stamp duty valuation of the property was fixed at 4,12,30,000/-. The A.O. adopted stamp duty value of the property as on the date of sale deed for the purpose of section 50C of the Act, to compute the deemed consideration for the purpose of capital gains.
After having heard both the sides and considered materials on record, the ITAT found that the A.O. had adopted stamp duty value of the property as on the date of sale deed. The facts relating to the market value as on the date of agreement to sale and as on the date of sale deed was not disputed. The only dispute was whether the stamp duty value as on the date of agreement to sale or sale deed to be considered for the purpose of computation of capital gain. The purpose of introducing section 50C of the Act was to counter suppression of sale consideration of sale of immovable properties. Before insertion of section 50C of the Act to the statute, there were lot of litigations as to consideration shown in document conveying title and payment of stamp duty. To overcome the litigations, the provision of section 50C of the Act had been inserted to the Act w.e.f. 1.6.2003, wherein it is made mandatory to adopt under section 50C of the Act for the purpose of determination of consideration. A proviso to section 50C of the Act has been inserted by the Finance Act, 2016 w.e.f. 1.4.2007 to resolve the genuine and intended hardship, in the case in which the date of agreement to sale is prior to the date of sale and market value of the property as on the date of agreement to sale and date of sale deed is different. The said proviso to section 50C of the Act has been examined by the coordinate bench of ITAT, Ahmedabad bench in the case of Dharma Sibai Sonani vs. DCIT in ITA No.1237/Ahd/2013 dated 30.09.2016 and therein it was held that the proviso to section 50C of the Act inserted by the Finance Act, 2016 w.e.f. 1.4.2007 is curative in nature and intended to remove an undue hardship to the assessee and accordingly given retrospective effect from 1st April, 2003 i.e. the date effective from which section 50C of the Act was introduced. Accordingly, as per the proviso, the stamp duty value of the property on the date of execution of the agreement to sale should be adopted instead of value on the date of execution of sale deed.
The learned Members of the ITAT, Vizag after perusing the facts available on record, found that the assessee had entered into a sale agreement in the year 2007 and as on that date, the stamp duty value of the property was less than sale consideration agreed to be paid between the parties. Although, stamp duty value of the property had been changed as on the date of sale deed, for the purpose of determination of deemed consideration under section 50C of the Act, stamp duty value of the property as on the date of execution of agreement to sale should be adopted, instead of value on the date of execution of sale deed. Therefore, it was held that the A.O. erred in adopting value of the property as on the date of sale deed to determine deemed consideration under section 50C of the Act.
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