Case Law Details
Case Name : Sh. Jastinder Singh Vedi Punjabi Bagh Vs DCIT (ITAT Delhi)
Appeal Number : ITA No. 1788/Del/2011
Date of Judgement/Order : 19/05/2017
Related Assessment Year : 2006-07
Courts :
All ITAT ITAT Delhi
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Full value of consideration mentioned in section 48 of the Act may be replaced by the value assessed or adopted by the stamp value authorities or fair market value only if section 50C of the Act applies in this case and which depends on the fact whether the sale transaction was registered by the stamp valuation authorities. In other words, if the property in question has been sold through registered sale deed and the value adopted or assessed by the stamp valuation authority is higher than the value declared by the assessee in the return of income, the provisions of Section 50C of the Act are clearly applicable. If the sale transaction in question is not registered with stamp value authorities, then full value of consideration has to be accepted as declared by the assessee following the decision of the Hon’ble High Court of Punjab & Haryana in the case of Quark Media House (India) Pvt. Ltd. (supra.).
RELEVANT EXTRACT OF THE ITAT JUDGMENT
2. Briefly stated facts of the case are that the assessee was the owner of 1/3rd share of a residential house along with his wife, who was having 2/3rd share. The property was situated at first floor, 37, West Avenue, Punjabi Bagh New Delhi. The ground floor and second floor of the said building was owned by unrelated persons. Subsequently, the assessee and his wife sold the said property on 15.06.2005 and shown sale consideration of Rs. 22 lakhs. In the return of income for the assessment year under consideration, the assessee declared a long term capital loss of Rs. 1,40,569/- pertaining to sale of his share in the property. In the course of assessment proceedings, the Assessing Officer conducted inquiries and found that the sale consideration declared by the assessee and his wife in the return of income was very low as compared to prevailing market rate in the locality on the date of the sale. The Assessing Officer referred the matter to the valuation cell of the department under section 55A of the Act for finding out the fair market value of the property in question. The Valuation Officer in his report submitted on 30/12/2008 determined the fair market value of the property of Rs. 68,06,061/- including cost of the land. After inviting objection of the assessee on the said valuation report, the Assessing Officer determined 1/3rd share of sale consideration of the assessee at Rs. 22,68,687/- and made addition under the head ‘long term capital gain’ of Rs. 15,35,354/-. On further appeal to the ld. CIT(A), the assessee disputed the fair market value adopted by the Valuation Officer. The learned CIT(A) observed that the circle rates for the aforesaid area had been fixed at Rs. 27,300/- per sq. mtr. w.e.f. 18.07.2007 as against the rate of Rs. 31,107/- per sq. mtr. adopted by the Valuation Officer. Accordingly, keeping in view the period of sale involved, he adopted the prevailing market value at Rs. 20,000/- per sq. mtr. and determined the fair market value of the property at Rs. 50,86,329/- and 1/3rd share of the assessee was worked out to Rs. 16,95,442/- as against Rs. 22,68,687/- adopted by the Assessing Officer. The assessee is in appeal against the additions sustained by the learned CIT(A).
3. Before us, the learned counsel for the assessee submitted that for the purpose of capital gain under Section 45 of the Act, computation has been provided under Section 48 of the Act. According to said computation, for capital gain determination, cost of acquisition of the asset is required to be reduced from the full value of consideration received or receivable by the assessee. He further submitted that the Assessing Officer was not authorized to substitute full value of consideration with the fair market value of the property. In support of his contention, he relied on the decision of the Hon’ble High Court of Punjab & Haryana in the case of Pr. Commissioner of Income Tax- 2, Chandigarh Vs. Quark Media House India (P.) Ltd., reported in [2017] 77 taxmann.com 301 (Pujnab & Haryana). The ld. counsel further submitted that as the circle rates for the aforesaid year was fixed w.e.f. 18.07.2007 only and during the year under consideration there was no circle rate prescribed for Punjabi Bagh and hence the provisions of Section 50C of the Act were not applicable.
4. On the other hand, learned Sr. DR relied on the orders of the lower authorities and submitted that the property was referred for valuation in accordance with the provisions of the Act and therefore, the Assessing Officer was justified in substituting the fair market value of the property in place of full value of consideration, as provided in Section 50C of the Act in case of capital gain assets being land or building or both.
5. We have heard the rival submissions and perused the relevant material on record. The issue in dispute in the case is whether the “fair market value of the property”can be substituted in place of “full value of consideration”in section 48 of the Act. In Section 48 of the Act, it is specified that income under the head ‘capital gains’ shall be computed by deducting from the full value of consideration received or accruing as a result of transfer of the capital asset, the amount of expenditure incurred in connection with transfer and cost of acquisition of the asset including cost of any employment of the asset. Thus, for the purpose of computation of capital gains “full value of the consideration” received/ accrued as a result of transfer of the capital asset is required to be considered. However, in case of specific capital asset like land or building, section 50C of the Act has been introduced w.e.f. 01.04.2003. According to which, in case of land or building or both, if the consideration received or accruing as a result of the transfer of capital asset is less than the value adopted or assessed or asses sable by any authority of the State Government i.e. stamp valuation authority for the purpose of payment of stamp duty then the valuation adopted or assessed or asses sable shall be deemed to be full value of consideration received accruing as a result of such transfer. The word ‘asses sable’ has been introduced w.e.f. 01.10.2009 and prior to that value adopted or assessed by stamp valuation authority was required to be deemed the full value of consideration. Further, in sub-section 2 of section 50C of the Act, if the assessee claims before the Assessing Officer that the value adopted or assessed or asses sable by the stamp valuation authority, exceeds the fair market value of the property on the date of transfer and the value adopted, assessed or asses sable by the stamp valuation authority has not been disputed by the assessee before any authority, court or High Court, then in such circumstances, there is a provision that the Assessing Officer may refer the valuation of the capital asset to Valuation Officer. The relevant provision is reproduced as under:
“Special provision for full value of consideration in certain cases.
50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or asses sable by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of
stamp duty in respect of such transfer, the value so adopted or assessed or asses sable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer :
stamp duty in respect of such transfer, the value so adopted or assessed or asses sable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer :
[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 asses sable 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.]
(2) Without prejudice to the provisions of sub-section (1), where—
(a) the assessee claims before any Assessing Officer that the value adopted or assessed or asses sable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer;
(b) the value so adopted or assessed or asses sable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court,
the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub- sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth Tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.”
6. Further, also it is evident from the decision of the Hon’ble High Court of Punjab & Haryana in the case of Quark Media House India (P.) Ltd. (supra), that when the Assessing Officer had not shown that the assessee received any consideration other than the consideration mentioned in the sale agreement, reference made to DVO under Section 55A was without jurisdiction. In the instant case, it is evident that the Assessing Officer did not invoke the provision of Section 50C of the Act and referred the matter to the Valuation Officer without observing the procedures laid in Section 50C(2) of the Act. The learned CIT(A) referred the Section 50C of the Act but held that it was not applicable in the case of the assessee, being no circle rate prescribed for the Punjabi Bagh area.
7. The ld. Sr. DR submitted before us that the learned CIT(A) relied on the letter dated 18.07.2007 of the Govt. of Delhi prescribing the circle rate of Rs. 27,300/- per sq. mtr. w.e.f. 18.07.2007, however, it was not clear that there was no circle rate prescribed prior to that date. The ld. Sr. DR further submitted that if the property has been registered by stamp valuation authority and value assessed or adopted is higher than the value shown by the assessee, in that circumstances the provisions of Section 50C of the Act would be applicable and the issue needs to be restored to the Assessing Officer for verification of these facts. The ld. Sr. DR also brought to our attention that the value of Rs. 22 lakhs adopted by the assessee was recorded in the sale deed dated 16.11.1999 through which the assessee purchased the property from vendors Sh. Jasbir Singh, s/o Sh. Nand Singh and, therefore, the value of the property was under assessed because the price of the property purchased in 1999 must have increased in a period of 7 years.
8. In our opinion, the full value of consideration mentioned in section 48 of the Act may be replaced by the value assessed or adopted by the stamp value authorities or fair market value only if section 50C of the Act applies in this case and which depends on the fact whether the sale transaction was registered by the stamp valuation authorities. In other words, if the property in question has been sold through registered sale deed and the value adopted or assessed by the stamp valuation authority is higher than the value declared by the assessee in the return of income, the provisions of Section 50C of the Act are clearly applicable. If the sale transaction in question is not registered with stamp value authorities, then full value of consideration has to be accepted as declared by the assessee following the decision of the Hon’ble High Court of Punjab & Haryana in the case of Quark Media House (India) Pvt. Ltd. (supra.). Since this issue has not been properly verified by the learned CIT(A) while holding that the provisions of Section 50C of the Act are not applicable in the case, in the circumstances, we feel it appropriate to restore the issue to the file of the Assessing Officer to examine the applicability of Section 50C of the Act with regard to transfer of the property in question and decide the issue afresh in accordance with law. The grounds of the appeal are accordingly allowed for statistical purposes.
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Offhand
The purport or import , much less the essence of the view taken, in the instant case, following the case law cited and followed, as read and understood, is not clear; on the contrary, extremely confusing. For, according to the well settled legal position, there could, on the flip side, conceivably no lawfully effective ‘transfer’, so as to attract tax, unless the transaction has been effected and evidenced by a deed of sale/conveyance, duly registered after paying stamp duty due.
Open to be enlightened, should the referred view be understood /construed, any differently !