Brief of the Case
ITAT Jaipur held In the case of ITO vs. Tara Chand Jain that the right in land cannot be equated with the land or building. Therefore, it is concluded that section 50C is applicable to transfer of capital asset only in respect of land or building or both and is not applicable to right in land. In the present case, the assessee has only transferred the right in land for a valuable consideration; therefore, the long term capital gain cannot be calculated by invoking the deeming provisions provided under section 50C.
Facts of the Case
The assessee is a pensioner from University of Rajasthan having long term capital gain and interest income. The assessee filed return on 31/07/2008 declaring total income of Rs. 8,46,760/-. The case was scrutinized U/s 143(3) of the Act. The ld Assessing Officer observed that during the assessment order under consideration, the assessee had sold land measuring 11 bighas alongwith three other persons Smt. Shanta Devi Jain, Sh. Naveen Kumar Jain and Sh. Akhilesh Kumar Jain to Shri Mahaveer Swami Grih Nirman Sahkari Samiti Ltd. for total consideration of Rs. 74,91,000/- on 18/04/2007 through an agreement to sale. The assessee had claimed his share at 50% in the property sold and the remaining 50% share belongs to other three persons. Accordingly, the assessee has declared half of the long term capital gains accrued on the above transaction in his hands. The land was not duly registered and no stamp duty was paid on the transaction. Therefore the Assessing Officer referred this property to Sub-Registrar for its valuation as on the date of transfer, for charging stamp duty on the above transaction. The Sub-Registrar 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 AR of the assessee submitted the detailed objection against proposed computation of capital gain, the argument of the assessee was that the stamp authority valuation is for the purposes of charging stamp duty and applicability of the provisions of Section 50-C. The AO observed that 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. Thus the 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/-.
Contention of the Assessee
The ld counsel of the assessee submitted that the reference made by the ld Assessing Officer U/s 50C is out of jurisdiction as the assessee only transferred the land to the society vide agreement to sale on 18/04/2007 relevant to A.Y. 2008-09. In Section 50C, the only reference can be made for the immovable property, which was registered under the Rajasthan Stamp Rules as the stamp authority assessed the value of assets and duty on it. The Statutes was got amended by the Parliament w.e.f. 01/10/2009 and assessable word has been inserted in Section itself. The purpose of insertion of this word i.e. ‘assessable’ was to get valuation of the property, which are not being registered.
He further relied on various case laws on this issue particularly Hon’ble ITAT, Jaipur Bench, Jaipur decision in the case of Smt. Pushpa Kalra Vs. ITO in ITA No. 1130/JP/2011 for A.Y. 2003-04 dated 20/01/2012 wherein the Hon’ble Bench has decided that Section 50C is not applicable on the cases where transfer made prior to this amendment, which is squarely applicable on amendment made in Section 50C i.e. word ‘assessable’ has been added w.e.f. 01/10/2009. It means that the provisions are not applicable retrospectively. He further argued that the same view has been expressed by the Jaipur ITAT in the case of Sh Pramod Chand Soni Vs. DCIT (2012) 6 Tax Corp (A.T.) 27781 (Jaipur) order dated 03rd January, 2012.
He further argued that the CIT (A) was also not justified to adopt the DVO valuation got done in case of co-owners U/s 50C as the same is also not applicable in the case of assessee.
Contention of the Revenue
The ld counsel of the revenue argued that the stamp authority had valued the impugned land by considering all factors, which were raised by the assessee i.e. nature of the land, location of the land, distance from the road/main road, civil amenities, land use etc. The ld Assessing Officer only referred this land for valuation to the Sub-Registrar for valuation under the Rajasthan Stamp Rules, 2004 but rates of the particular area’s land always decided by the DLC and it is a continuous process to evaluate the rates as per the stamp rules. Therefore, the ld Assessing Officer rightly applied the valuation of land disclosed by the assessee for long term capital gain.
He further argued that as per Section 2(47), this transfer may be legal but for immovable property valued more than Rs. 100/- is required to register under the Rajasthan Stamp Rules and transfer of immovable property can be said complete thereafter. Further he argued that it is a device not to pay the tax on actual value of the land by adopting such type of mode of transfer. He further argued that the assessee intentionally has not got property registered by adopting this mode of transfer. There is a huge difference between the value taken in agreement to sale i.e. Rs. 74.91 lacs whereas as per Sub-Registrar, Sanganer, Jaipur it was valued at more than Rs. 6.97 crores. Therefore, order of the Assessing Officer may be confirmed.
Held by CIT (A)
CIT (A) partly allowed the appeal of the assessee. It was held that the valuation adopted by Sub-Registrar did not have any legal sanctity and therefore any addition made by the A.O. on such valuation did not have legs to stand. Even as per revenue records, the land in question was “Khasara” and the Sub-Registrar had himself admitted that there were no DLC rates for agricultural land in the concerned area.
Therefore, he could not have applied DLC rate applicable to residential area situated far away from the land of the appellant.
It is not in dispute that the appellant had sold the land about 3 year back on 18/04/2007. The Collector (Stamps) on the other hand had assessed the value of land for the purpose of stamps duty as on 09/11/2010. The counsel of the appellant on the other hand, has brought to his notice that in the case of other co-owner namely Smt. Shanta Devi Jain, the DVO had assessed the fair market value of the land in question at Rs. 1,27,07,500/- as on 18/04/2007 on a reference made by ITO.
In the case of Smt. Trishla Jain Vs. ITO (011 ITR (Trib) 579), it was decided that Since the Assessing Officer had failed to refer the matter to the Valuation Officer under Section 50C (2) as required, the matter was to be restored to the file of the Assessing Officer for his fresh adjudication after referring the matter to the Valuation Officer under section 50C (2) and then to decide the issue accordingly under the law. This decision is fully applicable to the facts of the present case. Though the present A.O. had not made any reference to the DVO however ITO, Ward 7(2) Jaipur had made a reference to the DVO in the case of other co-owner namely Smt. Shanta Devi Jain for the land in question. Therefore, the A.O. is bound to follow the report of the DVO for application of provisions of section 50C. However, since the DVO had assessed the value of land in question at Rs. 1,27,07,500/- in the case of other co-owner i.e. Smt. Shanta Devi Jain, the A.O. should have adopted the lower of two values i.e. the value assessed by Collector (Stamps), Jaipur-II or the value adopted by DVO following the provisions of Section 50C(3). He, therefore directed the Assessing Officer to adopt the value of Rs. 1,27,07,500/- for substituting the sale consideration instead of Rs. 6,97,66,620/- taken by him.
Held by ITAT
It is undisputed fact that land got transferred on agreement to sale by showing consideration of Rs. 74.91 lacs, which was valued by the stamp authority at Rs. 6,97,66,620/- under Rajasthan Stamp Rules. The assessee’s objections were considered by the Sub-Registrar and finally value decided the same. The assessee’s argument are not tenable in view of that the land was not salable property, DLC rate are for residential area, land situated in the bed of Amani Shah Ka Nallah, catchment area of the Gooler Dam, 15-20 feet below the road level, not touching any city road, waste water of the entire Jaipur city flows in the said Nallah, sewage pipe lines of many colonies, waste water containing high chemicals and acid contents of the textile processing units located in an around Sanganer also discharged and monsoon rain water also flows in the said Nallah when he had got the price through agreement to sale.
Whether assessable word inserted in Section 50C w.e.f. 01/10/2009 is retrospectively or prospective
Section 50C is a deeming provision and it is only applicable in respect of capital assets which are land or building or both. It is thus clear that this deeming provision of section 50C will come into play only if the capital asset transferred by the assessee is a land or building or both. If, in the absence of capital asset transferred is neither the land nor building nor both, this deeming provision shall not be applicable to such transfer.
It is seen from the above mentioned statement of fact i.e. the ownership of the land is with the State Government. The land is acquired and the assessee is merely a Kastkar, this clearly shows that the assessee is only having the limited rights in the land sold. The limited rights of Kastkar on the land cannot be equated with the ownership of land or with building or with both. The Income Tax Act clearly recognized the distinction between the land or building or any right in the land or building under section 50C. Thus the Act has given the separate treatment to land, building and rights in the land.
In the opinion of the Bench, the rights in land cannot be equated with the land or building. Therefore, it is concluded that section 50C is applicable to transfer of capital asset only in respect of land or building or both and is not applicable to right in land. In the present case, the assessee has only transferred the right in land for a valuable consideration therefore, in the opinion of the Bench the long term capital gain cannot be calculated by invoking the deeming provisions provided under section 50C. Therefore we hold that section 50 C is not applicable to present case. This is also of view of Mumbai Tribunal in the case of Atul G. Puranik vs. ITO (2011) 11 ITR (Trib.) 120.
Also In the matter of CIT vs. R. Sugantha Ravindram, 352 ITR 488, the Hon’ble Madras High Court after referring to the Circular issued by the Board has concluded 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. Thus it is clear that the amended provision of section 50C is not applicable to the transfer which had already taken place prior to the amendment. In the present case the assessee has transferred the capital asset for a consideration of Rs. 74,91,000/- and the document was neither registered nor evaluated for the purpose of stamp duty purposes by the Stamp Valuation Authority at the time of execution of said document .
There was no evaluation of stamp duty payable on the document. Thus in our view the deeming provision of section 50C do not come in to play thereby replacing the full valuation of consideration of the document with the value calculated by the Stamp Valuation Authority / registering Authority. In the absence of any adoption or assessment by the authority of state government for the purposes of the Stamp duty in respect of subject transfer (as the document was not registered ), there was no occasion for the AO to either refer the matter to the Registering Authority or to the Stamp Valuation Authority for the purpose of arriving at the valuation of the property.
Therefore, in the interest of justice we set aside this issue to the Assessing Officer and directed to apply the provisions of Income Tax including Section 55A to determine the correct capital gain in this transaction and decided the case after considering the above observations of this Bench and also give reasonable opportunity of being heard to the assessee after bringing of required evidences on record.
Accordingly appeal of the revenue allowed for statistical purpose only.