Dharmidevi Kanaiyalal Suthar, Ahmedabad V. The Income Tax Officer, Ward-3(2)(6), Ahmedabad

ITA 1626/AHD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0421 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHWIN C SHAH
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Cost of acquisition; Fair market value
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.1626/AHD/2016 / ASSTT. YEAR: 2011-2012 DHARMIDEVI KANAIYALAL SUTHAR 26, KRISHNA PARK SOCIETY JASODANAGAR ROAD NR. SAHJANAND SCHOOL MANINAGAR, AHMEDABAD 380 008. PAN : AWRPS 2282 F ITO, WARD - 3(2)(6) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI ASHWIN C. SHAH, AR REVENUE BY : SHRI SATISH SOLANKI, SR.DR / DATE OF HEARING : 11/08/2016 / DATE OF PRONOUNCEMENT: 22/09/2016 $%/ O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST T HE ORDER OF THE LD.CIT(A)-3, AHMEDABAD DATED 11.5.2016 PASSED FOR T HE ASSTT.YEAR 2011-12. 2. ASSESSEE HAS TAKEN SUBSTANTIAL THREE GROUNDS OF APPEAL. OUT OF WHICH GROUND NO.1 RELATES TO CHALLENGE TO REOPENING OF THE ASSESSMENT, AND IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED CON FIRMATION OF ADDITION OF RS.31.00 LAKHS, WHICH WAS MADE BY THE AO WITH AI D OF SECTION 50C OF THE INCOME TAX ACT, 1961. OTHER GROUNDS ARE PERIPH ERAL ARGUMENTS TO THOSE MAIN ISSUES. ITA NO.1626/AHD/2016 2 3. AS FAR AS REOPENING OF THE ASSESSMENT IS CONCERN ED, THE LD.COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND. ACCORD INGLY, THE GROUND NO.1 IS REJECTED. 4. BRIEF FACTS WITH REGARD TO SECOND FOLD OF GRIEVA NCE IS THAT THE ASSESSEE WAS OWNER AND IN POSSESSION OF A PLOT BEAR ING NO.105, ADMEASURING 1000 SQ.METERS SITUATED IN INDUSTRIAL A REA, GIDC KERALA. THIS PLOT WAS PURCHASED BY THE ASSESSEE ON 23.5.200 6 FOR A SUM OF RS.9.50 LAKHS. THE ASSESSEE HAS ENTERED INTO AN AG REEMENT TO SELL OF THIS PLOT WITH M/S.MARVEL METAL & ALLOYS ON 7.5.2007 FOR A CONSIDERATION OF RS.11.50 LAKHS. ACCORDING TO THE ASSESSEE, THE PA YMENT WAS RECEIVED THROUGH BANKING CHANNEL AND POSSESSION WAS DELIVERE D AT THE TIME OF EXECUTION OF THE AGREEMENT. THE SALE DEED OF THE P LOT WAS EXECUTED ON 21.10.2010. THE ASSESSEE HAS FILED ITS RETURN OF IN COME ON 26.9.2011 DECLARING TOTAL INCOME AT RS.7,59,710/-. THE LD.AO HAD PROPOSED TO COMPUTE LONG TERM CAPITAL GAIN ON SALE OF PLOT AS P ER SECTION 50C OF THE INCOME TAX ACT. HE OBSERVED THAT ON THE BASIS OF S TAMP DUTY VALUATION, THE VALUE OF THE PLOT IS TO BE ADOPTED AT RS.59,18, 367/-. THE ASSESSEE HAS OBJECTED THIS COMPUTATION OF VALUE OF THE PLOT, AND ULTIMATELY AS PER SUB- SECTION 2 OF SECTION 50C, THE MATTER WAS REFERRED T O DVO, WHO MADE PRELIMINARY VALUATION OF PLOT AT RS.56 LAKHS, AND A FTER OBJECTION OF THE ASSESSEE, HE ADOPTED THE VALUE AT RS.42.50 LAKHS. THE CAPITAL GAIN COMPUTED BY THE AO READS AS UNDER: VALUATION AS PER DVO REPORT RS.42,50,000/- LESS: INDEXATION RS.6,35,660/- NET LTCG RS.36,14,340/- LESS: DISCLOSED BY THE ASSESSEE RS.5,14,340/- NET ADDITION RS.31,00,000/- ITA NO.1626/AHD/2016 3 5. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 6. BEFORE THE TRIBUNAL, THE ASSESSEE HAS RAISED THR EE FOLD SUBMISSIONS. IN HIS FIRST FOLD OF SUBMISSIONS, HE CONTENDED THAT THE ASSESSEE HAS RECEIVED FULL SALE CONSIDERATION AT TH E TIME OF EXECUTION OF THE AGREEMENT. HE HAS HANDED OVER THE POSSESSION T O THE VENDEE. THEREFORE, AS PER SECTION 2(47)(V) OF THE INCOME TA X ACT READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882, THE TRANSACTION HAS TAKEN PLACE ON 7.5.2007 WHEN THE ASSESSEE HAS HANDE D OVER THE POSSESSION, AND ANY GAIN ARISEN TO THE ASSESSEE IS TAXABLE IN THE ASSTT.YEAR 2008-09 AND NOT IN ASSTT.YEAR 2011-12. IN HIS NEXT FOLD OF CONTENTIONS, HE CONTENDED THAT LD.DVO HAS ERRED IN NOT CONSIDERING THE OBJECTION OF THE ASSES SEE, AND HAS ERRED IN TAKING THE RATES W.E.F. 1-4-2010, THAT IS THE PERIO D WHEN THE SALE DEED WAS EXECUTED. THE LD.DVO OUGHT TO HAVE TAKEN THE R ATES WHEN AGREEMENT WAS EXECUTED BY THE ASSESSEE. IN HIS LAST FOLD OF SUBMISSIONS, HE CONTENDED THAT AN AMENDMENT HAS BEEN EFFECTED IN SECTION 50C, WHICH HAS BEEN BR OUGHT ON THE STATUTE BOOK BY FINANCE BILL, 2016. THOUGH THE AMENDMENT H AS BEEN MADE EFFECTIVE FROM 1 ST DAY APRIL, 2017 AND IT IS INTENDED TO BE APPLIED I N THE ASSTT.YEARS 2017-18, BUT IT IS A PROCEDURAL ASPECT, AND IT CAN BE APPLIED EVEN IN THE PENDING MATTERS. ACCORDING TO THIS AME NDMENT, IT HAS BEEN PROVIDED THAT WHEREVER, SECTION 50C IS BEING APPLIE D, IT IS TO BE APPLIED FROM THE DATE OF AGREEMENT FIXING THE AMOUNT OF CON SIDERATION FOR THE TRANSFER OF IMMOVABLE PROPERTY, AND THE DATE OF REG ISTRATION, WHICH ARE ITA NO.1626/AHD/2016 4 NOT SAME, MAY NOT BE CONSIDERED. ON THE OTHER HAND , THE LD.DR RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 7. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. SECTION 48 OF THE INCOME TAX ACT PROVIDES MODE OF COMPUTATION OF CAPITAL GAIN. IT CONTEMPLATES THAT INCOME ARISING UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED BY DEDUC TING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING, AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSETS THE FOLLOWING AMOUNTS, VIZ. ( A) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER; AND (B) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMP ROVEMENT THERETO. 8. SECTION 50C FURTHER PROVIDES THAT WHERE THE CONS IDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE AD OPTED OR ASSESSED BY ANY AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP D UTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHA LL FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE C ONSIDERATION. IN OTHER WORDS, FULL CONSIDERATION MENTIONED IN SECTION 48 I S TO BE REPLACED BY THE CONSIDERATION ON WHICH VALUE OF THE PROPERTY WA S ADOPTED FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. 9. SUB-SECTION (2) OF SECTION 50C FURTHER CONTEMPLA TES THAT IN CASE ASSESSEE ALLEGES THAT STAMP DUTY VALUATION AUTHORIT Y UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY A S ON THE DATE OF TRANSFER, THEN, THE AO MAY REFER THE VALUATION OF T HE CAPITAL ASSET TO THE VALUATION OFFICER. IN THE PRESENT CASE, THIS PROCE DURE HAS BEEN FOLLOWED. ITA NO.1626/AHD/2016 5 A REFERENCE WAS MADE TO THE DVO UNDER SUB-SECTION(1 ) OF SECTION 50C AND HAS VALUED THE PROPERTY AT RS.42.50 LAKHS. AT THIS STAGE, LET ME FIRST DEAL WITH FIRST FOLD OF SUBMISSION MADE BY THE ASSE SSEE. SUB-CLAUSE (V) OF SECTION 2(47) HAS A DIRECT BEARING ON THE CONTRO VERSY. THEREFORE, IT IS PERTINENT TO TAKEN NOTE OF THIS CLAUSE. IT READS A S UNDER: SECTION 2 (47) 'TRANSFER', IN RELATION TO A CAPITAL ASSET, IN CLUDES, (I) ........ (II) (III) . (IV) . (IVA) . (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 ( 4 OF 1882) ; OR 10. THE CASE OF THE ASSESSEE IS THAT HE HAD EXECUTE D AN AGREEMENT TO SELL ON 7.5.2007 AND HANDED OVER THE POSSESSION TO THE VENDEE, THEREFORE, THE TRANSFER WITHIN THE MEANING OF SECTI ON 2(47)(V) WAS COMPLETE, AND ANY GAIN OUGHT TO BE ASSESSED IN THE ASSTT.YEAR 2008-09. THIS ARGUMENT WAS NOT DEALT WITH BY THE LD.REVENUE AUTHORITIES IN DETAIL, BECAUSE, BEFORE THE AO, IT WAS NOT RAISED. BEFORE TAKING COGNIZANCE OF THIS ARGUMENT, IT IS PERTINENT TO TAKE NOTE OF REGI STRATION AND OTHER RELATED LAWS, AMENDMENT ACT, 2001 WHICH HAS BROUGHT ABOUT RADICAL CHANGES IN THE RIGHTS FLOWING ON THE BASIS OF THE A GREEMENT EXECUTED IN PART PERFORMANCE OF THE CONTRACT UNDER SECTION 53A OF 1882 ACT. THE ITA NO.1626/AHD/2016 6 AMENDMENTS HAVE BEEN MADE TO SECTIONS 17 AND 49 OF THE INDIAN REGISTRATION ACT, 1908. IT IS PERTINENT TO TAKE NO TE OF SECTION 17(1A) AS WELL AS SECTION 49 OF THE REGISTRATION ACT. 17.(1A) THE DOCUMENTS CONTAINING CONTRACTS TO TRAN SFER FOR CONSIDERATION, ANY IMMOVABLE PROPERTY FOR THE PURPO SE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 188 2) SHALL BE REGISTERED IF THEY HAVE BEEN EXECUTED ON OR AFTER T HE COMMENCEMENT OF THE REGISTRATION AND OTHER RELATED LAWS (AMENDMENT) ACT, 2001 AND IF SUCH DOCUMENTS ARE NOT REGISTERED ON OR AFTER SUCH COMMENCEMENT, THEN, THEY SHALL HAV E NO EFFECT FOR THE PURPOSES OF THE SAID SECTION 53A. 49. EFFECT OF NON-REGISTRATION OF DOCUMENTS REQUIRE D TO BE REGISTERED.NO DOCUMENT REQUIRED BY SECTION 17 1[OR BY ANY PROVISION OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882)], TO BE REGISTERED SHALL (A) AFFECT ANY IMMOVABLE PROPERTY COMPRISED THEREIN , OR (B) CONFER ANY POWER TO ADOPT, OR (C) BE RECEIVED AS EVIDENCE OF ANY TRANSACTION AFFE CTING SUCH PROPERTY OR CONFERRING SUCH POWER, UNLESS IT HAS BE EN REGISTERED: PROVIDED THAT AN UNREGISTERED DOCUMENT AFFECTING IM MOVABLE PROPERTY AND REQUIRED BY THIS ACT OR THE TRANSFER O F PROPERTY ACT, 1882 (4 OF 1882), TO BE REGISTERED MAY BE RECEIVED AS EVIDENCE OF A CONTRACT IN A SUIT FOR SPECIFIC PERFORMANCE UNDER C HAPTER II OF THE SPECIFIC RELIEF ACT, 1877 (3 OF 1877) OR AS EVIDEN CE OF ANY COLLATERAL TRANSACTION NOT REQUIRED TO BE EFFECTED BY REGISTERED INSTRUMENT.] 11. I ALSO DEEM IT PERTINENT TO TAKE NOTE OF SECTIO N 53A OF THE TRANSFER OF PROPERTY ACT, 1882. IT READS AS UNDER: 53A. PART PERFORMANCE.WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVEABLE PROPERTY BY WRITIN G SIGNED BY ITA NO.1626/AHD/2016 7 HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CER TAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSIO N IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED O R IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT WHERE THERE IS AN INSTRU MENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MAN NER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE, TH E TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FRO M ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER H IM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESS LY PROVIDED BY THE TERMS OF THE CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 12. A PERUSAL OF SECTION 53A OF THE TPA WOULD INDIC ATE THAT IT PROVIDES A PROTECTION TO TRANSFEREE TO RETAIN HIS P OSSESSION WHICH WAS TAKEN IN PART PERFORMANCE OF THE CONTRACT. HE WAS ABLE TO PROTECT HIS POSSESSION EVEN AFTER EXPIRY OF LIMITATION TO BRING A SUIT FOR SPECIFIC PERFORMANCE. BUT AFTER THE AMENDMENT EFFECTED IN T HE REGISTRATION AND OTHER RELATED LAWS AMENDMENT ACT, 2001, IT HAS BEEN PROVIDED THAT THOUGH A CONTRACT ACCOMPANIED BY EITHER OF POSSESSI ON OR EXECUTED IN FAVOUR OF A PERSON IN POSSESSION IS COMPULSORILY RE GISTERABLE UNDER SECTION 17(1A) OF THE REGISTRATION ACT, 1908, IF HE FAILED TO REGISTER SUCH CONTRACT, THEN, HE WOULD NOT BE ABLE TO PROTECT HIS POSSESSION OR ANY BENEFIT CONFERRED BY SECTION 53A OF THE TPA. PROVISO APPENDED TO SECTION 49 OF THE INDIAN REGISTRATION ACT ONLY POST ULATES THAT SUCH ITA NO.1626/AHD/2016 8 AGREEMENT COULD BE TENDERED IN EVIDENCE IN A SUIT F OR SPECIFIC PERFORMANCE. IN OTHER WORDS, VALIDITY OF UNREGISTE RED AGREEMENT HAS NOT BEEN DENIED FOR THE PURPOSE OF ADDUCING IT AS EVIDE NCE FOR OBTAINING THE BENEFIT FLOWING FROM SUCH CONTRACT. BUT FOR THE PU RPOSE OF PROTECTING THE POSSESSION, UN-REGISTERED CONTRACT COULD NOT BE ENF ORCED. THE TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME T AX ACT WOULD COMPLETE, IF POSSESSION IS PROTECTED. THEREFORE, I DO NOT FIND ANY MERIT IN THE FIRST FOLD OF SUBMISSIONS RAISED BY THE LD.C OUNSEL FOR THE ASSESSEE. 13. AS FAR AS SECOND FOLD OF SUBMISSION IS CONCERNE D, THE LD.COUNSEL FOR THE ASSESSEE DREW MY ATTENTION TOWARDS PAGE NOS .3 TO 6 OF THE PAPER BOOK. HE CONTENDED THAT THE STAMP DUTY VALUATION A UTHORITY HAS NOTIFIED THE RATES IN THE AREA ON 1.4.1999. THE RATES WERE RS.50/- PER SQ.METER. ON 8.2.2007 THESE RATES HAVE BEEN REVISED. ACCORD ING TO THE REVISED RATES, AN ENHANCEMENT HAS BEEN MADE IN VALUATION OF MARKET RATE TO THE EXTENT OF 50% FROM THE RATE NOTIFIED IN 1999. IN O THER WORDS, THE RATES NOTIFIED AT RS.50/- PER SQ.METER HAD BEEN REVISED T O RS.75/- PER SQ.METER. THE ASSESSEE HAS SOLD THE PROPERTY ON 7.5.2007. TH E RATES NOTIFIED ON 8.2.2007 OUGHT TO BE ADOPTED BY THE DVO FOR WORKING OUT VALUE OF THE PROPERTY FOR THE PURPOSE OF STAMP DUTY. THE LD.AO HAS TAKEN RATES OF 2010 I.E. DATE ON WHICH SALE DEED WAS REGISTERED. ON DUE CONSIDERATION OF THIS LINE OF ARGUMENTS, I AM OF THE VIEW THAT TH E LD.REVENUE AUTHORITIES HAVE FAILED TO APPRECIATE THE CONTROVER SY IN RIGHT PERSPECTIVE. THE ASSESSEE HAS EXTINGUISHED HIS RIGHT IN THE PROP ERTY ON 7.5.2007 WHEN THIS AGREEMENT WAS EXECUTED. VENDEE COULD ENFORCE THIS AGREEMENT BY WAY OF SUIT FOR SPECIFIC PERFORMANCE, AND IN THAT P ROCEEDINGS, THE AGREEMENT IS TO BE TENDERED AS EVIDENCE, AS PROVIDE D IN PROVISO TO ITA NO.1626/AHD/2016 9 SECTION 49 OF THE INDIAN REGISTRATION AT. IN OTHER WORDS, RIGHT TO OBTAIN SALE DEED EXECUTED WAS ACCRUED IN FAVOUR OF THE VEN DEE. THE RATES APPLICABLE ON 7.5.2007 OUGHT TO BE APPLIED FOR DETE RMINING THE VALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTING CAPITAL G AIN. IT HAS BEEN BROUGHT TO MY NOTICE THAT LD.DVO HAS ADOPTED RATES AS APPLICABLE ON 20.10.2010. I ACCEPTED THIS FOLD OF CONTENTIONS AN D DIRECTED THE AO TO COMPUTE THE VALUE OF THE PROPERTY BY ADOPTING THE R ATE AT RS.75/- PER SQ.METER. IF THIS VALUE EXCEEDS THE VALUE DECLARED BY THE ASSESSEE IN THE SALE DEED, AND ADOPTED FOR COMPUTING THE CAPITAL GA IN, THEN, THE AO WOULD TAKE THIS VALUE, OTHERWISE, CAPITAL GAIN WOUL D BE COMPUTED ON SALE CONSIDERATION DISCLOSED BY THE ASSESSEE IN HIS COMP UTATION. THE LD.AO SHALL CARRY OUT THIS EXERCISE AFTER PROVIDING OPPOR TUNITY OF HEARING TO THE ASSESSEE. 5. AS FAR THIRD FOLD OF CONTENTION IS CONCERNED, I DO NOT DEEM IT NECESSARY TO CONSIDER, BECAUSE UNDER SECOND FOLD OF CONTENTIONS, I HAVE ACCEPTED THE STAND OF THE ASSESSEE THAT VALUE ON TH E DATE OF AGREEMENT FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN OUGHT TO BE ADOPTED 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTY A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 22 ND SEPTEMBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 22/09/2016