Shri Rahul G. Patel, Baroda V. The Dy. CIT., Circle-1(2), Baroda

ITA 2767/AHD/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9688 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 25-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DEEPAK R SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Retrospective amendment; Cost of acquisition; Fair market value
• Section: 43CA; 50C

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 2767/AHD/2016 / ASSESSMENT YEAR: 2013-14 RAHUL G. PATEL 402, 4 TH FLOOR BALAJIKRUPA, PLOT NO.16 SURVARNPURI JETALPUR, BARODA. PAN : AEIPP 4816 K VS DCIT, CIR.1(2) BARODA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI DEEPAK R. SHAH, AR REVENUE BY : SHRI MUDIT NAGPAL, SR.DR / DATE OF HEARING : 02/08/2018 /DATE OF PRONOUNCEMENT : 26/09/2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)- 5, VADODARA DATED 24.8.2016 PASSED FOR THE ASSESSMENT YEAR 2013-14. 2. REGISTRY HAS RAISED AN OBJECTION THAT APPEAL IS BARRED BY 184 DAYS. HOWEVER, THE LD.COUNSEL FOR THE ASSESSEE EXPLAINED THAT REGISTRY TOOK INCORRECT DATE WHILE CALCULATING LIMITATION. IN FO RM NO.36 AT SERIAL NO.9 THE ASSESSEE HAS MENTIONED DATE OF COMMUNICATION OF ORD ER APPEALED AGAINST AS 24/02/2016. THIS IS THE DATE ON WHICH ASSESSM ENT ORDER WAS PASSED AND THIS HAS CREATED CONFUSION IN THE MIND OF AUTHO RIZED PERSON RECEIVING ITA NO.2767/AHD/2016 - 2 - THE APPEAL. HE CALCULATED LIMITATION FROM THE ASSE SSMENT ORDER, OTHERWISE FROM ORDER OF THE LD.CIT(A) APPEAL IS WITHIN LIMITA TION. THE ASSESSEE HAS FILED FRESH FORM NO.36 RECTIFYING THE DEFECT. THUS , THE APPEAL IS NOT TIME BARRED. 3. GROUND NO.1 AND 2 ARE INTER-CONNECTED WITH EACH OTHER. THE DISPUTE INVOLVED IN THIS APPEAL RELATES TO COMPUTATION OF C APITAL GAIN ASSESSABLE IN THE HANDS OF THE ASSESSEE ON TRANSFER OF A CAPITAL ASSET. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 11.7.2013 DECLARING TOTAL INCOME AT RS.28 ,37,710/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTIC E UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTI NY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE WAS CO-OWNER I N AN IMMOVABLE PROPERTY COMPRISED AT BLOCK NO.10, REVENUE SURVEY N O.451, TANDALJA, BARODA ADMEASURING 1114 SQ.METERS. THIS PROPERTY W AS SOLD ON 5.6.2012 FOR A CONSIDERATION OF RS.3,00,11,000/-. THE AO FU RTHER OBSERVED THAT AS PER THE STAMP DUTY VALUATION AUTHORITY, THE VALUE O F THE PROPERTY FOR THE PURPOSE OF STAMP DUTY PAYMENT WAS DETERMINED AT RS. 3,94,48,890/-. THE LD.AO CONFRONTED THE ASSESSEE AS TO WHY FULL SALE C ONSIDERATION FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN BE NOT DEEMED EQUIVALENT TO THE AMOUNT ON WHICH THE STAMP DUTY WA S PAID AS CONTEMPLATED UNDER SECTION 50C OF THE INCOME TAX AC T. IN RESPONSE TO THE QUERY OF AO, IT WAS CONTENDED BY THE ASSESSEE THAT AGREEMENT TO SELL FOR SALE OF THIS PROPERTY WAS EXECUTED ON 8.12.2010. I N PURSUANCE OF THIS AGREEMENT, THE ASSESSEE HAD RECEIVED SUFFICIENT PAY MENT IN ADVANCE THROUGH ACCOUNT PAYEE CHEQUES. IT WAS FURTHER CONT ENDED THAT THE EXECUTION OF SALE DEED ON 5.6.2012 WAS FULFILLMENT OF A CONTRACTUAL ITA NO.2767/AHD/2016 - 3 - OBLIGATION IMPOSED UPON THE ASSESSEE BY VIRTUE OF S ALE AGREEMENT. HENCE, THE FULL VALUE OF CONSIDERATION OUGHT TO BE DETERMI NED UNDER SECTION 50C(2) BY TAKING INTO CONSIDERATION ENCUMBRANCE CRE ATED ON THE IMMOVABLE PROPERTY BY VIRTUE OF AGREEMENT DATED 8.2 .2010. IN OTHER WORDS, THE CASE OF THE ASSESSEE IS THAT JANTRI VALUE FOR THE PURPOSE OF SECTION 50C SHOULD BE TAKEN UP AS APPLICABLE ON 8.2 .2010. THE LD.AO REJECTED THIS CONTENTION OF THE ASSESSEE, HE TOOK I NTO CONSIDERATION THE SALE VALUE AT RS.3,94,48,890/- AND COMPUTED LONG TERM CA PITAL GAIN. 5. DISSATISFIED WITH THE ASSESSMENT ORDER, THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). BUT THE LD.C IT(A) CONCURRED WITH THE CONCLUSION OF THE AO. THE LD.CIT(A) FURTHER RE CORDED THAT TRANSFER OF AN IMMOVABLE PROPERTY COMPLETES WHEN SALE DEED IS B EING EXECUTED. THE ASSESSEE IS ALSO OFFERING LONG TERM CAPITAL GAIN TH E ASSTT.YEAR 2013-14, WHICH IS THE YEAR IN WHOSE ACCOUNTING YEAR THE SALE DEED HAS BEEN REGISTERED. OTHERWISE, THE ASSESSEE SHOULD HAVE OF FERED CAPITAL GAIN IN THE ACCOUNTING YEAR WHEN DATE OF AGREEMENT I.E. 8.2.201 0 FALLS. IN OTHER WORDS, THE LD.CIT(A) PROCEEDED TO TAKE NOTE OF CIRC LE RATE AT THE POINT OF TIME WHEN THE SALE DEED WAS EXECUTED. 6. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE REITE RATED CONTENTIONS AS WERE RAISED BEFORE THE REVENUE AUTHORITIES. HE POI NTED OUT THAT VIDE FINANCE ACT, 2016 W.E.F. 1.4.2017 A PROVISO TO SECT ION 50C HAS BEEN APPENDED WHICH CONTEMPLATES THAT WHERE THE DATE OF SALE DEED AS WELL AS SALE AGREEMENT ARE DIFFERENT AND FALLS WITHIN DIFFE RENT ASSESSMENT YEARS, THEN FOR THE PURPOSE OF DEEMING THE FULL SALE CONSI DERATION CONTEMPLATED IN SECTION 50C, THE VALUE DECLARED ON THE DATE OF AGRE EMENT BE TAKEN FOR COMPUTING THE GAIN. ON THE STRENGTH OF ITAT ORDER IN THE CASE OF ITA NO.2767/AHD/2016 - 4 - DHARAMSHIBHAI SONANI VS. ACIT, 75 TAXMANN.COM 141 ( AHD) HE CONTENDED THAT THE TRIBUNAL HAS HELD THAT THIS PROV ISO IS APPLICABLE WITH RETROSPECTIVE EFFECT. IN THIS WAY, HE CONTENDED TH AT JANTRI RATE AS ON 8.2.2010 BE APPLIED FOR CALCULATING FULL SALE CONSI DERATION OF THIS PROPERTY. 7. ON THE OTHER HAND, THE LD.DR RELIED UPON THE LD. CIT(A). HE SUBMITTED THAT THE LD.CIT(A) HAS ALREADY TAKEN INTO CONSIDERATION ALL THESE ASPECTS. THE LD.CIT(A) HAS SPECIFICALLY DEALT WITH THE ISSUE THAT EXECUTION OF SALE AGREEMENT DOES NOT CONFER A TITLE. IT DOES NOT TRANSLATE THE ACTION INTO A TRANSFER OF A CAPITAL ASSET. TRANSFER OF IM MOVABLE PROPERTY COMPULSORILY REQUIRES REGISTRATION UNDER SECTION 17 OF THE INDIAN REGISTRATION ACT. IN THE PRESENT CASE, SUCH REGIST RATION TAKEN PLACE ON 5.6.2012. 8. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 48 OF THE INCOME TAX ACT PROVIDES MODE OF COMPUTATION OF CAPITAL GAIN. IT CONTEMPLATES THAT I NCOME ARISING UNDER THE HEAD 'CAPITAL GAINS' SHALL BE COMPUTED BY DEDUCTING 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) EXPE NDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; A ND (B) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROV EMENT THERETO. 9. SECTION 50C FURTHER PROVIDES THAT WHERE THE CON SIDERATION 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 DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL FO R THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERA TION. IN OTHER WORDS, FULL ITA NO.2767/AHD/2016 - 5 - CONSIDERATION MENTIONED IN SECTION 48 IS TO BE REPL ACED BY THE CONSIDERATION ON WHICH VALUE OF THE PROPERTY WAS AD OPTED FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. 10. SUB-SECTION (2) OF SECTION 50C FURTHER CONTEMP LATES THAT IN CASE ASSESSEE ALLEGES THAT STAMP DUTY VALUATION AUTHORIT Y UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, THEN, THE AO MAY REFER THE VALUATION OF THE CAPITAL ASSET TO THE VALUATION OFFICER. SUB-CLAUSE (V) OF SECTION 2(47) HAS A DIRE CT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTINENT TO TAKEN NO TE OF THIS CLAUSE. IT READS AS UNDER: 'SECTION 2 . . . . . . . . . . . . . . . . (47) 'TRANSFER', IN RELATION TO A CAPITAL ASSET, IN CLUDES, (I) TO (IVA) (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) ; OR' 11. BEFORE TAKING COGNIZANCE OF ANY ARGUMENT, IT IS PERTINENT TO TAKE NOTE OF REGISTRATION AND OTHER RELATED LAWS, AMENDM ENT ACT, 2001 WHICH HAS BROUGHT ABOUT RADICAL CHANGES IN THE RIGHTS FLO WING ON THE BASIS OF THE AGREEMENT EXECUTED IN PART PERFORMANCE OF THE CONTR ACT UNDER SECTION 53A OF 1882 ACT. THE AMENDMENTS HAVE BEEN MADE TO SECTI ONS 17 AND 49 OF THE INDIAN REGISTRATION ACT, 1908. IT IS PERTINENT TO TAKE NOTE OF SECTION 17(1A) AS WELL AS SECTION 49 OF THE REGISTRATION AC T. ITA NO.2767/AHD/2016 - 6 - '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 1882) S HALL BE REGISTERED IF THEY HAVE BEEN EXECUTED ON OR AFTER THE COMMENCEMEN T 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 HAVE 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 AFFECTIN G SUCH PROPERTY OR CONFERRING SUCH POWER, UNLESS IT HAS BEEN REGIST ERED: PROVIDED THAT AN UNREGISTERED DOCUMENT AFFECTING IM MOVABLE PROPERTY AND REQUIRED BY THIS ACT OR THE TRANSFER OF PROPERT Y ACT, 1882 (4 OF 1882), TO BE REGISTERED MAY BE RECEIVED AS EVIDENCE OF A CONTRACT IN A SUIT FOR SPECIFIC PERFORMANCE UNDER CHAPTER II OF T HE SPECIFIC RELIEF ACT, 1877 (3 OF 1877) OR AS EVIDENCE OF ANY COLLATE RAL TRANSACTION NOT REQUIRED TO BE EFFECTED BY REGISTERED INSTRUMENT.]' 12. WE ALSO DEEM IT PERTINENT TO TAKE NOTE OF SECT ION 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 WRITING SI GNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTI TUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, 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 POSSESSION IN P ART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE O F THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFO RM HIS PART OF THE CONTRACT, ITA NO.2767/AHD/2016 - 7 - 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 FROM EN FORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY R IGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR C ONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDED B Y 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 T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF.' 13. A PERUSAL OF SECTION 53A OF THE TPA WOULD INDI CATE THAT IT PROVIDES A PROTECTION TO TRANSFEREE TO RETAIN HIS POSSESSION 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 SPEC IFIC PERFORMANCE. BUT AFTER THE AMENDMENT EFFECTED IN THE REGISTRATION AND OTHE R RELATED LAWS AMENDMENT ACT, 2001, IT HAS BEEN PROVIDED THAT THOU GH A CONTRACT ACCOMPANIED BY EITHER OF POSSESSION OR EXECUTED IN FAVOUR OF A PERSON IN POSSESSION IS COMPULSORILY REGISTERABLE UNDER SECTI ON 17(1A) OF THE REGISTRATION ACT, 1908, IF HE FAILED TO REGISTER SU CH 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 POSTULATES THAT SUCH AGREEMEN T COULD BE TENDERED IN EVIDENCE IN A SUIT FOR SPECIFIC PERFORMANCE. IN OTH ER WORDS, VALIDITY OF UNREGISTERED AGREEMENT HAS NOT BEEN DENIED FOR THE PURPOSE OF ADDUCING IT AS EVIDENCE FOR OBTAINING THE BENEFIT FLOWING FROM SUCH CONTRACT. BUT FOR THE PURPOSE OF PROTECTING THE POSSESSION, UN-REGIST ERED CONTRACT COULD NOT BE ENFORCED. THE 'TRANSFER' WITHIN THE MEANING OF S ECTION 2(47) OF THE INCOME TAX ACT WOULD COMPLETE, IF POSSESSION IS PRO TECTED. THUS ON EXECUTION OF AN AGREEMENT, IF IT WAS NOT REGISTERED THEN TRANSFER WITHIN THE ITA NO.2767/AHD/2016 - 8 - MEANING OF SECTION 2(47) WILL NOT HAPPEN. LIKE IN THE PRESENT CASE, AGREEMENT WAS EXECUTED ON 8.2.2010 BUT NOT REGISTER ED. THEREFORE, IT IS TO BE CONSTRUED THAT TRANSFER DID NOT TAKE PLACE ON 8. 2.2010 RATHER TOOK PLACE ON 5.6.2012 WHEN SALE DEED WAS EXECUTED AND REGISTE RED. THIS MAY BE THE REASON FOR THE ASSESSEE TO OFFER CAPITAL GAIN IN TH E ASSTT.YEAR 2013-14 ONLY. 14. IT IS PERTINENT TO OBSERVE THAT AN AGREEMENT TO SALE WAS EXECUTED BY THE ASSESSEE ON 8.2.2010 WHICH IS FOLLOWED BY PAYME NT THROUGH ACCOUNT PAYEE CHEQUE. DETAILS OF PAYMENTS HAVE BEEN DULY N OTICED BY THE LD.AO AS WELL AS BY THE LD.CIT(A). FIRST CHEQUE WAS RECE IVED ON 1.4.2011 FOR A CONSIDERATION OF RS.10 LAKHS; THEN RS.30 LAKHS ON 2 3.7.2011; RS.15 LAKHS ON 28.12.2011 AND RS.50 LAKHS ON 26.3.2012. SIMILA RLY ON 1.5.2012 RS.45 LAKHS WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. I T MEANS THAT SALE CONSIDERATION WERE RECEIVED BY THE ASSESSEE BEFORE THE REGISTRATION OF SALE DEED REGULARLY ON DIFFERENT INTERVALS. AS OBSERVED EARLIER, SECTION 50C PROVIDES THAT WHERE THE CONSIDERATION RECEIVED OR A CCRUING AS A RESULT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING L AND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTH ORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL FOR THE PURPOSES OF SECTION 48, BE D EEMED TO BE THE FULL VALUE OF THE CONSIDERATION. THE QUESTION BEFORE US IS, WHAT COULD BE THE FULL VALUE OF SALE CONSIDERATION I.E. WHETHER THE V ALUE ON WHICH STAMP DUTY WAS PAID AT THE TIME OF SALE DEED OR THE VALUE DECL ARED IN THE SALE AGREEMENT ? IN SUCH A SITUATION WHERE THE ASSESSEE IS NOT SATISFIED WITH ADOPTION OF SALE VALUE ON WHICH STAMP DUTY WAS PAID , THEN SCHEME OF THE ACT PRESCRIBES A MECHANISM UNDER SUB-SECTION (2) OF SECTION 50C FOR MAKING A REFERENCE TO THE DVO TO DETERMINE FAIR MAR KET VALUE OF THE PROPERTY. THE REASONS FOR SUCH A MECHANISM IS THAT STAMP DUTY FEE IS ONLY ITA NO.2767/AHD/2016 - 9 - 4.95% (HEREIN GUJARAT) ON THE TOTAL SALE CONSIDERAT ION, WHICH IS A SMALL AMOUNT AND CAN BE BORNE BY ANY VENDOR/VENDEE. BUT FOR THE PURPOSE OF INCOME TAX ACT, THE LIABILITY WOULD ENHANCE MULTI F OLD, AND DUE TO THIS REASON, MECHANISM HAS BEEN PROVIDED IN THE ACT FOR THE ASSESSEE TO DEMONSTRATE THAT THE VALUE RECEIVED BY HIM WAS FAR LESS THAN ONE ADOPTED FOR THE PURPOSE OF STAMP DUTY VALUATION. FOR THIS, HE CAN MAKE A REQUEST TO THE AO UNDER SECTION 50C(2) FOR MAKING A REFERENCE TO THE DVO. IT IS PERTINENT TO OBSERVE THAT THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL ON 8.2.2010. THE AO HAS NOT DISPUTED THIS AGREEMENT. THE ASSESSEE HAS RECEIVED PAYMENT IN PURSUANCE OF THIS AGREEMENT THR OUGH ACCOUNT PAYEE CHEQUE. LET US TAKE A SITUATION WHERE A VENDEE FAI LS TO GET THE SALE DEED EXECUTED. THE ASSESSEE BEING VENDOR HAS A REMEDY F OR FILING A SUIT FOR SPECIFIC PERFORMANCE UNDER THE SPECIFIC RELIEF ACT. THE TIME LIMIT TO FILE A SUIT FOR SPECIFIC PERFORMANCE HAS BEEN PROVIDED I N INDIAN LIMITATION ACT, WHICH IS THREE YEARS. IN SUCH SITUATION, WHEN THE VENDOR FILES A SUIT FOR SPECIFIC PERFORMANCE TO FORCE THE VENDEE TO PURCHAS E THE PROPERTY. IN THAT SITUATION, HE WILL NOT PAY ANYTHING OVER AND ABOVE, THE AMOUNT STATED IN THE SALE AGREEMENT. IN THAT SITUATION, THE ASSESSE E WOULD NOT GET ANYTHING MORE THAN THE AMOUNT MENTIONED IN THE AGREEMENT, TH OUGH SUCH SITUATION MAY ARISE AFTER THREE-FOUR YEARS ON EXECUTION OF TH E DECREE PASSED IN A SUIT FOR SPECIFIC PERFORMANCE. IN BETWEEN THERE MAY AN APPRECIATION OR DEPRECIATION IN THE SAID PROPERTY. CIRCLE RATE MAY RISE OR REDUCE. IN OTHER WORDS, AT THE TIME OF AN AGREEMENT IN RESPECT OF AN IMMOVABLE PROPERTY, A RIGHT IN PERSONA IS CREATED IN FAVOUR OF THE TRANSFEREE/VENDEE. WH EN SUCH RIGHT IS CREATED IN FAVOUR OF THE VENDEE, THE VENDO R IS RESTRAINED FROM SELLING THE SAID PROPERTY TO SOMEONE ELSE BECAUSE V ENDEE IN WHOSE FAVOUR RIGHT IN PERSONA IS CREATED HAS LEGITIMATE RIGHT TO ENFORCE SUCH SP ECIFIC PERFORMANCE OF THE AGREEMENT, IF THE VENDOR FOR SOM E REASON IS NOT ITA NO.2767/AHD/2016 - 10 - EXECUTING THE SALE DEED. THUS, BY VIRTUE OF AGREEM ENT TO SELL, SOME RIGHT IS GIVEN TO THE VENDEE BY THE VENDOR. IT IS ENCUMBRAN CE ON THE PROPERTY. AT THIS STAGE, WE WOULD LIKE TO MAKE REFERENCE TO NEW PROVISO APPENDED TO SECTION 50C BY WAY OF FINANCE ACT, 2016 AND THE BAC KGROUND, UNDER WHICH SUCH PROVISION HAS BEEN INCORPORATED. IN 201 5, GOVERNMENT OF INDIA HAS SET UP INCOME TAX SIMPLICATION COMMITTEE HEADED BY JUSTICE R.V.EASWAR, FORMER JUDGE OF DELHI HIGH COURT. THE COMMITTEE IN ITS REPORTED OBSERVED AS UNDER: 6.1 RATIONALISATION OF SECTION 50C TO PROVIDE RELI EF WHERE SALE CONSIDERATION FIXED UNDER AGREEMENT TO SELL SECTION 50C MAKES A SPECIAL PROVISION FOR DETERMINI NG THE FULL VALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PRO PERTY. IT PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVE D OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (I.E. 'STAMP VALUATION AUTHORITY') FOR T HE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION, AND CAPITAL GAINS SHALL BE COMPUTED ON THE BASIS OF SUCH CONSIDERATION UNDER SECTION 48 OF THE INCOME-T AX ACT. THE SCOPE OF SECTION 50C WAS EXTENDED W.E.F. A.Y. 2 010-11 TO THE TRANSACTION WHICH WERE EXECUTED THROUGH AGREEMENT T O SELL OR POWER OF ATTORNEY BY INSERTING THE WORD 'ASSESSABLE' ALON GWITH WORDS 'THE VALUE SO ADOPTED OR ASSESSED'. HENCE, SECTION 50C I S NOW ALSO APPLICABLE IN CASE OF SUCH TRANSFERS. THE PRESENT PROVISIONS OF SECTION 50C DO NOT PROVID E ANY RELIEF WHERE THE SELLER HAS ENTERED INTO AN AGREEMENT TO SELL TH E ASSET MUCH BEFORE THE ACTUAL DATE OF TRANSFER OF THE IMMOVABLE PROPER TY AND THE SALE CONSIDERATION HAS BEEN FIXED IN SUCH AGREEMENT. A L ATER SIMILAR PROVISION INSERTED BY WAY OF SECTION 43CA DOES TAKE CARE OF SUCH A SITUATION. 6.2 IT IS THEREFORE PROPOSED TO INSERT THE FOLLOWIN G PROVISIONS IN SECTION 50C: ITA NO.2767/AHD/2016 - 11 - (4) WHERE THE DATE OF AN AGREEMENT FIXING THE VALUE OF CONSIDERATION FOR THE TRANSFER OF THE ASSET AND THE DATE OF REGIS TRATION OF THE TRANSFER OF THE ASSET ARE NOT SAME, THE VALUE REFERRED TO IN SUB-SECTION (1) MAY BE TAKEN AS THE VALUE ASSESSABLE BY ANY AUTHORITY O F A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER ON THE DATE OF THE AGREEMENT. (5) THE PROVISIONS OF SUB-SECTION (4) SHALL APPLY O NLY IN A CASE WHERE THE AMOUNT OF CONSIDERATION OR A PART THEREOF HAS B EEN RECEIVED BY ANY MODE OTHER THAN CASH ON OR BEFORE A DATE OF AGREEME NT FOR TRANSFER OF THE ASSET. 15. TAKING A CLUE FROM THE REPORT, A PROVISO HAS BE EN APPENDED BY WAY OF FINANCE ACT, 2016 TO SECTION 50C AND SUCH PROVIS O READS AS UNDER: 'PROVIDED THAT WHERE THE DATE OF THE AGREEMENT FIXI NG THE AMOUNT OF CONSIDERATION AND THE DATE OF REGISTRATION FOR THE TRANSFER OF THE CAPITAL ASSET ARE NOT THE SAME, THE VALUE ADOPTED OR ASSESS ED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY ON THE DATE OF AGREEM ENT MAY BE TAKEN FOR THE PURPOSES OF COMPUTING FULL VALUE OF CONSIDE RATION 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 BAN K DRAFT OR BY USE OF ELECTRONIC CLEARING SYSTEM THROUGH A BANK ACCOUN T, ON OR BEFORE THE DATE OF THE AGREEMENT FOR TRANSFER.' 16. THIS AMENDMENT WAS EXPLAINED IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE BILL 2016. IT READS AS UNDER : RATIONALIZATION OF SECTION 50C IN CASE SALE CONSIDE RATION IS FIXED UNDER AGREEMENT EXECUTED PRIOR TO THE DATE OF REGIS TRATION OF IMMOVABLE PROPERTY UNDER THE EXISTING PROVISIONS CONTAINED IN SECTION 50C, IN CASE OF TRANSFER OF A CAPITAL ASSET BEING LAND OR BUILDING ON BOTH, THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORIT Y FOR THE PURPOSE OF PAYMENT OF STAMP DUTY SHALL BE TAKEN AS THE FULL VALUE OF CONSIDERATION FOR THE PURPOSES OF COMPUTATION OF CA PITAL GAINS. THE ITA NO.2767/AHD/2016 - 12 - INCOME TAX SIMPLIFICATION COMMITTEE (EASWAR COMMITT EE) HAS IN ITS FIRST REPORT, POINTED OUT THAT THIS PROVISION DOES NOT PROVIDE ANY RELIEF WHERE THE SELLER HAS ENTERED INTO AN AGREEMENT TO S ELL THE PROPERTY MUCH BEFORE THE ACTUAL DATE OF TRANSFER OF THE IMMO VABLE PROPERTY AND THE SALE CONSIDERATION IS FIXED IN SUCH AGREEMENT, WHEREAS SIMILAR PROVISION EXISTS IN SECTION 43CA OF THE ACT I.E. WH EN AN IMMOVABLE PROPERTY IS SOLD AS A STOCK-IN-TRADE. IT IS PROPOSE D TO AMEND THE PROVISIONS OF SECTION 50C SO AS TO PROVIDE THAT WHE RE THE DATE OF THE AGREEMENT FIXING THE AMOUNT OF CONSIDERATION FOR TH E TRANSFER OF IMMOVABLE PROPERTY AND THE DATE OF REGISTRATION ARE NOT THE SAME, THE STAMP DUTY VALUE ON THE DATE OF THE AGREEMENT MAY B E TAKEN FOR THE PURPOSES OF COMPUTING THE FULL VALUE OF CONSIDERATI ON. IT IS FURTHER PROPOSED TO PROVIDE THAT THIS PROVISION SHALL APPLY ONLY IN A CASE WHERE THE AMOUNT OF CONSIDERATION REFERRED TO THERE IN, OR A PART THEREOF, HAS BEEN PAID BY WAY OF AN ACCOUNT PAYEE C HEQUE OR ACCOUNT PAYEE BANK DRAFT OR USE OF ELECTRONIC CLEARING SYST EM THROUGH A BANK ACCOUNT, ON OR BEFORE THE DATE OF THE AGREEMENT FOR THE TRANSFER OF SUCH IMMOVABLE PROPERTY. 30 THESE AMENDMENTS ARE PROPOSE D TO BE MADE EFFECTIVE FROM THE 1ST DAY OF APRIL, 2017 AND SHALL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2017-18 AND SUBSEQUENT YEARS.' 17. IF WE TAKE ALL THESE ASPECTS IN THEIR SETTINGS AS A WHOLE, THEN IT WOULD INDICATE THAT EARLIER WHENEVER AN ASSESSEE DISPUTED ADOPTION OF SALE EQUIVALENT TO THE AMOUNT ON WHICH STAMP DUTY IS PAI D, THEN REFERENCE TO THE DVO IS MADE UNDER SECTION 50C(2). NORMALLY, AS OBSERVED EARLIER, WHEN A SALE AGREEMENT WAS EXECUTED, PAYMENT WAS REC EIVED IN PART PERFORMANCE OF THE AGREEMENT, THEN VENDOR WOULD NOT GET ANYTHING MORE THAN THE AMOUNT AGREED IN THE SALE AGREEMENT. THER E MAY BE A TIME GAP BETWEEN EXECUTION OF AGREEMENT TO SELL AND EXECUTIO N OF SALE DEED. IN BETWEEN IF CIRCLE RATE IS BEING ENHANCED, THEN HE W OULD LIKE TO CHALLENGE ADOPTION OF HIGHER SALE VALUE ON THE STRENGTH OF SA LE AGREEMENT. IN THAT SITUATION, UNNECESSARY ENERGY WOULD BE DEVOTED IN A SCERTAINING FAIR MARKET VALUE OF THE PROPERTY ON THE DATE OF SALE. THE ENC UMBRANCE ON THE PROPERTY BY VIRTUE OF SALE AGREEMENT WOULD ALSO GOA D THE DVO TO ITA NO.2767/AHD/2016 - 13 - DETERMINE THE FAIR MARKET VALUE OF THE PROPERTY ON THE DATE OF SALE AT A LESSER AMOUNT THAN THE VALUE ADOPTED FOR THE PURPOS E OF PAYMENT OF STAMP DUTY. WE HAVE ALREADY MADE A REFERENCE TO SPECIFIC RELIEF ACT AND HOW A VENDOR OR VENDEE COULD ENFORCE THE SALE AGREEMENT U NDER SPECIFIC RELIEF ACT. UNDER SUCH ENFORCEMENT, THEY WOULD SETTLE THE IR RIGHT ON THE BASIS OF AGREED TERMS IN THE SALE AGREEMENT. THIS PROVISO W OULD ONLY SIMPLIFY THIS EXERCISE I.E. INSTEAD REMITTING THE MATTER TO THE D VO UNDER SECTION 50C(2), HE WOULD CONDUCT AN INQUIRY AS TO WHAT COULD BE VAL UE OF THE PROPERTY ON THE DATE OF EXECUTION OF THE AGREEMENT, AND WHETHER SUCH AGREEMENT HAS CREATED ANY ENCUMBRANCE OR NOT. THERE COULD BE A D IFFERENCE IN THE ACTUAL SALE CONSIDERATION THAN THE AMOUNT ON WHICH STAMP D UTY WAS PAID. THIS PROVISO HAS SIMPLIFIED THIS THING. IT CONTEMPLATES THAT STAMP DUTY VALUATION OF THE PROPERTY FOR THE PURPOSE OF STAMP DUTY PAYMENT ON THE DATE OF AGREEMENT CAN BE DEEMED AS FULL CONSIDERATI ON OF THE CAPITAL ASSET. THUS, IN THIS WAY, THE PROVISO CAN BE CONSTRUED AS CLARIFICATORY IN NATURE, AND CAN BE APPLIED ON PENDING MATTERS AS ALREADY HE LD BY THE ITAT IN THE CASE OF DHARAMSHIBHAI SONANI (SUPRA). 18. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAS CONTENDED THAT CONSIDERATION OF RS.3,00,11,000/- IS MORE THAN THE VALUATION FOR THE PURPOSE OF STAMP DUTY AS ON 8.2.2010. NO WHERE THE ASSESSEE HAS POINTED OUT SPECIFIC RATE ON THE DATE OF AGREEMENT. THEREF ORE, WE ALLOW THESE TWO GROUNDS OF APPEAL FOR THE STATISTICAL PURPOSE. WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO. THE LD.AO SHALL CALL FOR CIRCLE RA TE FOR THE PURPOSE OF STAMP DUTY VALUATION OF THIS PROPERTY AS ON 8.2.201 0. HE SHALL DETERMINE THE SALE VALUE OF THE PROPERTY ON THE BASIS OF CIRC LE RATE APPLICABLE ON THIS PROPERTY ON 8.2.2010, AND THEREAFTER COMPUTE LONG T ERM CAPITAL GAIN ASSESSABLE IN THE ASSESSMENT YEAR 2013-14. IN OTHE R WORDS, TRANSFER OF THIS ITA NO.2767/AHD/2016 - 14 - PROPERTY WOULD BE CONSTRUED ON 5.6.2012, BUT THE FU LL VALUE OF CONSIDERATION IS TO BE EQUIVALENT TO THE AMOUNT ON WHICH STAMP DUTY WAS PAYABLE ON 8.2.2010. 19. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN NOT GRANTING DEDUCTION/EXEMP TION UNDER SECTION 54EC OF THE ACT AMOUNTING TO RS.50 LAKHS. 20. BRIEF FACTS OF THE CASE ARE THAT AFTER AGREEMEN T TO SELL THE ASSESSEE HAS RECEIVED SALE CONSIDERATION FROM THE VENDEE. H E HAS MADE INVESTMENT IN NHAI BONDS AND CLAIMED DEDUCTION UNDER SECTION 5 4EC. THE LD.AO HAS OBSERVED THAT SUCH INVESTMENTS WERE MADE BEFORE THE REGISTRATION OF SALE DEED, AND THEREFORE, HE IS NOT ENTITLED FOR TH E EXEMPTION. THE ISSUE IS, WHETHER INVESTMENT MADE FROM THE ADVANCE RECEIVED O N SALE OF CAPITAL ASST WILL QUALIFY FOR GRANT OF EXEMPTION UNDER SECTION 5 0EC OR NOT. BOARD HAS ISSUED A CIRCULAR WHEREBY IT HAS LAID DOWN THAT SUC H ASSESSEE WOULD BE ENTITLED FOR EXEMPTION. CIRCULAR BEARING NO.359 DA TED 10.5.1983 READS AS UNDER: CIRCULAR : NO. 359 [F.NO. 207/8/82-IT(A-LL)], DATED 10-5-1983 1. SECTION 54E PROVIDES FOR EXEMPTION OF LONG-TERM CAPITAL GAINS IF THE NET CONSIDERATION IS INVESTED BY THE ASSESSEE I N SPECIFIED ASSETS WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF SUC H TRANSFER. A TECHNICAL INTERPRETATION OF SECTION 54E COULD MEAN THAT THE EXEMPTION FROM TAX ON CAPITAL GAINS WOULD NOT BE AV AILABLE IF PART OF THE CONSIDERATION IS INVESTED PRIOR TO THE DATE OF EXECUTION OF THE SALE DEED AS THE INVESTMENT CANNOT BE REGARDED AS H AVING BEEN MADE WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF TRA NSFER. 2. ON CONSIDERATION OF THE MATTER IN CONSULTATION W ITH THE MINISTRY OF LAW, IT IS FELT THAT THE FOREGOING INTERPRETATIO N WOULD GO AGAINST THE PURPOSE AND SPIRIT OF THE SECTION. AS THE SECTI ON CONTEMPLATES ITA NO.2767/AHD/2016 - 15 - INVESTMENT OF THE NET CONSIDERATION IN SPECIFIED AS SETS FOR A MINIMUM PERIOD AND AS EARNEST MONEY OR ADVANCE IS A PART OF THE SALE CONSIDERATION, THE BOARD HAVE DECIDED THAT IF THE A SSESSEE INVESTS THE EARNEST MONEY OR THE ADVANCE RECEIVED IN SPECIFIED ASSETS BEFORE THE DATE OF TRANSFER OF ASSET, THE AMOUNT SO INVESTED W ILL QUALIFY FOR EXEMPTION UNDER SECTION 54E. 21. CONSIDERING THE ABOVE CIRCULAR, WE ALLOW THIS G ROUND OF APPEAL AND DIRECT THE AO TO GRANT EXEMPTION UNDER SECTION 54EC OF THE ACT. GROUND NO.3 IS ALLOWED. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2018. SD/- (WASEEM AHMED) ACCOUNTANT MEMBER SD/- (RAJPAL YADAV) JUDICIAL MEMBER