Saturday, 3 December 2016

Whether Section 50C can have retrospective application in case of transfer of property prior to Oct 01, 2009 - NO: ITAT

THE ISSUE IS - Whether Section 50C of I-T Act can have retrospective application in case of transfer of a property, if the transfer was made prior to Oct 01, 2009. NO IS THE ANSWER.
Facts of the case:

The assessee is an individual. The assessee had vide an agreement sold his right to acquire 5000 sq. yards of land for a consideration of Rs.23,53,000/- on as is where is basis to M/s. Chheda Reality Pvt. Ltd. During the year, full payment was received by the assessee and therefore, it disclosed long term capital loss for an amount of Rs.4,47,826/- by taking actual sale consideration at Rs.24,03,000/-. During the course of assessment proceedings, it was noted by the AO that aforesaid agreement was not registered with the Stamp Duty Authorities and also possession of the land was not given to the assessee. But, according to him assessee had right in the property and therefore, liable for tax under the head capital gains. Under these circumstances, the AO held that provisions of sec 50C were applicable and thus, he adopted the sale consideration on the basis of Stamp Duty Ready Reckoner by taking rate at Rs.17,300/- per sq. meter as applicable for F.Y. 2009-10 and thus, he substituted the sales consideration at Rs.7,23,24,899/- and after deducting the index cost of acquisition he computed amount of long term capital gain of Rs.6,66,44,262/-. On appeal, CIT(A) dismissed all the arguments of the assessee. Therefore, second appeal filed before the Tribunal.
On appeal, the ITAT held:
++ for all practical purpose the transfer of the property was completed before 01.10.09 as far as the assessee is concerned. Under these circumstances, let us examine if the amendment made in sec 50C w.e.f. 01.10.2009...it is noted by us that it was clarified by the CBDT vide its circular no. 5 of 2010 dated 03.06.2010 that aforesaid amendment made in sec 50C is only prospective in nature, and thus, it cannot be applied retrospectively. It is noted that it has been clarified by the Board that aforesaid amendment shall be applied in relation to transactions undertaken on/or after 01.10.2009. The said circular has been properly explained by the Mad HC in the case of CIT v. R. Sugantha Ravindran. It is further noted that that their lordships analysed the provision independently also and found that the impugned amendment was not applicable on the transactions done prior to Oct 01, 2009;
++ thus, it is clear from the above legal discussion that since in the facts of the case before us the transaction was carried out by the assessee prior to 01.10.2009, therefore provisions of sect 50C could not have been applied. Since, the impugned agreement was not registered, therefore, there was no occasion for any assessment of stamp valuation. Under these circumstances, the AO was not empowered to adopt any valuation in place of actual sales consideration on the basis of his own notions or calculations. Thus, we find that action of the lower authorities in invoking the provisions of sec 50C and in substituting some other valuation was clearly beyond the provisions of law as applicable upon the impugned transaction. Under these transactions, we hereby delete the addition made by the AO

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