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Mohd. Imran Baig vs. ITO (ITAT Hyderabad)
January, 27th 2016

S. 50C: The stamp duty value on the date of agreement & not date of sale deed has to be taken. The nature of the property on the date of agreement has to be considered. Q whether proviso to s. 56(2)(vii)(b) is curative and retrospective left open

(i) The issue is as to whether the date of agreement or the date of execution of sale deed has to be considered for the purpose of adopting the SRO value under S.50C of the Act. We find that this issue is now settled in favour of the assessee by the decisions of the Hon’ble Supreme Court in the case of Sanjeev Lal and Smt. Shantilal Motilal V/s. CIT(365 ITR 389) as well as decisions of the coordinate bench of this Tribunal at Visakhapatnam in the cases of M/s. Lahiri Promoters Visakhapatnam V/s. ACIT, Circle 1(1), Visakhapatnam (ITA No.12/Vizag/2009 dated 22.6.2010) and Moole Rami Reddy V/s. ITO (ITA No.311/Vizag/2010 dated 10.12.2010). It is therefore, now settled that the SRO value as on the date of agreement of sale has to be considered for the purpose of computation of capital gains.

(ii) In Sanjeev Lal & Smt.Shantilal Motilal (supra), though the issue was the date of transfer for the purpose of allowing the deduction u/s. 54 of the Act, the ratio laid down by the Apex Court that ‘by executing an agreement to sell in respect of an immovable property, a right in personam is crated in favour of the transferee/vendee and when such a right is created in favour of the vendee, the vendor is restrained from selling the said property to some one else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed”, is very much applicable to the case before us.

(iii) In the cases of Lahiri Promoters and Moole Ram Reddy (supra), the coordinate bench of the Tribunal at Visakhapatnam has considered the decision of the Apex Court in the case of K.P.Verghese (supra) to hold that the purpose of introduction of S.50C being to prevent undervaluation of the real value of the property in the sale deed, to avoid payment of tax or duty which the government is entitled to, the character of the transaction vis-à-vis Income Tax Act should be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into.

(iv) A transaction involving such immovable property in such prime locality of the city of Hyderabad and involving such financial implications would definitely not take place overnight. The purchaser would require time to verify the legal and clear title of the owners and also about the encumbrances on the property before proceeding to make the payment and get the sale deeds executed. All this would consume time and money. For this purpose, they would have negotiated with the owners about the sale consideration before embarking on this exercise, Therefore, it cannot be said that the transaction has been agreed to as well as executed on the same date. Thus, there had to be an agreement to sell, either oral or in writing.

(vi) The next question is the nature of the property for valuation under S.50C, because, according to the assessee, even if the date of registered sale deed is considered for determination of the fair market value under S.50C, the SRO value should be taken for residential area and not commercial area. He submitted that if the value of the residential area as on 1.4.2006 i.e. Rs.10,000 per sq. yard, is taken into consideration, the sale consideration received by the assessee was more than the SRO value and no addition was warranted. Therefore, the nature of the property as on the date of transfer attains importance. There cannot be any dispute that the nature of the property on the date of transfer/sale is to be considered.

(vii) As regards the reliance of the assessee on the proviso to S.56(2)(vii)(b) of the Act, we find that the said proviso has been brought into the statute by the Finance Act of 2013 with effect from 1.4.2014. The learned counsel for the assessee has relied upon the raito laid down judgment of the Apex Court in the case of Allied Motors P. Ltd. V/s. CIT(224 ITR 677), in support of the contention that the said proviso is curative in nature and is therefore, applicable retrospectively. He also relied upon the judgment of the Hon’ble Supreme Court in the case of Alom Extrusions Ltd. (319 ITR 306) for the proposition that where the amendments are curative in nature, they are effective retrospectively. However, on the legal principle, we have already held that the guideline value as on the date of agreement of sale is to be adopted. Therefore, the decision on this point would only result in an academic exercise. Therefore, this ground is not adjudicated at this stage.

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