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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

ITO, Ward 14 (4), New Delhi. Vs. M/s. Protex Plastics Pvt. Ltd., W 18, Okhla Industrial Area, Phase II, New Delhi.
March, 23rd 2015
             IN THE INCOME TAX APPELLATE TRIBUNAL
                  (DELHI BENCH `F' : NEW DELHI)

        BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
                             and
             SHRI C.M. GARG, JUDICIAL MEMBER

                           ITA No.69/Del./2013
                       ASSESSMENT YEAR : 2007-08

ITO, Ward 14 (4),                vs.   M/s. Protex Plastics Pvt. Ltd.,
New Delhi.                             W ­ 18, Okhla Industrial Area,
                                       Phase ­ II, New Delhi.

                                              (PAN : AAACP1684N)

      (APPELLANT)                                    (RESPONDENT)

                  ASSESSEE BY : Shri Ved Jain, Advocate
                REVENUE by : Shri Vikram Sahay, Senior DR

                    Date of Hearing       :         17.02.2015
                    Date of Pronouncement :           .03.2015

                                       ORDER

PER B.C. MEENA, ACCOUNTANT MEMBER :

      This appeal filed by the revenue emanates from the order of the CIT

(Appeals)-XVII, New Delhi dated 06.10.2010 for the assessment year 2007-08.

2.    In this case, the return of income was filed on 25.08.2007 declaring

income of Rs.1,31,760/-. During the relevant period, the assessee was engaged

in the business of manufacture and sale of garments and rollers. The Assessing

Officer made an addition of Rs.83,40,901/- as long term capital gain. The CIT

(A) has granted the relief by holding as under :-
                                    2
                                                             ITA NO.69/Del/2011

"3.3. I have carefully considered the assessment order as well as
the submissions made by the ld. AR along with the judicial
decisions cited by him. In this case, the appellant has shown the
transfer of its land and building (hereinafter referred to as "capital
assets") on 03.11.2006. The transfer has been made on the basis of
an agreement made in 1990. At the time of the transfer, no sale
deed was registered. However, a conveyance deed was registered
in subsequent year i.e. AY. 2008-09 where a value of
Rs.11,72,000/- was adopted. The appellant has submitted that
capital gain was assessable in the year under consideration i.e. A.Y.
2007-08 because the necessary formalities like payment of
consideration and handing over of possession of capital asset were
completed during the A.Y. 2007-08 itself. There is no dispute by
the AO about the year of transfer of capital asset. He has accepted
the claim of the appellant that transfer took place in A.Y. 2007-08.
However, instead of accepting the sale consideration of
Rs.3,25,000/- as shown by the appellant, he has applied the circle
rate by taking the recourse to section 50C. It is not the case of the
AO that actual sale consideration that passed between the appellant
and the buyer was more than that what has been shown by the
appellant. Therefore, the issue to be decided is whether section 50C
can be invoked and if yes; what value has to be considered as full
value received or accruing as a result of transfer of capital asset. For
the sake of convenience, the provisions of section 50C are
reproduced as under:




      "Special provision for full value of consideration in certain
      cases.

      50C. (1) Where the consideration received or accruing as a
      result of the transfer by an assessee of a capital asset, being
      land or building or both, is less than the value adopted or
      assessed [or assessable] by any authority of a State
      Government (hereafter in this section referred to as the
      "stamp valuation authority'') for the purpose of payment of
      stamp duty in respect of such transfer, the value so adopted
      or assessed [or assessable] shall, for the purposes of section
      48,be deemed to be the full value of the consideration
      received or accruing as a result of such transfer---------------."

      From the plain reading of above provision, it is apparent that
 upto 30.09.2009 the value actually adopted by stamp valuation
 authority has to be deemed as full value of consideration received
                                   3
                                                           ITA NO.69/Del/2011

 or accruing as a result of transfer. The Finance (No 2) Act 2009,
 w.e.f. 01.10.2009 has inserted the word "assessable" meaning
 thereby that even if there is no registration, then also, the value
 assessable as per stamp valuation authority can be taken as full
 value of consideration received. Since this amendment has come
 into effect w.e.f. 01.10.2009, the same cannot be applied
 retrospectively. Upto 30.09.2009, section 50C cannot be applied if
 there is no registration or value assessed by Stamp Valuation
 Authority. Since the circle rates were not even notified during
 A.Y. 2007-08, the same could not have been adopted by A.O. for
 the period during which they were not in existence.

       In the case of Carlton Hotel Pvt. Ltd. vs ACIT (2009) 122 TT
J 515 (Luck) it was held by the Lucknow Bench of Hon'ble IT AT
that if transfer by way of sale is not registered under Registration
Act and No Stamp Duty is paid, then section 50C can not be
invoked.

Similarly, in the case of M. Siva Parvathi & Otrs vs ITO (2010) 129
TTJ 463 (Visakha), it was held by the ITAT that where sale
agreement was entered into before introduction of section 50C and
registration was completed after introduction of said section,
section 50C could not be applied.

       Admittedly the consideration stated as per the agreement was
Rs.3,25,000/- and accordingly the assessing officer was not justified
in making an observation that this agreement has no legal sanctity,
as the conveyance deed has been executed by the DDA on
25.09.2007 on the basis of the same. In case the assessing officer's
case is that the transfer has taken place only on the date of
execution of Conveyance Deed by DDA then admittedly the
transfer will be on 25.09.2007 i.e. AY 2008-09 and not the AY
under consideration i.e. AY 2007-08. If the argument of the
assessing officer on this point is accepted then there will be no
Capital Gain chargeable in the year under consideration. The
assessing officer having recognized the transfer during the year, the
only basis for computing capital gain will be the agreement to sell
on the basis of which transfer has taken place during the year and
the consideration stated therein. The assessing officer cannot tax a
capital gain in this year by applying law of subsequent year.

      As per the provision of section 50C where the consideration
received is less than the value adopted by any authority for the
                                   4
                                                            ITA NO.69/Del/2011

purpose of payment of stamp duty in respect of such transfer, the
value so adopted is to be deemed to be the full value of
consideration received. The assessing officer in this case in para 9
has applied a circle rate on hypothetical basis of the next year and
thereafter by a reverse indexation has computed the sale
consideration. This action is against the express provision of the
section 50C of the Act. The said section nowhere mandates this. If
the circle rates are revised in subsequent year then that will not
mean that the AO can use the circle rate of subsequent year by
applying reverse indexation to work out the sale consideration u/s
50C of the Act. Section 50C creates a deeming fiction and
accordingly this provision has to be construed. strictly. The
admitted fact here is that for the year under consideration, there was
no circle rate notified by the government. The circle rate in Delhi
got     notified    vide     Circular     No.   F.2(12)/Fin.(E.1)/Part
File/Vol.1(ii)/3548 dated 18.07.2007. If that be the case, provision
of section 50C shall not be applicable in respect of any transfer on
any day before that date. If the argument of the assessing officer is
to be accepted, it will lead to a total anomaly whereby the assessing
officer can apply the circle rate of subsequent year to any of the
earlier assessment year which cannot be permitted under section
50C.

       As regards the comparative sale instance stated by the
assessing officer in para 10 of his order, I find force in the
contention of the appellant that the sale consideration u/s 48 has to
be the actual consideration and not the consideration which ought to
have been received. The case law relied upon by the appellant i.e.
CIT vs George Henderson and Co 66 ITR 622 is squarely
applicable to the present facts. This issue is also covered by the
Apex Court judgment in the case of K.P. Varghese vs ITO 131 ITR
597 (SC) and by the Delhi High Court in the case of CIT vs
Gulshan Kumar 175 CTR 416. Moreover, after the introduction of
section 50C the assessing officer can adopt the value for the
purpose of stamp duty. In view of the specific provision in the Act
whereby a deeming fiction has been created the assessing officer
cannot substitute the value with any other value. The provision of
section 50C are very specific whereby, if the consideration received
is less than the value adopted for the purpose of payment of stamp
duty the same has to be deemed to be sale consideration.
Accordingly, the assessing officer was not justified in substituting
the value by the sale instance. In view of the above discussion, the
action of the assessing officer in invoking the provision of section
                                           5
                                                                      ITA NO.69/Del/2011

     50C cannot be sustained. Hence, the addition made by the AO is
     deleted. These grounds of appeal are allowed."




3.       We have heard both the sides on the issue. The conveyance deed was

registered in the financial year pertaining to assessment year 2008-09 whereby

value has taken Rs.11,72,000/-. The Finance (No.2) Act, 2009 has inserted the

word assessable meaning thereby that even if there is no registration, then also,

the value assessable as per stamp valuation authority can be taken as full value

of consideration received.        This amendment has come into effect w.e.f.

01.10.2009 only.       Therefore, it cannot be retrospectively implemented or

applied. Further, the Assessing Officer has himself has taken the year for

working out the capital gain as assessment year 2007-08 and for that period, no

circle rates were specified by the stamp valuation authority for Delhi. The

circle    rates   in   Delhi   have    been    notified   only   by     Circular    No.

F.2(12)/Fin.(E.1)/Part File/Vol.1(ii)/3548 dated 18.07.2007. Keeping all these

facts in view, we find no fault in the order of the CIT (A) and we dismiss this

appeal of the revenue.

4.       In the result, the appeal of the revenue stands dismissed.

         Order pronounced in open court on this 20th day of March, 2015.

                   Sd/-                                  sd/-
             (C.M. GARG)                            (B.C. MEENA)
           JUDICIAL MEMBER                      ACCOUNTANT MEMBER

Dated the 20th day of March, 2015
TS
                                 6
                                     ITA NO.69/Del/2011

Copy forwarded to:
     1.Appellant
     2.Respondent
     3.CIT
     4.CIT(A)-XVII, New Delhi.
     5.CIT(ITAT), New Delhi.
                                     AR, ITAT
                                     NEW DELHI.

 
 
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