Income Tax Appellate Tribunal - Indore
The Dcit, 2(1), Indore vs M/S. Indorie Foot Care Pvt. Ltd., Indore on 2 May, 2017
Indorie Footcare ITA 788/Ind/2016
आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE SHRI C.M. GARG, JUDICIAL MEMBER
AND SHRI O.P. MEENA, ACCOUNTANT MEMBER
आ.अ.सं./I.T.A. No. 788/Ind/2016
नधा रण वष /Assessment Year: 2012-13
Dy. Commissioner of Income tax
2(1), Indore :: अपीलाथ /Appellant
Vs
M/s Indorie Foot Care Pvt. Ltd.,
Indore
PAN - AAACI8941B :: !यथ /Respondent
राज#व क$ ओर से/Revenue by Shri Mohd. Javed
नधा 'रती क$ ओर से/Assessee by Shri S.N. Agrawal & Shri Pankaj
Mogra
सन
ु वाई क$ तार ख 30.3.2017
Date of hearing
उ-घोषणा क$ तार ख 02 5.2017
Date of pronouncement
आदे श /O R D E R
PER SHRI C.M. GARG, JM
This appeal has been filed by the revenue against the order of the learned CIT(A)-I, Indore, dated 8.3.2016 in First Appeal No.IT-766/2014-15 for the assessment year 2012-13.
1Indorie Footcare ITA 788/Ind/2016
2. The sum and substances of the grounds of appeal taken by the revenue is that the learned CIT(A) was not justified in law in deleting the addition amounting to Rs.68,98,200/- by interpreting the provision u/s 50C of the IT Act.
3. Briefly stated, the facts of the case are that the assessee has shown long term capital gain of Rs.52,94,495/- from sale of land in its computation of income. The Assessing Officer, therefore, vide questionnaire u/s 142(1) dated 28.11.2014 required the assessee to furnish sale deeds relating to this sale. In reply dated 10.12.2014 the assessee submitted copies of sale deeds relating to eight properties wherefrom the Assessing Officer observed that the sale consideration shown by the assessee for calculation of capital gain was less than the valuation of Stamp Valuation Authority. In this regard, the Assessing Officer made the following observations from these sale deeds: -
Name of purchaser Address and area in Hectare Sale Stamp Valuation Difference Consideration as authority value shown by the (Rs.) assessee (Rs.) Smt. Radha ifjofrZr Hkwfe xzke lstok;k 7,66,200/- 20,90,000/- 13,23,800/-
Khandelwal iVokjh gYdk uEcj 55 W/o Naveen Prakash fodkl[k.M ukyNk jktLo 2 Indorie Footcare ITA 788/Ind/2016 Khandelwal fujh{kd e.My dz-1 rglhy Gram Ghatabillod ftyk /kkj vkS?kksfxd iz;kstu Tehsil Dhar. Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij fLFkr Hkwfe Shri Kailash Chandra ifjofrZr Hkwfe xzke lstok;k 7,66,200/- 20,90,000/- 13,23,800/- Mungad 2/4, Mahesh iVokjh gYdk uEcj 55 Nagar, Indore fodkl[k.M ukyNk jktLo fujh{kd e.My dz-1 rglhy ftyk /kkj vkS?kksfxd iz;kstu Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij fLFkr Hkwfe Shri Vinod ifjofrZr Hkwfe xzke lstok;k 11,49,300/- 18,84,000/- 734700/- Khandelwal iVokjh gYdk uEcj 55 S/o Shri Babulal fodkl[k.M ukyNk jktLo Khandelwal fujh{kd e.My dz-1 rglhy Gram Ghatabillod ftyk /kkj vkS?kksfxd iz;kstu Tehsil Dhar. Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij vUnj dh vksj fLFkr Hkwfe Shri Purushottam Das ifjofrZr Hkwfe xzke lstok;k 7,66,200/- 12,54,000/- 4,87,800/- Jajoo S/o Shri Laxmi iVokjh gYdk uEcj 55 Narayan Jajoo Gram fodkl[k.M ukyNk jktLo Ghatabillod Tehsil fujh{kd e.My dz-1 rglhy Dhar. ftyk /kkj vkS?kksfxd iz;kstu Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij vUnj dh vksj fLFkr Hkwfe Smt. Beena ifjofrZr Hkwfe xzke lstok;k 7,66,200/- 12,54,000/- 4,87,800/- Khandelwal W/o Shri iVokjh gYdk uEcj 55 Sachin Khandelwal, fodkl[k.M ukyNk jktLo Gram Ghatabillod fujh{kd e.My dz-1 rglhy Tehsil Dhar. ftyk /kkj vkS?kksfxd iz;kstu Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij vUnj dh vksj fLFkr Hkwfe Smt. Sunita Jajoo W/o ifjofrZr Hkwfe xzke lstok;k 7,66,200/- 12,54,000/- 4,87,800/- Purusottam Jajoo, iVokjh gYdk uEcj 55 Gram Ghatabillod fodkl[k.M ukyNk jktLo Tehsil Dhar. fujh{kd e.My dz-1 rglhy ftyk /kkj vkS?kksfxd iz;kstu Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij vUnj dh vksj fLFkr Hkwfe Shri Sachin ifjofrZr Hkwfe xzke lstok;k 7,66,200/- 20,90,000/- 13,23,800/- Khandelwal S/o iVokjh gYdk uEcj 55 Naveen Prakash fodkl[k.M ukyNk jktLo Khandelwal Gram fujh{kd e.My dz-1 rglhy Ghatabillod Tehsil ftyk /kkj vkS?kksfxd iz;kstu Dhar. Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij 3 Indorie Footcare ITA 788/Ind/2016 fLFkr Hkwfe Smt. Beena ifjofrZr Hkwfe xzke lstok;k 11,49,300/- 18,78,000/- 7,28,700/- Khandelwal W/o Shri iVokjh gYdk uEcj 55 Sachin Khandelwal, fodkl[k.M ukyNk jktLo Gram Ghatabillod fujh{kd e.My dz-1 rglhy Tehsil Dhar. ftyk /kkj vkS?kksfxd iz;kstu Hkwfe {ks=Qy 0-209 gsDVs;j iku[ksM+h ?kkVkfcYykSn ekxZ ij vUnj dh vksj fLFkr Hkwfe Total 68,95,800/- 1,37,94,000/- 68,98,200/-
In view of the above, the Assessing Officer observed that there was difference of Rs.68,98,200/- between the sale consideration and the valuation of Stamp Valuation Authority and, therefore, provisions u/s 50C of the Income Tax Act are clearly attracted. He, therefore, issued a questionnaire questionnaires u/s 142(1) of the Act dated 23.01.2015 and 04.02.2015 thereby asking the assessee to show cause as to why the difference amount of Rs.68,98,200/- between the market value as per Stamp Valuation Authority within the meaning of section 50C (Rs.1,37,94,000/-) and the sale consideration (Rs.68,95,800/-) for sale of properties should not be added to the income of the assessee. In its reply dated 28.01.2015 the assessee submitted as under :-
"A show cause notice dated 23.01.2015 has been issued in the name of the above assessee company for 4 Indorie Footcare ITA 788/Ind/2016 the Assessment Year 2012-13 wherein you have asked from the assessee to explain as to why the difference of Rs.68,98,200/- in the amount of sale consideration of Rs.68,95,800/- and stamp duty value of Rs.1,37,94,000/- should not be added to the total income of the assessee company . In reply to the said show cause notice we have been directed by the assessee to submit as under -
1.1] That during the year under consideration the assessee company had sold an Industrial Land admeasuring 1.881 Hectare located at Village Sejavaya Tehsil, District Dhar to 8 parties for Rs.68,95,800/- . Xerox copy of the registered sale deeds were already filed and available on pages 67 to 210 of the submission dated 10.12.2014. A statement giving party wise details of the same is enclosed.
1.2] That the value as adopted by the Registrar in respect of above property as sold by the assessee to the said parties was of Rs.1,37,94,000/- in the Asst Year 2012-13.
1.3] That assessee company through its Directors have entered into agreement with the above Buyers on 29.11.2010 i.e. in A.Y. 201 1-12 for sale of its Industrial Land Situated at Village Sejavaya, Dist Dhar for Rs.68,95,800/-.Copy of Agreement is enclosed for your kind reference.
1.4.1] That as per the said Agreement the assessee has agreed to sale the Industrial Land to the said 8 parties for an amount of Rs.68,95,800/- and it has also received an amount of Rs.14,00,000/- in advance through an account payee cheques during the previous year relevant to the A.Y. 2011-12 which was also duly shown by the assessee in its Audited Balance Sheet for the A.Y. 2011-12 as Advance against sale of Factory Land. Kindly refer Schedule - 8 of Audited Balance Sheet. Copy of Bank Statement 5 Indorie Footcare ITA 788/Ind/2016 duly highlighting the relevant entries in respect of Advance received by the assessee are also enclosed.
1 .4.2] That at the time of agreement when the advance was received by the t assessee company through Account payee cheques, the guideline value of this land was of Rs.34,47,873/- being 1.881 hectare Rs.18,33,000/- [which is Guidelines Rate per hectare in F.Y. 2010-11] whereas the assessee had sold the said land for Rs.68,95,800/-. Photocopy of Prevailing Guideline Rate for said Land in F.Y. 201 1- 12 is enclosed for your kind reference.
1.4.3] That guideline rate of said Location where the land of assessee wasl ocated and which was sold by it in the F.Y. 2011-12 when actual sale deed was executed has been increased from Rs.18,33,000/- per hectare to Rs.50,00,000/-. For this reason the stamp duty value had substantially increased in the year of actual registry i.e. A.Y. 2012-
13. Photocopy of Prevailing Guideline Rate for said Land in F.Y. 2010-12--is enclosed for your kind reference.
1.5] The assessee has made an application in the Office of Collector, Dhar to grant it permission for sale of said Industrial Land to the proposed buyers as per the provisions of M.P. Land Revenue Code , 1959 since the said Land was a diverted Land and prior permission from the office of the collector was required before it can sale.
1.6] The Collector of Dhar has however passed the order on 22.03.2012 and granted the permission to the assessee for sale of said Diverted Land to the proposed buyers. Copy of Order as passed by the Ld. Collector Dhar on 22.03.2012 is enclosed for your kind reference.
1.7] That as per the said order the Collector has directed the Dy. Registrar Dhar to do the registry of said Land on Value as per the Prevailing Guideline 6 Indorie Footcare ITA 788/Ind/2016 or Actual Valuation or Transaction value whichever is higher.
1.8] That assessee submits that since the agreement for Sale of said Land was entered into by it in the A.Y. 2011-12 and advance was also received by the assessee through Account Payee cheques in that case the stamp duty value for the Asst Year 2011-12 is required to be considered for the purpose of section 50C of the Act. That since the permission to sale the said Land was received by it hi on 22.03.2012 the said land has been registered on 31.03.2012 i.e. in A.Y. 2012-13.
1.9] It is therefore submitted that in the Guideline value of said Land for applicability of Provision of Sec. 50C has to be adopted as per the value prevailing, in the A.Y. 2011-12 which was calculated at Rs.34,47,873/- only whereas the assessee had sold the said land at Rs.68,95,800/- which is more than that figure.
02] That in view of the facts of the present case addition of Rs.68,98,200/- as proposed by you u/s 50C of the Income Tax Act vide show cause notice dt. 23.01.2015 is not correct. The same is not acceptable to the assessee"
On consideration of the above submissions of the assessee, the Assessing Officer observed as under :-
"3.4 Thus major arguments from the reply of the assessee are as below:-
1. Assessee has emphasized that the transfer of these properties actually took place in F.Y. 2010-11.
The basis of this argument is receipt of Rs.14,00,000/- in advance against the sale consideration through account payee cheque in F.Y. 2010-11.
7Indorie Footcare ITA 788/Ind/2016 The Guideline value of sold property in F.Y. 2010-11was Rs.34,47,873/- and the sale consideration was more than guideline rate of F.Y. 2010-11. 3. Sale of these lands could be executed during the F.Y. 2011-12 because of the reason that permission from Collector of Dhar could be obtained on 22.03.2012.
3.5 Thus assessee is asserting that the transfer of property actually took place in F.Y. 2010- 11 and sale consideration was much more than the guideline value of aforesaid lands in F.Y. 2010-11.
Assessee is giving arguments on the basis of an agreement submitted in response to the notice from which it can be noticed that Rs.14,00,000/- were to be obtained by the assessee upto 17.11.2010. Thus assessee is saying that due to the reason of receipt of this advance, transfer should be treated in F.Y. 2010-
11. 3.6 Above argument of the assessee is not acceptable because it is based on half representation of the facts. If we carefully read the agreement furnished by assessee, many facts come in the picture that in F.Y. 2010-11 transfer did not take place ,as it was not ascertainable and it was not transferred within the meaning of section 2(47) of I.T. Act. First of all page number 280 and 281 of the aforesaid agreement furnished by the assessee are to be examined (scanned copies are as under):-
Øekad fnukad Hkqxrku dh tkus okyh jkf'k
1- 01 twu 2011 36]00]000@& ¼NRrhl yk[k :i;s½
2- 05 vDVwcj]2011 9]625]800@& ¼uks yk[k fipkUos gtkj
vkB lkS :i;s½
3- 31 vDVwcj]2011 vFkok
U;k;ky; dysDVj ls Hkwfe
foØ; dh vuqefr izkIr gksus
ij nksuksa esa ls tks Hkh ckn esa gks 9]00]000@&¼ukS yk[k :i;s½ &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& ;ksx 54]95]800@& ¼pkSiu yk[k fipkUos gtkj vkB lkS :i;s½ 8 Indorie Footcare ITA 788/Ind/2016 foØsrk izFke i{k }kjk dysDVj egksn; ls Hkwfe foØ; dh vuqefr izkIr gksus ,oa foØ; izfrQy dh vo'ks"k jkf'k gksus ij foØsrk izFke i{k }kjk fcuk fdlh vkifRr ds Øsrk f}rh; i{k ds fgr esa ;k Øsrk f}rh; i{k ds }kjk ftlds Hkh uke ls dgk tkosxk foØ; i= dk iath;u mlds uke ls Øsrk f}rh; i{k ds O;; ij foØsrk izFke i{k ds }kjk djok;k tkosxkA 4- ;g fd U;k;ky; vuqfoHkkxh; vf/kdkjh /kkj ds }kjk jktLo izdj.k Øekad 2@ v&2@1983&84 e-iz- Hkw&jktLo lafgrk 1959 dh /kkjk 172 ds varxZr ikfjr vkns'k fnukad 23-11-1982 ds }kjk foØ; dh tk jgh Hkwfe dks Ñf"k ls fHkUu vk'k; gsrq O;iorZu (Diversion) fd;k x;k gSA 5- ;g fd foØsrk izFke i{k ds }kjk vius O;; ij foØ; i= ds iath;u ds iwoZ e/;
izn's k Hkw&jktLo lafgrk 1959 dh /kkjk 165¼5½¼d½ ds varxZr U;k;ky; dysDVj egksn; ds le{k fof/kor vkosnu izLrqr dj vuqefr izkIr djsaxAs vuqefr izkIr djus ,oa bl ij gksus okys O;; dh Øsrk f}rh; i{k dh dksbZ tokcnkjh ugha jgsxhA 6- ;g fd mDr Hkwfe dh foØ; vuqefr dysDVj egksn; ls izkIr gksus ds i'pkr ;fn Øsrk f}rh; i{k fcØh i= dk iath;u ugha djokrs gSa rks c;kuk jkf'k foØsrk izFke i{k ds }kjk leig`r ¼tIr Forfeit) ¼jkf'k izkIr djus dk vf/kdkjh [kks nsuk½ dj yh tkosxhA foØsrk izFke i{k mDr Hkwfe vU; fdlh dks foØ;' djus gsrq Lora= jgsaxs vkSj ;fn foØsrk izFke i{k Hkwfe foØ; vuqcU/k esa of.kZr Hkwfe ds foØ; foys[k dks Øsrk f}rh; i{k ds fgr esa Hkwfe dks iathd`r ugha djokrs gSa rks Øsrk f}rh; i{k dks foØsrk izFke i{k ds fo:) O;ogkj U;k;ky; esa vuqcU/k ds fofufnZ"V ikyu ls lacfa /kr okn (Suit for Specific Performance of Agreement) izLrqr dj vius i{k esa foØ;i= dks iath;u djkus dk vf/kdkjh jgsxk rFkk mlesa yxus okys leLr ,oa {kfriwfrZ ds fy, foØsrk izFke i{k iw.kZr% tokcnkj jgsxkA 7- ;g fd] foØ; Hkwfe dh vuqefr izkIr djus ds i'pkr foØsrk izFke i{k ds }kjk fcØh i= dk iath;u djkus ls badkj fd;k tkrk gS ;k Vkye&Vwy dh tkrh gS rks Øsrk f}rh; i{k dks ;g vf/kdkjh jgsxk fd og l{ke U;k;ky; esa okn izLrqr dj foØ; vuqcU/k esa mYysf[kr Hkwfe ds fcØh i= dks iathd`r djok;s rFkk ;g Hkh Li"V fd;k tkrk gS fd foØ; foys[k dks iathd`r djokus ds fy;s rFkk mlesa yxus okys leLr O;; ds fy, fo6srkl izFke i{k iw.kZ :i ls tokcnkj gksdj lEiw.kZ O;; ogu djsxkA 8- ;g fd] mDr Hkwfe dks foØ; jhfr ls varfjr djus gsrq foØsrk izFke i{k l{ke vf/kdkj x`fgrk gS] ckotwn blds fdlh O;fDr@laLFkk ;k foØsrk izFke i{k ds fdlh okfjl vFkok mRrjkf/kdkjh us dksbZ vkifRr ;k mtj fd;k rks mldks fu/kkZfjr le;kof/k esa fuiVkus dk nkf;Ro foØsrk izFke i{k dk jgsxkA 9- ;g fd] mDr laifRr ds ukekarj.k o foØ; i= dks iathd`r djokus ,oa vko';d dk;Zokgh ,oa fy[kki<h esa gksus okys leLr O;; Øsrk f}rh; i{k ogu djsx a s rFkk Øsrk f}rh; i{k pkgs rks foØ; i= iath;u ,d ;k vf/kd Hkkx esa vFkok viuh lqfo/kkuqlkj fofHkUu uke ls djokus gsrq Lora= jgsxa s] bl lac/a k esa foØsrk izFke i{k dks fdlh izdkj dh vkifRr ;k mtj djus dk vf/kdkjh ugha jgsxkA 10- ;g fd] foØsrk izFke i{k ,rn~ }kjk ?kksf"kr ,oa fuf'pr djrs gSa fd mDr lEifRr foØsrk izFke i{k us Øsrk f}rh; i{k ds vykok vU; fdlh Hkh vU; O;fDr@laLFkk dks fdlh Hkh izdkj ls varfjr ugha dh x;h gS vkSj u gh ,sls fdlh ys[k] foys[k] ekSf[kr opu ;k ikfjokfjd O;oLFkk i= bR;kfn dk fdlh izdkj dk fu"iknu fd;k x;k gSA 11- ;g fd] mDr laifRr ds lac/a k esa dksbZ Hkh izdj.k fdlh Hkh U;k;ky; esa fopkjk/khu ugha gS] vkSj u gh dksbZ ikfjokfjd fookn gSA fQj Hkh f}rh; Øsrk i{k pkgs rks Lo;a ds O;; ls tkfgj lwpuk dk izdk'ku fdlh Hkh lekpkj i= esa djok ldrs gS]a fdlh izdkj dh vkifRr vkus ij mldk fujkdj.k foØsrk izFke i{k ds }kjk vius O;; ls fd;k tkosxk rFkk vkifRr ds fujkdj.k rd vuqc/a k dh le;&lhek Loes; c< tkosxh] ftlesa Øsrk f}rh; i{k dh dksbZ tokcnkjh ugha jgsxhA 12- ;g fd mDr laifRr ds laca/k esa foØ; dh tk jgh Hkwfe ds vkf/kiR; fn;s tkus ds fnukad rd yxus okys leLr cdk;k M~;t w Mk;o'kZu VsDl] VsDlsl LFkkuh; fudk;
9Indorie Footcare ITA 788/Ind/2016 bR;kfn foØsrk izFke i{k ogu djsx a s rFkk Hkwfe vkf/kiR; fnukad ds i'pkr ls mDr laifRr ds lac/a k esa yxus okys ,sls mijksDr lHkh nkf;R; Øsrk f}rh; i{k }kjk ogu fd;s tkosaxAs 13- ;g fd] mDr izFke foØsrk i{k ;g opu izdV djrk gS fd & bl foØ; vuqc/a k ds fu"iknu ds i'pkr foØsrk izFke i{k dk mDr laifRr ij fdlh Hkh izdkj dk gLrkarj.k ;ksX; fgr vFkok vf/kdkjh ugha jgsxk rFkk foØsrk izFke i{k dks mDr laifRr dks fdlh vU; i{k dks gLrkarj.k djus ;k vU; i{k ls O;ogkj djus dk vf/kdkjh ugha jgsxk rFkk u gh ,slk dksbZ d`R; ;k O;ogkj djsxk ftlls mDr laifRr fdlh izdkj gLrkarfjr Hkkfjr vFkok cksf>r gksA 14- ;g fd] foØ; dh xbZ Hkwfe dh lai.w kZ izfrQy dh jkf'k foØsrk izFke i{k dks izkIr gks tkus ij mDr foØ; dh xbZ laifRr dk fjDr ewfrZeUr vkf/kiR; lk{khx.k ds le{k Øsrk f}rh; i{k dks lkSia fn;k tkosxkA 15- ;g fd] foØsrk izFke i{k }kjk foØ; dh xbZ Hkwfe dk lhekadu vius O;; ls vuqc/a k fnukad ds ,d ekg I'pkr djok;k tkosxkA ;fn lhekadu ds le; jktLo vfHkys[k esa ntZ {ks=Qy 1-881 gSDVs;j ls de Hkwfe ekSds ij miyC/k Thus from above pages it becomes clear that transfer did actually took place on F.Y.2011-12 and not in F.Y.2010-11.Major reasons of this conclusion are as below :
1. from page no. 280 of this agreement it is clear that amount of Rs. 54,95,800/- was to be received by assessee in F.Y. 2011-12. This amount is more than 75% of the sale consideration. Thus the major sale consideration was received by assessee in F.Y. 2011- 12 only.
2. Even the language of agreement is very clear from which it can be ascertained that the relevant transfer was subject to the permission of sale by collector. Thus only the agreement does not ascertain the transfer of this property, but permission of collector was a must condition which was to be obtained in order to transfer the property. In all sale deeds it is mentioned that the permission to sale is obtained from collector-Dhar on 22.03.2012.
3. From Point No. 3 and 6 on page No. 280 it is clear that if registration is not ensured by the purchaser seller would be free to sell the property to any third party.
4. Also the possession was not handed over to the purchaser, party as per the agreement in F.Y. 2010-
11. Infact it could not be handed over till certain conditions in the agreement like approval of collector 10 Indorie Footcare ITA 788/Ind/2016 for sale of land, registration of sale etc were to be met. In a latest decision of ITAT- Hyderabad bench in case of Smt. Bhavya Anant Udeshi vs. ITO (International taxation)[2014] 51 taxmann.com415(Hyderabad Trib.), it was determined that possession of property is one of the must conditions in order to complete the transfer.
From the permission letter of collector (scanned copy on next page) it is clear that purchaser paid the stamp duty on guideline value of F.Y. 2011-12.
Thus above facts fully proves that transfer did not take place in F.Y.2010-11 as claimed by assessee but in F.Y. 2011-12.Hence, from above observation it is clear that the transfer of aforesaid property actually took place in F.Y. 2011-12 only. Hence for application of Section 50C F.Y. 2011-12 i.e. A.Y. 2012-13 is the year of transfer. Therefore I add amount of Rs.68,98,200 (difference between stamp valuation authority value of properties and sale consideration as shown by assessee in its computation of income) in the total income of assessee under section 50C of the Income Tax Act, 1961."
3. Being aggrieved with the addition made by the Assessing Officer, the assessee preferred first appeal before the learned CIT(A). On consideration of the facts of the case, assessment order and the submissions of assessee, the learned CIT(A) observed as under :-
"1. Ground No.1: By this ground the appellant has disputed the addition of Rs. 6098200/- made to the total income by invoking the provisions of section 50C and adopting the guideline rate for the F.Y.11-12 on the basis of the registered deed instead of the guideline rate for the 11 Indorie Footcare ITA 788/Ind/2016 F.Y. 10-11 pursuant to the sale agreement entered in the F.Y. 10-11. The detailed facts as per the assessment order are reproduced at Para No.2 above and the detailed submissions of the appellant are reproduced at Para No.3 above. During the course of appellate proceedings the appellant has reiterated what was stated during the assessment proceedings.
5.1: From the material on record it is seen that it is an admitted position that the sale agreement was dated 29.11.2010 and an amount of Rs.1400000/- was received by the appellant as advance towards the sale. The total sale consideration was Rs.6895800/-. AO has not accepted the contentions of the appellant by observing that the sale was not complete as only a small percentage of the total consideration was received and possession was not handed over and that the sale was subject to the permission of the collector as mentioned in the agreement. The appellant has contended that the registry could not be made in the year of agreement as the permission of collector was received only on 22.3.2012 although application for the same was made. Appellant has placed reliance on the decision in the case of ITO Vs Modipon Ltd. 168 TTJ 480 (ITAT Delhi) in support of the contention that the circle rate prevailing on date of registration of agreement to sell and not circle rate as on the date of execution of sale deed should be adopted as sale consideration for computation u/s 50C.
5.2 The contention of the appellant that the circle rate as on the date of agreement should have been adopted in the computation of LTCG u/s 50C of The Act is found to be covered in its favour by the decision of the Supreme Court in the case of Sanjeev Lal Etc. Vs ACIT wherein the court has held as under:
"The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December, 2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of the transferee/vendee. When such a right is created 12 Indorie Footcare ITA 788/Ind/2016 in favour of the vendee, the vendor is restrained from selling the said property to someone 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. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word "transfer" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word "transfer" is as under:
"2(47) "transfer", in relation to a capital asset, includes,-
(i)................
(ii) the extinguishment of any rights therein; or ...................................."
Para 21 Now in the light of definition of "transfer" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. In the light of the aforestated definition, let us look at the facts of the present case where an agreement to sell in respect of a capital asset had been executed on 27th December, 2002 for transferring the residential house/original asset in question and a sum of Rs. 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between Shri Ranjeet Lal on one hand and the appellants on the other as Shri Ranjeet Lal had challenged the validity of the Will under which the property had devolved upon the appellants. By virtue of an order passed in the suit filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term "transfer", one can come to a conclusion that some right in respect of the capital asset in 13 Indorie Footcare ITA 788/Ind/2016 question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs.15 lakhs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand."
5.3 The appellant has received part of the sale consideration in the year in which the agreement was made and due to reasons beyond the control of the appellant (permission from collector not received) the registry could not be made in the year itself and was made only in the subsequent year. In view of the above and the observations of the Hon'ble Supreme Court the contention of the appellant that the circle rate as on the date of agreement should have been adopted in the computation of LTCG u/s 50C of The Act is upheld. The appellant has also submitted the circle rate as on the date of agreement. According to the same the guideline rate is Rs. 1833000/- per hectare. The land in question is 1.881 hectares and the sale consideration is Rs. 6895800/- which is more than the value as per the guideline rate which comes to Rs. 3447873/- and hence the LTCG has accordingly been worked out with reference to the sale consideration of Rs. 6895800/-. AO is therefore directed to verify the circle/guideline rate as on the date of agreement and adopt the same if it is more than the sale consideration of Rs. 6895800/-. This ground of the appellant is therefore allowed."
4. Against the above findings of the learned CIT(A), the revenue is now in appeal before the Tribunal on the effective ground mentioned in para 1 (supra).
14Indorie Footcare ITA 788/Ind/2016
5. Apropos the sole issue, the learned DR supporting the action of the Assessing Officer submitted that the transfer of sole property did not take place in the financial year 2010- 11 but it was in the financial year 2011-12 pertaining to the assessment year 2012-13. Therefore, the application of section 50C of the Act is the year of transfer i.e. the period under consideration. The learned DR submitted that the Assessing Officer was correct in taking different value between the valuation of stamp valuation authority and sale consideration shown by the assessee in its computation of income u/s 50C of the Act. The learned DR strongly pointed out that the assessee received only 25% of sale consideration in the assessment year 2011-12 and all other formalities completing the transaction of transfer of property such as handing over possession and execution of registered sale deed was shown in the assessment year 2012-13, therefore, the Assessing Officer was right in taking the stamp valuation authority valuation for calculating the income of the assessee u/s 50C of the Act.
15Indorie Footcare ITA 788/Ind/2016
6. The learned DR submitted that the amendment has been brought in section 50C of the Act by Finance Bill, 2016 wherein it has been provided that the date of agreement will be effective from 1.4.2017. The learned DR submitted that in the present case the transfer of land took place before 14.2017, therefore, the Assessing Officer rightly considered the date of registration and determined the value as per stamp valuation authority. The learned D R submitted that the Commissioner of Income Tax (Appeals) was not justified in allowing the appeal of the assessee relying upon the decision of the Hon'ble Apex Court in the case of Sanjeev Lal and Smt. Shantilal Motilal (supra) Lal as the facts and circumstances of the present case are quite dis-similar and distinct from that case.
7. Replying to the above, the learned counsel for the assessee drew our attention to the assessee's paper book pages 77 to 83 i.e. registered agreement to sell dated 29.11.2010 and submitted that execution of registered sale deed could not be done during the assessment year 2011-12 as the permission of the Collector could not be obtained 16 Indorie Footcare ITA 788/Ind/2016 during that period. The learned counsel for the assessee drew our attention to clauses (v) and (vi) of the said agreement and submitted that it was the duty of the seller assessee to obtain permission to sell the land from the Collector but due to reasons beyond the control of the assessee it could be obtained only during the assessment year 2012-13 and thereafter registered sale deed were executed and this delay was not under the control of the assessee.
8. The learned counsel for the assessee submitted that the Assessing Officer misunderstood the ratio of the decision of the Hon'ble Supreme Court in the case of Sanjeev Lal (supra) as in that case also the Hon'ble Supreme Court explicitly held that in view of the definition of the term "transfer", one can come to the conclusion that some right in respect of capital asset in question had been transferred in favour of the vendee and, therefore, some right which the assessee-seller had in respect of capital asset, in question, had been extinguished because after execution of the agreement of sale it was not open to then appellant to sell 17 Indorie Footcare ITA 788/Ind/2016 the property to someone else in accordance with law. The learned counsel for the assessee further submitted that the amendment inserted with effect from 1.4.2017 is explanatory and, therefore, the same is also applicable with retrospective effect.
9. On careful consideration of the above rival submissions, we are of the view that undisputedly the assessee has received 25% of sale consideration in the assessment year 2011-12, the year in which the agreement to sell was made and due to the reasons beyond the control of the assessee viz. permission to sell from the Collector could not be obtained in that year itself and the same could be obtained in the assessment year 2012-13.
10. At this juncture, it would be profitable to take respectful note of the decision of the Hon'ble Apex Court in the case of Sanjeev Lal (supra) wherein sitting for the Apex Court of India, their Lordships held that when the agreement to sell in respect of any capital asset is made then obviously some rights had been transferred in favour of the vendee/purchaser and the remaining rights which the 18 Indorie Footcare ITA 788/Ind/2016 appellant-seller had in respect of the capital asset, in question, had been extinguished as after execution of the sale agreement it is not validly permissible to sell the same property to someone else as per the provisions of Transfer of Property Act.
11. So far as the next question posed to us i.e. amendment inserted by way of Finance Act, 2016 w.e.f. 1.4.2017 to the said provision for full valuation of consideration in certain cases u/s 50C of the Act is concerned, the mandate of the legislature is that where the date of agreement fixing the amount of consideration and the date of registration for the transfer of capital asset are not the same, the value adopted or assessable by the stamp valuation authority on the date of agreement may be taken for the purpose of computing the full value of consideration for such transfer. This amendment is applicable w.e.f. 1.4.2017 as per the amendment itself. Be that it may, in our considered opinion, this amendment is not a substantial amendment but the same is clarificatory, therefore, if this amendment is taken into consideration in the light of the dicta laid down by the 19 Indorie Footcare ITA 788/Ind/2016 Hon'ble Supreme Court in the case of Sanjeev Lal (supra) then it has to be held that the date of agreement of sale is relevant for the purpose of computing full value of consideration of such transfer and hence the conclusion drawn by the Commissioner of Income Tax (Appeals) is quite reasonable and meaningful. We may point out that the facts and circumstances of the present case are identical and similar to the facts of the case of Sanjeev Lal (supra).
Therefore, the Commissioner of Income Tax (Appeals) was quite correct in adopting the same and following the order of ITAT, Delhi Bench in the case of ITO vs. Modipan Limited;
168 TTJ 480 (ITAT Delhi). Finally, we are inclined to accept the contention of the respondent-assessee which was accepted by the Commissioner of Income Tax (Appeals) that the circle rate prevailing on the date of registration of agreement to sell and not circle rate as on the date of sale deed, should be adopted as sale consideration for computation of income of the assessee from LTGS u/s 50C of the Act. Accordingly, we uphold the conclusion drawn by the Commissioner of Income Tax (Appeals) and 20 Indorie Footcare ITA 788/Ind/2016 consequently the sole ground of the appellant is de void of merit, is dismissed.
12. In the result, the appeal of the revenue is dismissed.
The order has been pronounced in open Court on 02.05.2017.
Sd/- sd/-
लेखा सद#य या यक सद#य
(O.P.Meena) (C.M. Garg)
Accountant Member Judicial Member
02.05.2017.
Dn/
21
Indorie Footcare ITA 788/Ind/2016
Submissions of the assessee before the learned CIT(A) :-
The appellant has filed written submission during the course of appellate proceedings. The relevant parts of which are reproduced hereunder:-
Appellant submission 01]. GROUND No 1 1.1] That in this ground of appeal, the assessee has challenged the addition of Rs. 60,98,200/- under the head Income from Long Term Capital Gain by invoking the provisions of Sec. 50C of the Income Tax Act.
1.2] That during the year under consideration the assessee company had sold an Industrial Land admeasuring 1.881 Hectare located at Village Sejavaya Tehsil, District Dhar to 8 parties for Rs.68,95,800/- . Xerox copy of the registered sale deeds are enclosed for your kind reference.
1.3] That the value as adopted by the Registrar in respect of above property as sold by the assessee to the said parties was of Rs 1,37,94,000/- in the Asst Year 2012-13.
1.4] That assessee company through its Directors have entered into an agreement with the Buyers on 29.11.2010 i.e. in A.Y. 2011-12 for sale of its Industrial Land Situated at Village Sejavaya , DistDhar for Rs. 68,95,800/-.
Copy of Agreement is enclosed for your kind reference.
1.5.1] That as per the said Agreement the assessee has agreed to sale the Industrial Land to the 8 parties for an amount of Rs.68,95,800/-and it has also received an amount of Rs.14,00,000/- in advance through an account payee cheques during the previous year relevant to the A.Y. 2011-12 which was also duly shown by the assessee in its Audited Balance Sheet for the A.Y. 2011-12 as Advance against sale of Factory Land. Kindly refer Schedule - 8 of Audited Balance Sheet. Copy of Bank Statement duly highlighting the relevant entries in respect of Advance received by the assessee are also enclosed.
1.5.2] That at the time of agreement when the advance was received by the assessee company through account payee cheques, the guideline value of this land was of Rs.34,47,873/- [being 1.881 hectare * Rs.18,33,000/- ][which is Guidelines Rate per hectare in F.Y. 2010-11] whereas the assessee had sold the said land for Rs.68,95,800/-. Photocopy of Prevailing Guideline Rate for said Land in F.Y. 2010-11 is also enclosed for your kind reference.
22Indorie Footcare ITA 788/Ind/2016 1.5.3] That guideline rate of said Location where the land of assessee was located and which was sold by it in the F.Y. 2011-12 when actual sale deed was executed has been increased from Rs.18,33,000/- per hectare to Rs.50,00,000/-. For this reason the stamp duty value had substantially increased in the year of actual registry i.e. A.Y. 2012-13. Photocopy of Prevailing Guideline Rate for said Land in F.Y. 2011-12 is enclosed for your kind reference. Guideline rate as per prevailing market rate for the previous year relevant to the AsstYears 2011-12 and 2012-13 are as under:-
S.No Particulars Asst Year Asst Year
2011-12 2012-13
1.1 Agreement date 29-11-2010
1.2 Sale deed 31-03-2012
2 Area of Industrial Land sold 1.881 Hecatare 1.881.Hectare
3 Guideline Rate 18,33,000 50,00,000
4 Value as per sale Agreement 34,47,873 94,05,000
and Sale deed
5 Value adopted for stamp duty 1,37,94,000
6 Actual sale consideration 68,95,800 68,95,800
7 Addition made to the income 68,98,200
1.5.4] Party wise detail of sale as executed by the assessee and stamp duty value as adopted by the stamp value authorities was reproduced on inner page No 2 of the assessment order.
1.6] The assessee company has made an application in the Office of Collector, Dharto grant it permission for sale of said Industrial Land to the proposed buyers as per the provisions of M.P. Land Revenue Code, 1959 since the said Land was a diverted Land and prior permission from the office of the collector was required before it can sale.
1.7] The Collector of Dhar has however passed the order on 22.03.2012 and granted the permission to the assessee for sale of said Diverted Land to the proposed buyers. Copy of Order as passed by the Ld. Collector Dhar on 22.03.2012 is enclosed for your kind reference.
1.8] That as per the said order the Collector has directed the Dy. Registrar Dhar to do the registry of said Land on Value as per the Prevailing Guideline or Actual Valuation or Transaction value whichever is higher.
1.9] That assessee submits that since the agreement for Sale of said Land was entered into by it in the A.Y. 2011-12 and advance was also received by the assessee through Account Payee cheques in that case the stamp duty value for the Asst Year 2011-12 is required to be considered for the purpose of section 50C of the Act. That since the permission to sale the said Land 23 Indorie Footcare ITA 788/Ind/2016 was received by it in on 22.03.2012 it was for this reason only the said land has been registered on 31.03.2012 i.e. in A.Y. 2012-13.
1.10] It is Submitted that in the Guideline value of said Land for applicability of Provision of Sec. 50C has to be adopted as per the value prevailing in the A.Y. 2011-12 which was calculated at Rs.34,47,873/- only whereas the assessee had sold the said land at Rs.68,95,800/- which is more than that figure. That in view of the facts of the present case addition of Rs.68,98,200/- as made by the Ld. A.O. u/s 50C of the Income Tax Act is not correct .
1.11.1] That Hon'bleDelhi Bench of ITAT in the case of ITO V/s Modipon Ltd. as reported in 168 TTJ 480 has held that Consideration for Sale of Land was to be worked out on the basis of circle rate prevailing on date of registration of agreement to sell and not by applying circle rate as on the date of execution of sale deed. It was held by the Hon'ble Bench that :-
13. he aforesaid section provides that where consideration received or accruing as a result of the transfer by an assessee, of a capital asset being a land or building or both is less than the value adopted or assessed by stamp value authority, the value so adopted by the stamp value authority shall be deemed to be full value of consideration under s. 48 of the Act. It is thus manifest that the value adopted by the stamp valuation authority is deemed as the consideration for computation of capital gain. However, such valuation adopted by the stamp valuation authority should be in respect of the transfer by the assessee, of the capital assets. Now, in the instant case, undisputedly on the execution of the sale deed circle rate was Rs.20,000/- per sq. m. and therefore, the value adopted for the purpose of stamp duty was Rs.4,03,20,000/- which was deemed as full value of consideration by the AO.
The assessee on the other hand, contends that circle rate on the date of agreement registered with Registrar of Ghaziabad was for Rs.13,000/- per sq. meter, which works out to be the actual sale consideration of Rs.2,62,08,000/- and therefore the said figure should be adopted instead of Rs.4,03,20,000/-. In our opinion, on the peculiar set of facts we find that the agreement to sale was duly registered, whereby the total consideration as agreed to between parties works out to Rs.2,62,08,000/- and was adopted as the consideration for the payment of stamp duty i.e. @ 4 per cent of Rs.2,62,08,000/- i.e. Rs.10,48,320/-. In view thereof, the aforesaid valuation is also the value adopted by the stamp valuation authority in respect of transfer of the capital asset by the assessee. However, subsequent to the said agreement to sell, there was change in the circle rate from 16th June, 2014, whereby the valuation was enhanced from Rs.13,000/- to Rs.20,000/- per sq. meter. This Enhancement was beyond the control of the assessee (seller). It is 24 Indorie Footcare ITA 788/Ind/2016 also not the case of the Revenue that the buyer has given more than the consideration that has been accepted by the parties where they executed the agreement to sell. Furthermore, on facts of a case, the Hon'ble apex Court held that registration of the transfer in accordance with the agreement to sale cannot be termed as the "date of transfer" as envisaged by s. 50C of the Act - SanjeevLal v. CIT [2014] 365 ITR 389/225 Taxman 239/46 taxmann.com 300 (SC) wherein, it was held as under :
"In normal circumstances by executing an agreement to sell in respect of' an immovable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone 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. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of s. 2(47) of the Act, which defines the word transfer' in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of s. 2(47), defining the word 'transfer' is as under :
'2(47) 'transfer', in relation to a capital asset, includes,--
(ii) the extinguishment of any rights therein; or'...
Now, in the light of definition of 'transfer' as defined under s. 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset."
14. Moreover, in an identical matter, Vishakhapatanam Bench of Tribunal in the case of Lahiri Promoters (supra) as under:
"8. We have heard the rival contentions and carefully perused the record. The issue agitated before us revolves around s. 50C of the Act. For the sake of convenience, we extract the s. 50C(1) below :
'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 by any authority of a State Government (hereafter in this section referred to as the 'stamp valuation 25 Indorie Footcare ITA 788/Ind/2016 authority') for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of s. 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.' This section provides for adoption of value assessed/determined by the stamp valuation authority for the purpose of payment of stamp duty (hereinafter 'stamp duty value'), if the sale consideration disclosed in the sale deed is less than the stamp duty value. Sec. 50C was inserted by the Finance Act, 2002 w.e.f. 1st April, 2003.
9. In the instant case, there is no dispute that the assessee herein entered into a separate sale agreement with the two vendees respectively on 27th March, 2003. The assessee has cited certain reasons for not executing the sale deed immediately which were not found to be false. Thereafter, the sale deeds were executed on 30th June, 2005 by complying with the terms of the sale agreement. Hence, the sale deed was executed for the consideration as agreed between the parties as per the sale agreement. If we apply the provisions of s. 50C literally, the tax authorities are right in adopting the value assessed by the stamp authority for the purposes of computation of capital gains. However, learned Authorised Representative has heavily placed reliance on the decision of Hon'ble Supreme Court in the case of K.P. Varghese v. ITO referred supra, with regard to the proper interpretation of s. 50C in the facts and circumstances of the case.
10. The Hon'ble Supreme Court in the case of K.P. Varghese (supra) has observed that while interpreting a provision, strictly literal reading of s.
should not be adopted if it leads to manifestly unreasonable and absurd consequences. However attempt should be made to discover the intent of the legislature from the language used by it. The Hon'ble apex Court rendered the said decision in the context of then existing s. 52(2) of the Act, which provided that where a capital asset is transferred and if in the opinion of the ITO, the fair market value of that asset exceeds the full value of the consideration declared by the assessee by an amount of not less than 15 per cent of the value so declared, then the full value of the consideration shall be taken to be its fair market value on the date of its transfer. The Revenue took the stand that in order to invoke the provisions of s. 52(2), it is enough if it is shown that the fair market value exceeded the disclosed value by 15 per cent However, the Hon'ble Supreme Court held that a fair and reasonable construction of s. 52(2) would be to read into it a condition that it would apply only where the consideration for the transfer is understated and hence it would have no application in the case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. For the 26 Indorie Footcare ITA 788/Ind/2016 sake of convenience, we extract below the relevant observations of the Hon'ble apex Court on the rule of interpretation and the logical conclusion:-
'5. Now, on these provisions the question arises as to what is the true interpretation of s. 52, sub-s (2). The argument of the Revenue was, and this argument found favour with the majority Judges of the Full Bench, that on a plain and natural construction of the language of s. 52, sub-s. (2), the only condition for attracting the applicability of that provision was that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeded the full value of the consideration declarered by the assessee in respect of the transfer by an amount of not less than 15 per cent of the value so declared. Once the ITO is satisfied that this condition exists, he can proceed to invoke the provision in s. 52, sub-s. (2), and take the fair market value of the capital asset transferred by the assessee as on the date of the transfer as representing the full value of the consideration for the transfer of the capital asset and compute the capital gains on that basis. No more is necessary to be proved, contended the Revenue. To introduce any further condition such as understatement of consideration in respect of the transfer would be to read into the statutory provision something which is not there; indeed, it would amount to rewriting the section. This argument was based on a strictly literal reading of s. 52, sub-s. (2), but we do not think such a construction can be accepted. It ignores several vital considerations which must always be borne in mind when we are interpreting a statutory provision. The task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and, as pointed out by Lord Denning, it would be idle to expect every statutory provision to be 'drafted with divine prescience and perfect clarity'. We can do no better than repeat the famous words of Judge Learned Hand when he said:-
'.... it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable source of interpreting the meaning of any writing: be it a statute, a contract or anything else. But, it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary: but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning'.
We must not adopt a strictly literal interpretation of s. 52, sub-s. (2), but we must construe its language having regard to the object and purpose which 27 Indorie Footcare ITA 788/Ind/2016 the legislature had in view in enacting that provision and in the context of the setting in which it occurs. We cannot ignore the context and the collocation of the provisions in which s. 52, sub-s. (2) appears, because, as pointed out by Judge Learned Hand in the most felicitous language :
'...the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create.' Keeping these observations in mind we may now approach the construction of s. 52, sub-s. (2).
6. The primary objection against the literal construction of s. 52, sub-s.(2), is that it leads to manifestly unreasonable and absurd consequences. It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well-
recognized rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly. un-reasonable result which could never have been intended by the legislature. Take, for example, a case where A agrees to sell his property to B for a certain price and before the sale is completed pursuant to the agreement--and it is quite well known that sometimes the completion of the sale may take place even a couple of years after the date of the agreement--the market price shoots up with the result that the market price prevailing on the date of sale exceeds the agreed price, at which the property is sold, by more than 15 per cent of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would find in a large number of cases where the sale is completed more than a year or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement. Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no understatement of consideration in respect of the transfer and the transaction is perfectly honest and bona fide and, in fact, in fulfilment of a contractual obligation, the assesses, who has sold the property, should be liable to pay tax on capital gains which have not accrued or arisen to him. It would indeed be most harsh and inequitable to tax the assessee on income, which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation undertaken by him. It is difficult to conceive of any rational reason why the legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell 28 Indorie Footcare ITA 788/Ind/2016 the property at the agreed price and honestly carried out such a contractual obligation. It would indeed be strange if obedience to the law should attract the levy of tax on income, which has neither arisen to the assessee nor has been received by him. If we may take another illustration, let us consider a case where A sells his property to B with a stipulation that after sometime which may be a couple of years or more, he shall resell property to A for the same price. Could it be contended in such a case that when B transfers the property to A for the same price at which he originally purchased it, he should be liable to pay tax on the basis as if he has received the market value of the property as on the date of resale, if, in the meanwhile, the market price has shot up and exceeds the agreed price by more than 15 per cent ? Many other similar situations can be contemplated where it would be absurd and unreasonable to apply s. 52, sub-s. (2), according to its strict literal construction. We must, therefore, eschew literalness in the interpretation of s. 52, sub-s. (2), and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation. It is now a well-settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even 'do some violence' to it, so as to achieve the obvious intention of the legislature and produce a rational construction; vide Luke v. IRC (1963) AC 557 : (1964) 54 ITR 692 (HL). The Court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision. We think that, having regard to this well recognized rule of interpretation, a fair and reasonable construction of s. 52, sub-s. (2), would be to read into it a condition that it would apply only where the consideration for the transfer is understated or, in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in the case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee. There are several important considerations which incline us to accept this construction of s. 52, sub-s. (2).
The Hon'ble Supreme Court also observed that while interpreting a section it would be legitimate to consider what was the mischief and defect, which was sought to be remedied by an enactment. In that connection the Speech made by the Finance Minister while moving the amendment is extremely relevant as it throws a considerable light on the objectives and purpose of enactment. However, as pointed out by learned Authorised Representative the purpose of 29 Indorie Footcare ITA 788/Ind/2016 introduction of s. 50C was not mentioned by the Finance Minister at the time of moving amendment. It was also not explained in the Notes on Clauses and Explanatory Memorandum attached to the relevant Finance Bill. However, the Hon'ble Madras High Court in the case of K.R. Palanisamy v. Union of India (2008) 219 CTR (Mad.) 323 : (2008) 13 DTR (Mad.) 121 while upholding the constitutional validity of s. 50C, had an occasion to spell out the objective of introducing s. 50C. The relevant observations are extracted below:
'17. Let us consider the legislative competence of the Parliament in inserting the provision s. 50C of the IT Act. It is obvious from the reading of the above provision and rather it is not disputed that the same is inserted to prevent large scale under-valuation of the real value of the property in the sale deed so as to defraud Revenue, the Government legitimately entitled to by pumping in black money. The impugned provision has been incorporated to check such evasion of tax by under-valuing the real properties.
Tax could be evaded by breaking the law or could be avoided in terms of the law. When there is a factual avoidance of tax in terms of law, the legislature steps into amend the IT law to catch such an income within the net of taxation.' Hence, the object of introduction of s. 50C is 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, which, in our opinion, is akin to the objective of introduction of s. 52, which was existing earlier.
11. In the case of K.P. Varghese (supra) the Hon'ble apex Court contemplated a situation, by way of an example, where the completion of sale took place after a Couple of years after the date of agreement. In this connection it is pertinent to extract the relevant Observations of the Hon'ble Supreme Court, at the cost of repetition, as the said example contemplated by the Hon'ble apex Court is squarely applicable to the facts of the present case.
There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature. Take, for example, a case where A agrees to sell his property to B for a certain price and before the sale is completed pursuant to the agreement--and it is quite well known that sometimes the completion of the sale may take place even a couple of years after the date of the agreement--the market price shoots up with the result that the market price prevailing on the date of sale exceeds the agreed price, at which the property is sold, by more than 15 per cent of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would fine in a large number of cases where the sale is completed more than a year 30 Indorie Footcare ITA 788/Ind/2016 or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement. Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no understatement of consideration in respect of the transfer and the transaction is perfectly honest and bona fide and, in fact, in fulfilment of a contractual obligation, the assessee, who has sold the property, should be liable to pay tax on capital gains which have not accrued or arisen to him ? It would indeed be most harsh and inequitable to tax the assessee on income, which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation undertaken by him. It is difficult to conceive of any rational reason why the legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell the property at the agreed price and honestly carried out such a contractual obligation. It would indeed be strange if obedience to the law should attract the levy of tax on income, which has neither arisen to the assessee nor has been received by him.' 11.2 The Hon'ble apex Court in the case of K.P. Varghese (supra) has held that the provision of s. 52(2), that was existing at the relevant point of time was not applicable to an honest and bona fide transaction where the consideration received by the assessee was correctly declared or disclosed by him and there was no concealment or suppression of the consideration. The Hon'ble Supreme Court, after considering the Speech of the Finance Minister, has understood that the object of introduction of s. 52(2) was to curtail those transactions of sale of property, where the actual consideration received was understated in the sale deed. However, though the object of introduction of s. 50G was not mentioned in the relevant Finance Bill or in the Speech of the Finance minister, yet, the Hon'ble Madras High Court in the case of K.R. PalaniSwamy (supra) and others, supra has stated that the provision of s. 50C was inserted in the IT Act to prevent large scale under-valuation of real value of property in the sale deed, so as to defraud Revenue which the Government is legitimately entitled to, by pumping in black money. Thus we can see that the purpose of introduction of s. 52(2) earlier and s. 50C w.e.f. 1st April, 2003 are for the purpose of achieving similar objectives.
11.3 In the instant case also, the assessee herein has fulfilled a contractual obligation on 30th June, 2005, which the assessee is bound by law to carry out as per the sale agreement entered in March, 2003. Now the next question that requires to be addressed is whether there was any understatement of actual consideration at the time when the sale agreements were entered into. The assessee has placed a copy of the certificate dt. 16th April, 2010 issued by 31 Indorie Footcare ITA 788/Ind/2016 the Joint Sub-Registrar, Visakhapatnam by way of additional evidence. According to the said certificate, the market value of the impugned property located at Allipuram Ward was Rs. 5,000 as on 26th March, 2003. According to the learned Authorised Representative, the sale value agreed to by the parties, as per the sale agreement entered into on 27th March, 2003 was more than the market value fixed by the Joint Sub-Registrar at the time the sale agreement was entered into. Thus, according to learned Authorised Representative, there is no understatement or suppression of actual consideration. It is also not the case of Revenue that there was any understatement of actual consideration.
12. Thus, by executing the sale deed in June, 2005, the assessee has only completed the contractual obligation imposed upon it by virtue of the sale agreement, Since the process of sale has been initiated from the date of sale agreement, in our opinion, the character of the transaction vis-a-vis IT Act should be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into. Accordingly, the applicability of the provisions of s. 50C should be looked at only on the date of sale agreement. The assessee has filed a certificate obtained from the Joint Sub- Registrar, Visakhapatnam, regarding market value of the impugned property as on the date of the sale agreements. The said certificate was not produced before the tax authorities. We have already held that the provisions of s. 50G should be applied to the impugned sale transactions as on the date on which sale agreements were entered into. Since the applicability of s. 50C as on the date of sale agreements is required to be examined by the AO, we set aside the issue to the file of the AO with a direction to compute the capital gains on sale of impugned properties after applying the provisions of s. 50G as on the date of sale agreements. Accordingly, the order of learned CIT(A) is reversed."
15. The ratio of the above decision, has also been followed in the cases of Kodura Satya Srinivas (supra) and Molle Rani Reddy (supra). No contrary decision has been brought to our notice.
16. Having regard to the above factual and judicial position, we delete the addition. As a result the ground is allowed.
1.11.2] That Hon'ble Hyderabad Bench of ITAT in the case of Shri Mohd. Imran BaigV/s ITO [ ITA No. 1942/Hyd/2014] has held that Consideration for Sale of Land was to be worked out on the basis of circle rate prevailing on date of registration of agreement to sell and not by applying circle rate as on the date of execution of sale deed. It was held by the Hon'ble Bench that (Para 15) :-
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15. Having regard to the rival contentions and the material on record, we find that 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 infavour of the assessee by the decisions of the Hon'ble Supreme Court in the case of Sanjeev Lal and Smt. ShantilalMotilal V/s. CIT(365 ITR 389) as wellas 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 RamiReddy 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 beconsidered for the purpose of computation of capital gains.
1.11.3] In view of the above it is Submitted that in the Guideline value of said Land for applicability of Provision of Sec. 50C has to be adopted as per the value prevailing in the A.Y. 2011-12 and not in the A.Y. 2012-13. That in view of the facts of the present case addition of Rs.68,98,200/- as made by the Ld. A.O. u/s 50C of the Income Tax Act requires to be deleted.
02] GROUND No 2 2.1] That in the present ground of appeal, the assessee has challenged the chargeability of Interest U/s 234B and 234C of Rs9,59,598/- and Rs. 64,180/-
respectively.
2.2] That in the present case, detailed calculation of interest U/s 234B and 234C is not available. Hence, the assessee is not in a position to make specific comments on the same.
2.3] That in view of the above, it is submitted that interest u/s 234B is chargeable as per provisions of Income Tax Act on the Total income as may finally be assessed.
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