Income Tax Appellate Tribunal - Ahmedabad
Sudhan G.Kanitkar, Baroda vs Acit.,Circle-5,, Baroda on 5 May, 2017
आयकर अपील य अ
धकरण, अहमदाबाद यायपीठ - अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD - BENCH 'A'
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.929/Ahd/2012
नधा रण वष /Asstt. Year: 2008-2009
Sudhan G. Kanitkar Mahajan Gali Vs. ACIT, Cir.5
Opp: Khushalchand Kanya Baroda.
Vidhyalay, Sursagar
Vadodara 390 001.
PAN : AIIPK 0409 K
अपीलाथ / (Appellant) तयथ
् / (Respondent)
Assessee by : Shri M.K. Patel, AR
Revenue by : Shri N.K. Patel, Sr.DR
सन
ु वाई क तार ख/Date of Hearing : 19/04/2017
घोषणा क तार ख /Date of Pronouncement: 05 /05/2017
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of ld.CIT(A)-V, Vadodara passed for the Asstt.Year 2008-09.
2. Though the assessee has taken four grounds of appeal, but his grievance revolves around a single issue viz. the ld.CIT(A) has erred in confirming addition of 57,85,829/- which was added by the AO with the aid of section 50C(1) and addition of Rs.2,01,389/- which was added by ITA No.929/Ahd/2012 2 making a disallowance out of cost of transfer while computing capital gain.
3. Brief facts of the case are that the assessee has field his return of income on 31.7.2008 declaring an income of Rs.39,69,480/-. On scrutiny of the accounts it revealed to the AO that the assessee had sold a non-agriculture land in residential zone of moje Bapod, Sim R.S. No.367 paiki 375 and 378. The sale deed was registered on 30.3.2008. The assessee has shown sale value at Rs.1,81,92,371/-, whereas sub- registrar office has valued the property for the purpose of stamp duty valuation at Rs.2,39,78,200/-. Thus, the AO has observed that as per section 50C(1), value of the sale consideration would be deemed equivalent to the amount on which stamp duty was paid by the assessee while transferring the capital assets. In other words, the capital gain would be computed under section 48 by taking into consideration the value of the property determined for the purpose of stamp duty valuation. In this way, the ld.AO has made an addition of Rs.57,85,829 (i.e. Rs.2,39,78,200 minus Rs.1,81,92,371). Appeal to the ld.CIT(A) did not bring any relief to the assessee.
4. Before us, the ld.counsel for the assessee contended that the assessee had entered into an agreement for sale of this land on 5th July, 2007 with M/s.Rajni Builders. The sale consideration as per MOU was determined at Rs.1,81,92,371/- and MOU to this effect was executed which was notarized. Thus, contention of the assessee was that he has handed over possession to the purchaser and also received total sale consideration. Therefore, the transfer has taken place on 6.7.2007. The assessee has not received any amount over and above one stated in this MOU. The ld.counsel for the assessee contended that the Tribunal has recently considered a similar issue in the case of Shri Dharamshibhai Sonani Vs. ACIT, IT No.1237/Ahd/2013 wherein the Tribunal has observed that provisos to section 50C authorize the ITA No.929/Ahd/2012 3 assessee to opt stamp duty valuation on the date of agreement, is a clarificatory amendment which is applicable with retrospective effect. Thus, the proviso introduced by way of Finance Act, 2016 w.e.f. 1.4.2017 is to be applied in the case of the assessee and the stamp duty valuation of the property is to be determined on the date of agreement i.e. 6.7.2007. The actual sale consideration would be replaced by deemed sale consideration determined for the purpose of stamp duty valuation on this date. He further contended that the AO in such situation ought to have referred this issue to the file of the DVO as per section 50C(2) of the Income Tax Act. This exercise has not been carried out, and therefore, orders of the ld.Revenue authorities are not sustainable.
5. On the other the ld.DR relied upon the orders of the Revenue authorities. He contended that except a bald statement of agreement executed on 6th July, no document was produced by the assessee. Similarly, this agreement is not registered agreement.
6. We have duly considered rival contentions and tone through the record carefully. A somewhat similar situation has been dealt by us in ITA No.55/RJT/2016 in the case of Shri Devendra J. Mehta Vs. ACIT. We have discussed the position of law and the facts are also identical. Therefore, for the sake of brevity, we would like to note the finding recorded by the Tribunal in that case and in the light of the finding of the Tribunal explaining the position of law on this issue, we would like to consider the facts of the present case.
7. The discussion made by the Tribunal in the case of Shri Devendra J. Mehta (supra) reads as under:
"7. We have duly considered rival contentions and gone through the record carefully. Section 48 of the Income Tax Act provides mode of computation of capital gain. It contemplates that income arising under the head "capital gains" shall be computed by ITA No.929/Ahd/2012 4 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) expenditure incurred wholly and exclusively in connection with such transfer; and (b) the cost of acquisition of the asset and the cost of any improvement thereto.
8. Section 50C further provides that where the consideration 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 adopted 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 for the purposes of section 48, be deemed to be the full value of the consideration. In other words, full consideration mentioned in section 48 is to be replaced by the consideration on which value of the property was adopted for the purpose of payment of stamp duty.
9. Sub-Section (2) of section 50C further contemplates that in case assessee alleges that stamp duty valuation authority 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. At this stage, let us first deal with second fold of submission made by the assessee. Sub- clause (v) of Section 2(47) has a direct bearing on the controversy. Therefore, it is pertinent to taken note of this clause. It reads as under:
"Section 2 ......
......
(47) "transfer", in relation to a capital asset, includes,--
(i) ...........
(ii) .........
(iii) ..........
(iv) ..........
(iva) ..........
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or"
10. The case of the assessee is that he had executed an agreement to sell on 31.3.2008 and handed over the possession to ITA No.929/Ahd/2012 5 the vendee, therefore, the transfer within the meaning of section 2(47)(v) was complete, and any gain ought to be assessed in the Asstt.Year 2008-09. This argument was rejected by the ld.Revenue authorities on the ground that assessee himself recognised the sale on 10.1.2011 and offered the gain in Asstt.Yar 2011-12. Before taking cognizance of this argument, it is pertinent to take note of Registration and other related Laws, Amendment Act, 2001 which has brought about radical changes in the rights flowing on the basis of the agreement executed in part performance of the contract under section 53A of 1882 Act. The amendments have been made to sections 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 Act.
"17.(1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement 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 required 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 affecting such property or conferring such power, unless it has been registered:
Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property 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 the Specific Relief Act, 1877 (3 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.] ITA No.929/Ahd/2012 6
11. We also deem it pertinent to take note of Section 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 signed by him or on his behalf from which the terms necessary to constitute 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 part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by 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 the contract or of the part performance thereof."
12. A perusal of section 53A of the TPA would indicate 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 specific performance. But after the amendment effected in the Registration and Other Related Laws Amendment Act, 2001, it has been provided that though a contract accompanied by either of possession or executed in favour of a person in possession is compulsorily registerable under section 17(1A) of the Registration Act, 1908, if he failed to register such 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 agreement could be tendered in evidence in a suit for specific performance. In other words, validity of unregistered agreement has not been ITA No.929/Ahd/2012 7 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-registered contract could not be enforced. The "transfer" within the meaning of section 2(47) of the Income Tax Act would complete, if possession is protected. Therefore, we do not find any merit in the second fold of submissions raised by the ld.counsel for the assessee.
13. It is also pertinent to observe that in the case of Dharamshibhai Sonani Vs. ACIT, though the Tribunal has made an observation that proviso appended to section 50C recognizing the date on which agreement was entered into for sale of the land or building, such date on which value adopted or assessed for the purpose of stamp duty valuation is to be deemed as sale consideration is concerned, the Tribunal has observed that such a date would be recognized if payment was made through account payee at the time of agreement. It is a specific observation of Tribunal in para-9. In other words, the Tribunal has observed that partial sale consideration was received through banking channel. In that background, the Tribunal has made observation. In the present case, agreement was entered into on 31.3.2008. Not a single paisa was paid on that date. It was transfer somewhere in the month of December, 2008. Agreement was without any consideration, but a promise of consideration was there. Therefore, the assessee cannot draw benefit from the order of the Tribunal in the case of Dharamshibhai Sonani Vs. ACIT (supra). As pleaded by the ld.CIT-DR, the assessee himself has recognized the sale in the Asstt.Year 2011-12 when deed was registered. Considering the cumulative effect of these factors i.e. non-payment of any consideration at the time of agreement, non-registration of agreement, recognisation of sale by the assessee himself in the Asstt.Year 2011-12, the amdnement in the Indian Registration Act and Other Related Law Amendment Act, 2001, we are of the view that the transfer cannot be recognized in the Asstt.Year 2008-09. The capital gain tax is to be levied upon the assessee in Asstt.Year 2011-12 only.
14. Next fold of dispute is whether alternative contention of the assessee for remitting the matter to the DVO under section 50C(2) ought to be rejected by the ld.CIT(A), and the full sale ITA No.929/Ahd/2012 8 consideration on which stamp duty was paid could only be adopted for the purpose of computing long term capital gain. As discussed earlier, sub-section 2 of Section 50C contemplates that in case the assessee has alleged that value adopted by stamp valuation authority exceeds fair market value of the property as on the date of transfer, then the AO may refer valuation of capital assets to the valuation officer. The reason for such a mechanism is that stamp duty even in the case of the assessee was only Rs. 21,32,070/-. It was to be borne by the vendee and not by the vendor. Thus, there was no liability upon the assessee as such under the stamp valuation Act. This aspect has enhanced liability of the assessee multi-fold under the Income Tax Act, and due to this reason a mechanism has been provided in the Act for the assessee to demonstrate that actual value received by him was far less than the one adopted for the purpose of stamp duty valuation. Now in the present case, it to be seen that the assessee has entered into an agreement to sell on 31.3.2008. The time limit for filing a suit for specific performance under the Specific Relief Act has been provided in the Indian Limitation Act, and this limitation is three years from the date of agreement. In case the vendee refused to get sale deed registered, then assessee can only sue for specific performance, persuading vendee to purchase land. In that situation, the assessee would not get anything more than the amount agreed in the agreement. Similarly, there can be a time gap between the date of agreement vis-à-vis ultimate registration of sale deed. There can be an appreciation or depreciation in the property. In other words, at the time of execution of agreement in respect of an immovable property, the right in persona is created in favour of the transferee/vendee. When such right is created in favour of the vendee, vendor is restrained from selling the said property to someone-else, because vendee in whose favour the right in persona is created has legitimate right to enforce specific performance of the agreement, if vendor for some reason is not executing sale deed. Thus, by virtue of agreement to sell, some right is given to the vendee by the vendor. It is an encumbrance on the property and considering this aspect, the ld.AO should have remitted this issue to the file of DVO for determining fair market value on the date of transfer of land. The DVO will have to keep in mind the encumbrance over the property by virtue of sale agreement. It is also pertinent to note that validity or genuineness ITA No.929/Ahd/2012 9 of the agreement has also to be decided because under the agreement, consideration was promised and not paid at the time of agreement. It was paid on 15.12.2008. All these factors are to be kept in mind by the DVO while determining the FMV of the property. Considering these aspects, we deem it appropriate to set aside the issue to file of the AO for re-adjudication. The ld.AO shall refer the matter to the DVO as contemplated under section 50C(2) of the Income Tax Act, 1961. The ld.DVO shall determine fair market value of the property on the date of sale deed, but keep in mind the encumbrance over the property by virtue of agreement. The ld.AO shall determine the long term capital gain thereafter. Accordingly, appeal of the assessee is partly allowed."
8. In the light of the above discussion, if we examine the facts of the present case, then it would reveal that the alleged agreement/MOU was executed on 5.7.2007. It is placed on page no.5 to 11 of the paper book. This memorandum contains that sale consideration would be calculated at the rate of Rs.1195/- per sq.meter. The vendee has paid an amount of Rs.20 lakhs by cheque bearing no.366815 dated 12.4.2007 and amount of Rs.12 lakhs through account payee cheque on 23.5.2007. Thereafter schedule of payment has been given in para-2 of the memorandum. This schedule of payment is subsequent to alleged execution of the sale deed. But one thing is clear from this memorandum, a right in persona has been created in favour of the vendee as well as in favour of the vendor, which he can be enforced with the help of suit for specific performance. In such situation, we are of the view that fair market value of this property ought to have been determined by the AO as provided in section 50C(2). We, therefore, set aside this issue to the file of the AO for re-adjudication. The ld.AO shall call for a report from the DVO as contemplated in section 50C(2) and the ld.DVO shall keep in mind any encumbrance created on the property by virtue of the alleged execution of the agreement. In this way, first grievance of the assessee is allowed for statistical purpose.
ITA No.929/Ahd/2012 109. In the second fold of grievance, the assessee has pleaded that the ld.CIT(A) has erred in confirming the addition of Rs.2,01,389/-. We find that the ld.CIT(A) has remitted this issue for re-verification and reconsideration. No interference is called for in such finding of the ld.CIT(A), because the ld.AO shall verify whether any expenditure is incurred by the assessee for transfer of this capital asset and if some expenditure was incurred then he will allow this expenditure. This ground of appeal is also allowed for statistical purpose.
10. In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the Court on 5th May, 2017 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER