INCOME TAX ACT, 1961

Section 50C, Proviso

Capital gains - Applicability of proviso to section 50C - Retrospective application - Execution of sale deed in favour of other persons then mentioned in agreement to sale

Assessee entered into sale agreement with one M on 9-2-2012 and fixed sale consideration of Rs. 5,10,00,000 and also received advance of Rs. 1 crore by cheque. The property was subsequently registered in favour of sister and mother of purchaser by executing sale deed in May, 2012 for consideration of Rs. 5,10,000. However, guideline value of property as on date deed was at Rs. 7,76,70,000. Therefore, AO invoked section 50C and made addition. Assessee pleaded that guideline value had been subsequently revised by authorities with effect from 1-4-2012, i.e., subsequent to agreement of sale and thus, value fixed by authorities subsequent to date of agreement of sale could not be adopted for computing long term capital gain, in view of proviso inserted to section 50C(1) by the Finance Act, 2016. As per CIT(A), proviso inserted to section 50C by the Finance Act, 2016 with effect from 1-4-2017 did not operate retrospectively. Further, sale deed was executed in favour of person other than the person who agreed to buy property and thus, it was not a case of the assessee that there was sale agreement between parties fixing consideration for transfer of property before enhancement of guideline value by the authorities and accordingly, assessee's case did not fall within proviso to section 50C. Even agreement to sale was not registered. Held:Though, proviso to section 50C(1) was inserted by the Finance Act, 2016 with effect from 1-4-2017, but the proviso seeking to relieve assessee from undue hardship was to be taken as effective from date when main provision was introduced, i.e., retrospectively. Therefore, for the purpose of computation of long-term capital gain, agreed consideration shown in sale agreement between parties was to be considered, irrespective of fact that guideline value of property as on date of registration of property was more than agreed sale consideration. Execution of sale deed in favour of other persons did not in any way take away right of assessee to get benefit of proviso to section 50C(1). Further, it was very clear from the Registration (Tamil Nadu Amendment) Act, 2012 as regards instruments of agreement relating to sale of immovable property, registration was made mandatory from October, 2012. Therefore, for non-registration of sale agreement, more particularly when assessee had subsequently acted upon such sale agreement, benefit could not be denied to assessee. In view of all this addition was deleted.

Relied:CIT v. Vummudi Amarendran (2020) 429 ITR 97 (Mad-HC) : (2020) 120 Taxmann.com 171 (Mad) : 2020 TaxPub(DT) 4239 (Mad-HC) and Dharamshibhai Sonani v. Asstt. CIT (2016) 75 Taxmann.com 141 (Ahd-Trib) : 2016 TaxPub(DT) 4420 (Ahd-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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