The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the provisions of section 50C of the Income Tax Act, 1961 mandating application of fair market value of the property is applicable from the date of execution of agreement to sale.
The 50cAssessee has entered into agreement to sale of its factory line and building on 14/08/2007 wherein consideration of Rs.27.62 Crores was decided. Assessee also received a sum of Rs.14.39 Crores by cheque at the signing of the agreement. However, agreement the sale was registered on 29/04/2009. The AO proposed to take valuation of property as on the date of registration i.e., 29/04/2009 and thereafter, at the request of the assessee matter was referred to the DVO.
The issue was that whether valuation to be taken as on the date of entering into agreement or as on the date when the sale deed is actually registered.
On first appeal, the CIT(A) held that fair market value of the property is to be taken as on the date of agreement to sale.
On second appeal, the Tribunal observed that at the time of entering into agreement to sale, the assessee has already received more than 50% of the advance, however, due to certain conditions, the sale deed could not be registered. Finally, it was registered only on 29/04/2009.
“The various decisions cited and relied on by the CIT(A), the Tribunal after relying on the decision of the Hon’ble Supreme Court has held that when agreement to sale is executed between the parties and part consideration is received, approval of the authorities of Section 50C of the Act takes place and computation u/s.48 of the Act will start accordingly. We do not find any infirmity in the order of CIT(A) for holding that provisions of 50C is applicable as on the date of execution of the agreement to sale. Accordingly, AO is directed to take the fair market value of property as on the date of agreement to sale i.e., on 14/08/2007,” the Tribunal said.
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