Land Sale Value to be Determined as on Date of Agreement for Income Tax Deduction u/s 50C: Karnataka HC [Read Order]

The Karnataka High Court rejected the appeal filed by revenue was not meritorious and held that the revenue has no discretion to adopt any date other than the date of agreement in question.

In this case, the asessee, Bellandur Chikkagurappa Jayaramareddy, filed his income tax returns (ITR) for the year 2014-2015, declaring a total income of Rs. 2,02,59,920/-. The assessee had declared income of Rs. 1,95,75,979/- from capital gains on land transfers in his return.

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The assessee calculated the capital gains while filing their income return by using the guideline value as of 8.4.2013, the date of the MOU regarding a certain (land) property, as the sale price and determined the capital gains as Rs. 1,95,75,979.

The assessee’s case was selected for income tax scrutiny, and the Assessing Officer (AO) concluded the assessment proceedings by stating that the guideline value of the property should be taken only on the date of registration of the exchange deed and not on the date of the MOU, which was not registered.

The assessee, aggrieved by the above order, approached the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee could not receive a favorable order from CIT(A). Thus, the assessee approached the Income Tax Appellate Tribunal (ITAT).

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The ITAT allowed the appeal in favor of the assessee and held that the assessee had satisfied the second provision to Section 50C(1) of the act as the assessee had paid a part of sale consideration on the date of such MoU dated 8.4.2013.

Now coming back to the present situation, the revenue has appealed against the order of the Income Tax Appellate Tribunal (ITAT) for the Assessment Years 2014-2015.

The main issue raised by revenue in the above case is that whether the MOU, which is relied upon by the assessee, being an unregistered document, will it be treated as a valid document for the purpose of transfer of property and does it create a valid title for the assessee. The revenue also contended that the assessee has not satisfied the provisions under Section 50C(1) of the Income Tax Act,1961.

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The High Court bench observed that the date of agreement should be considered and not the date on which it is registered. It also stated that Section 50C clearly states that when the date of the agreement for fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, then for stamp valuation, the date of agreement is to be taken.

The Bench comprising of Justice Krishna S. Dixit andAgreement D. Huddar, held that Revenue has no discretion to adopt any date other than the date of agreement under Section 50C(1) of the Income Tax Act, 1961.

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To Read the full text of the Order CLICK HERE 

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