Section 50C(1) of Income Tax Act is Retrospective in Nature: ITAT directs AO to Calculate Capital Gain [Read Order]

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) held that the amended provisions of section 50C(1) of the Income Tax Act is retrospective in nature, the value adopted or assessed or assessable by the Stamp Valuation Authority on the date of agreement has to be taken for the purpose of full value of the consideration in calculating capital gain in case of immovable property.

The assessee Smt. Anupama Krishna Rao Premaraju is a Non-resident Individual. The assessee has accrued income on account of capital gains which has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961.

During the course of assessement proceedings, the Assessing Officer (AO) noted that information was received from the I & CI Wing of the Department for the financial year 2012-13 that the assessee along with another person has sold immovable property being House on Plot No.18 for a total sale consideration of Rs.22,00,000 as against the SRO (Sub Registrar's Office) value of Rs.1,07,93,300.

The assessee became the owner of the property by virtue of inheritance in the year 1987 after the death of her mother Smt. P. Uma Rani . The assessee and her father Premmaraju Venkata Krishna Rao sold the property vide sale deed registered at the Registrar of Hyderabad to Dhanthuri Pandariunath and Smt. Dhanthuri Kasthurinath. Various link documents prior to her inheritance are mentioned in the recitals.

Since the link documents are not available on record, therefore, the details of cost of acquisition as well as cost of construction/improvement etc., are not available on record. Since the recorded sale consideration is Rs.22.00 lakhs and the SRO value is Rs.1,07,93,300/-, the Assessing Officer invoked the provisions of Section 50C of the Income Tax Act and determined the assessee’s share being 50% of the SRO value at Rs.53,96,650/which is thedeemed sale consideration in the hands of the assessee for the purpose of capital gain computation.

Aggrived by the order the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld the proposed addition made by the AO but gave direction to the Assessing Officer to allow indexed cost of acquisition while computing the capital gains. The Assessing Officer accordingly, after allowing the indexed cost of acquisition, made addition of Rs.27,86,328/- in the hands of the assessee.

Further aggrieved the assessee filed an appeal before the Tribunal .

The Authorised Representative of the assessee (AR) referring to the agreement of sale submitted that the property was agreed to be sold for a sale consideration of Rs.22,00,000/out of which an amount of Rs.20.00 lakhs was received by way of 3 different cheques and an amount of Rs.2.00 lakhs by way of cash, he further submitted that due to some litigation, the property could not be sold and vide sale deed, the property was formally sold to Sri Dhanthuri Pandariunath and Smt. Dhanthuri Kasthurinath for a total consideration of Rs.22.00 lakhs which was originally agreed.

Referring to the provisions of Section 50C(1) of the Income Tax Act he submitted that where the date of agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the Stamp Valuation Authority on the date of agreement should be taken as the value.

The Department Representative (DR) relied on the order of the AO and the CIT(A) and submitted that the assessee in the instant case has sold the immovable property  for a consideration of Rs.22.00 lakhs and the SRO value is Rs.1,07,93,300. Therefore, the AO was fully justified in adopting Section 50C of the Income Tax Act.

The Bench comprising of R.K. Panda, Vice-President and K. Narasimha Chary, Judicial Member observed that it has been held in various decisions that the amendment to Section 50C of the Income Tax Act introduced by the Finance Act 2016 for determining the full value of consideration in the case of the immovable property is curative in nature and will apply retrospectively.

The Tribunal further relied on the decision of  Madras High Court in the case of CIT vs. Vummundi Amarendran  where it  was has held, “the provisions of Section 50C(1) of the Act should be taken to be retrospective from the date when the proviso exists”.

Therefore, in view of the amended provisions of Section 50C(1) of the Income Tax which according to the Bench is retrospective in nature, the value adopted or assessed or assessable by the Stamp Valuation Authority on the date of agreement has to be taken for the purpose of full value of the consideration.

The Bench deemed it proper to restore the issue to the file of the AO with a direction to verify the circle rate on the date of agreement dated 15.06.2006 and adopt the same for the purpose of calculation of the capital gain in the hands of the assessee.

Hence, appeal filed by the assessee was allowed for statistical purposes.

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