ITAT Grants S. 50C Proviso relief where Advance Received by Cheque Before Sale Deed Registration [Read Order]

The Chandigarh Bench of the Income Tax Appellate Tribunal ( ITAT ) held that where part of the sale consideration was received through bank account or electronic mode at the time of agreement to sell, the stamp duty value as on the agreement date and not the later registration date must be considered for capital gains computation.

A sale of an industrial shed at Panchkula occurred for a declared consideration of ₹4.80 crore, with the sale deed registered on 22 May 2012.

During assessment, the Assessing Officer noted that the stamp duty authority had valued the property at ₹4.97 crore on the registration date and invoked Section 50C to substitute the higher stamp value as deemed sale consideration, resulting in an addition of ₹17,80,299 to the long-term capital gains. The addition was confirmed by the first appellate authority.

Before the Tribunal, the assessee, Monica Bibbly Sood, submitted that an agreement to sell had already been executed in March 2012 and advance consideration exceeding ₹1.80 crore had been received through account payee cheques on 12 March 2012 and 15 March 2012. It was before the registration of the sale deed.

The assessee argued that the case fell within the scope of the provisos to Section 50C, which permit adoption of stamp duty value as on the agreement date where consideration or part thereof has been received through banking channels before that date.

The Tribunal bench of Manoj Kumar Aggarwal (Accountant member) and Rajapal Yadav ( Vice president) explained that Section 50C is a deeming provision, but its provisos clearly relax the rule where there is a gap between the agreement date and registration date and advance consideration has moved through verifiable banking modes. In such cases, the stamp duty valuation on the agreement date must be adopted.

The Bench observed that the purpose of the proviso of Section 50 is to address genuine transactions where price is fixed earlier and registration happens later, sometimes even through court-enforced specific performance, without any change in actual consideration.

Accordingly, the bench set aside the addition of ₹17.80 lakh made. The matter was remanded to the Assessing Officer for fresh determination based on the agreement date valuation.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates