Author: Khushi J Prajapati
In a recent ruling, the Karnataka High Court has determined that in order to assess the total amount for consideration as per Section 50-C of the Income Tax Act, one must consider the value set by the Stamp Valuation Authority on that particular day when the agreement was made.
It was observed by the Court, regarding legislative intent behind section 50C(1) and its provisos, which were very clear. Specifically, if payment conditions are met, then according to second proviso date of a mere an unregistered agreement could be used for valuation even when properties were still unregistered. The Court added that especially under its proviso, it provided for valuation based on agreement dates provided part payment conditions are fulfilled.
The court further observed that though recognizing that MOU might not transfer the title legally; still for purpose of valuing under Section 50C the date can still be important.
It was therefore concluded by the Court that main concern is rather whether the payment was consistent with the conditions or not whether it had been registered.
According to Section 50C(1), in case there is a transfer of land or building and the consideration for such transfer is lesser than the value adopted by stamp valuation outright then that value shall be deemed to be the whole amount of consideration for calculating capital gain. Provided that any part of sale consideration has been received before or at agreement date through account payee cheque, bank draft or electronic mode of payment as authorized by Second Proviso to this section, valuation fixed or assessed by stamp duty authority on date of agreement may be taken into account.
The bench observed that the Tribunal accepted the MOU date for valuation purposes and noted that the assessee had paid part of the consideration on that date, thereby satisfying the second proviso to section 50C(1). The Revenue contested this position arguing that MOU being unregistered document are not good enough to transfer property rights and should exclude such date from valuation consideration altogether. It was Revenue’s view that in these circumstances, it was the date of registration of transfer that should be taken for purposes of valuation.
Issue Raised
Whether, on the facts and in the circumstances of the case and law, the Tribunal is right in law in holding that the assessee has proved that 2nd proviso to Section 50C(1) is satisfied since assessee has paid part of sale consideration on the date of MOU on 8/4/2013 and in view of this, he guidance value has to be computed as prevailing on the date of MOU and therefore same is allowable ignoring that MOU relied upon by assessee is an unregistered document which is not valid document for purpose of Transfer of Property as MOU dated 8/4/2013 does not create any title in favour of assessee”?
Whether, on the facts and in the circumstances of the case and law, the Tribunal’s order can be said as perverse in nature in setting aside disallowance of Capital Gains ignoring the findings and materials brought on record by assessing authority and which has been rightly upheld by Commissioner of Income Tax (Appeals)?
Facts
The Revenue contested the Tribunal’s determination that had overturned the Commissioner of Income Tax (Appeals)’s choice and gave assistance to the assessee for the Assessment Year 2014-15. The main point was whether or not the Tribunal rightfully employed the second proviso to Section 50C(1) of the Income Tax Act, 1961 in order to calculate property values for capital gains tax.
Conclusion
The court concluded that tribunal was right in applying second provision of section 50C (1). The Revenue’s appeal was subsequently rejected due to lack of merits and court reiterated that if brought out in time; then date of agreement must be used for valuation purposes.
Case Details
Case Name – Bellandur Chikkagurappa Jayaramareddy vs PR Commissioner of IT & Asst Commissioner of income tax
Case Name: ITA No – 372 of 2022
Jurisdiction of court – Karnataka High Court
Date of Judgement – 15 July 2024
Judges – Justice Krishna S Dixit & Justice Ramachandra D Huddar.
