HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 75 / 2014 Commissioner of Income Tax, Jaipur-II, Jaipur ----Appellant Versus Shri Satya Dev Sharma, 29, J.L.N. Marg, Uniyara Garden, Jaipur ----Respondent For Appellant(s) : Mr. K.D. Mathur for Mr. R.B. Mathur For Respondent(s) : Mr. Sanjay Jhanwar HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 11/09/2017 By way of this appeal, assessee has challenged judgment and order of Tribunal whereby Tribunal has dismissed appeal of department and allowed appeal of assessee. While admitting matter on 14.07.2016, Court framed following substantial questions of law:- 1.Whether on facts and in circumstances of case, ITAT was justified in law in holding that municipal limits existing on date of issue of Notification No.9447 dated 06.01.1994 u/s 2(14)(iii)(b) should be considered for purpose of determination of agricultural land instead of municipal limits existing on date of sale/transfer. 2.Whether on facts and circumstances of case, ITAT was justified in law in holding that agriculture land sold by assessee is not capital asset u/s. 2(14) (iii)(b) as it was situated beyond 8 Kms. from municipal limits on date of issue of Notification No.9447 dated 06.01.1994 despite fact that land was undisputedly situated within 8 Kms from (2 of 13) [ITA-75/2014] municipal limit on date of sale. Following decision was passed on 24.07.2017, in D.B. Income Tax Appeal No.328/2011, Commissioner of Income Tax vs. Shri Sher Singh Sunda by this Court which reads as under:- 1. By way of this appeal, appellant has challenged judgment and order of Tribunal whereby tribunal has dismissed appeal of department and C.O. of assessee is partly allowed. 2. While admitting appeal, this court on 13.04.2012 framed following substantial question of law:- Whether Hon ble ITAT was right in law in deleting addition of Rs.65.00 lacs made u/s 50C after having held that transaction was transfer u/s 2(47) of I.T. Act read with Section 50(c) and where value of property was assessed for purpose of Stamp Duty payment and transaction was covered by explanation 2 to Section 50C of I.T. Act, 1961? 3. For sake of convenience, Section 50(C) Explanation 2 which is strongly relied upon by appellant and Section 2(47) of Income Tax Act is reproduced as under:- 50C. (1) Where consideration received or accruing as result of transfer by assessee of capital asset, being land or building or both, is less than value adopted or assessed 86[or assessable] by any authority of State Government (hereafter in this section referred to as "stamp valuation authority") for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed 86[or assessable] shall, for purposes of section 48, be deemed to be full value of consideration received or accruing as result of such transfer. (2) Without prejudice to provisions of sub-section (1), where (a) assessee claims before any Assessing Officer that value adopted or assessed 86[or assessable] by stamp valuation authority under sub-section (1) exceeds fair market value of property as on date of transfer; (b) value so adopted or assessed 86[or assessable] by stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or High Court, Assessing Officer may refer (3 of 13) [ITA-75/2014] valuation of capital asset to Valuation Officer and where any such reference is made, provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modi-fications, apply in relation to such reference as they apply in relation to reference made by Assessing Officer under sub-section (1) of section 16A of that Act. 87 [Explanation 1]. For purposes of this section, "Valuation Officer" shall have same meaning as in clause (r) of section 2 of Wealth-tax Act, 1957 (27 of 1957). 88 [Explanation 2. For purposes of this section, expression "assessable" means price which stamp valuation authority would have, notwithstanding anything to contrary contained in any other law for time being in force, adopted or assessed, if it were referred to such authority for purposes of payment of stamp duty.] (3) Subject to provisions contained in sub-section (2), where value ascertained under sub-section (2) exceeds value adopted or assessed 88[or assessable] by stamp valuation authority referred to in sub- section (1), value so adopted or assessed 88[or assessable] by such authority shall be taken as full value of consideration received or accruing as result of transfer.] Section 2(47)Transfer U/s 2(47) of Income-tax Act 1961, term transfer has been defined as Transfer in relation to capital asset includes : (i) sale, exchange or relinquishment of asset; or (ii) extinguishment of any rights therein; or (iii) compulsory acquisition thereof under any law; or (iv) in case where asset is converted by owner thereof into, or is treated by him as stock-in-trade of business carried on by him, such conversion or treatment; or (v) any transaction involving allowing of possession of any immovable property to be taken or retained in part performance of contract of nature referred to in section 53A of Transfer of Property Act, 1882; or (4 of 13) [ITA-75/2014] (vi) any transaction (whether by way of becoming member of, acquiring shares in, co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has effect of transferring or enabling enjoyment of, any immovable property. (vii) maturity or redemption of zero coupon bond. 4. He and contended that tribunal has seriously committed error in dismissing appeal of department in as much as grounds raised by revenue in para 2.1 reads as under:- 2.1 ground of appeal raised by Revenue is as under:- On facts and in circumstances of case, Ld. CIT(A) has erred in law in holding that provisions of Section 50C of I.T. Act, 1961 are not applicable in case of assessee and thereby deleting addition of Rs.65.00 lacs made by AO u/s 50C of I.T. Act, 1961. contentions raised by assessee are as under: 2.2 assessee has shown long term capital gains of Rs.7,29,025/- on sale of agriculture land at Jaipur. assessee was asked to file Registered Sale Deed and assessee filed copy of sale agreement and power of attorney issued in favour of assessee by Smt. Pushpa Devi and Smt. Gulab Devi. power of attorney was registered in office of Sub- Registrar, Sanganer-1, Jaipur. As per registered power of attorney, value of sold property was determined at Rs.1.35 Crores u/s 54 of Stamp Duty Act. assessee was asked to explain as to why sale consideration of property be not adopted at Rs.1.35 crores as provided u/s 50C of Act. In response to show-cause notice issued by AO, assessee filed reply and same is reproduced by AO at page 2 of assessment order. contentions of assessee are summarized as under:- 1. power of attorney was executed in favour of assessee by Smt. Pushpa Kedia and assessee made payment of Rs.62,70,975/- to Smt. Pushpa Kedia on execution of power of attorney in his favour. power of attorney was duly registered before Sub-Registrar and Sub-Registrar has assessed value for registration of power of attorney at Rs.1.35 crores. (5 of 13) [ITA-75/2014] 2. assessee executed agreement in favour of M/s. Rising Build Estate Ltd. and transferred all right acquired under power of attorney on consideration of Rs.70.00 lacs. This Registration was presented for registration before Stamp Duty authority. 3. assessee has not transferred any immovable property but has transferred right of purchase of immovable property. assessee neither received possession of property nor has any control been acquired on property. 4. Section 50C is applicable in respect of transfer of capital asset being land or building or both while in instant case assessee has neither transferred any land nor transferred any building. 5. assessee has not presented agreement executed in favour of M/s. Rising Build Estate Ltd. for registration before Stamp Duty Authority to assess or adopt any value of transaction. Hence, Section 50C is not applicable. 6. Section 50C is fiction made in Act for adoption of value in certain specific cases. fiction cannot be read in wider sense. No value is adopted or accepted by Stamp Duty Authority. Therefore, provisions of Section 50C is not applicable. It was further argued that capital gain is not chargeable in in case asset which is transferred has no cost at all. 5. He has taken to us observations made by Tribunal in para 2.6 2.8 and 2.9 which are as under:- 2.6 We have heard both parties. copy of general power of attorney is available at pages 12 to 14 of paper book filed by ld. AR. As per this general power of attorney, assessee was given authority to get different actions executed on behalf of owner .The genera power of attorney was authorized to apply for approval u/s 90B and was also given authority to look after land and to get NOC from JDA and to get patta issued from JDA. It is true that general power was executed on stamp paper of Rs.500/-. Sub-Registrar registered this power of attorney at Rs.1,07,800/- against stamp duty of Rs.500/-. This general power of attorney has been cancelled vide cancellation deed dated 03.01.2007. copy of this cancellation is available at pages 15 to 20 of paper book. In cancellation deed, it is not mentioned that general power of attorney has entered into agreement for sale of land with M/s. Rising Build Estate Ltd. copy of sale agreement is available at pages 1 to 4 of paper (6 of 13) [ITA-75/2014] book. agreement has been made on 13.11.2006. In this agreement, it is mentioned that assessee has sold land which he has purchased. In this agreement, it is stated that assessee has purchased land through agreement and has also obtained possession. agreement with M/s. Rising Build Estate Ltd. by assessee is not in capacity of general power of attorney holder but has entered into agreement as person who has purchased land through agreement for purchase of land. From these, it is clear that assessee has transferred rights in land and building and we are not inclined to accept that assessee has not transferred immovable property. Section 50C has been amended by Finance Act, 2009 and word assessable has been included w.e.f. 1-10-2009. memo explaining provision of Finance (No.2) Bill, 2009 (refer to 314 ITR 214 St.) states that word assessable has been added so that transactions which are executed through agreement to sell power of attorney are covered u/s 50C of Act. It will be useful to reproduce relevant portion from memo explaining provisions of Finance (No.2) Bill, 2009. existing provisions of Section 50C provide tht where consideration received or accruing as result of transfer of capital asset, being land or building or both, is less than value adopted or assessed by authority of State Government (stamp valuation authority) for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed shall be deemed to be full value of consideration received or accruing as result of such transfer for computing capital gain. However, present scope of provisions does not include transactions which are not registered with stamp duty authority, and executed through agreement to sell or power of attorney. With view to preventing leakage of revenue, it is proposed to amended Section 50C so as to provide that where consideration received or accruing as result of transfer of capital asset, being land or building or boht is less than value adopted or assessed or assessable by authority of State Government for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed or assessable shall be deemed to be full value of consideration received or accruing as result of such transfer for computing capital gain. Further, it is proposed to insert new Explanation so as to clarify meaning of term assessable . This amendment will take effect from 1st October, 2009 and shall accordingly apply in relation to transactions undertaken on or after such date; (7 of 13) [ITA-75/2014] 2.8 Jaipur Bench had occasion to consider applicability of Section 50C in case of transfer of land which has not registered. Tribunal vide order dated 08.04.2011 in ITA No.1356/JP/2010 has held that Section 50C will not be applicable when transaction has not been registered with Stamp Duty Authority. It will be useful to reproduce para 2.4 of Tribunal in case of ITO Vs. Shri Shailendra Soni. 2.4 We have heard both parties. During course of hearing before us, Ld. AR stated that issue under reference is covered by order or Tribunal in ITA No.42/JP/2010 dated 08.06.2010. Ld. AR filed copy of order. It will be useful to reproduce para 5 of order dated 8 th June, 2010 in case of Shri Dinesh Kumar Khatoria. 5. We have heard both parties. Section 50C is applicable when consideration received or accruing is result of transfer of capital asset being land or building or both. word capital asset is defined in Section 2(14) of I.T. Act and according to which capital assets means property of any kind held by assessee. assessee entered into purchase agreement for purchase of property. assessee sold such agreements. Thus what assessee has transferred is his right to purchase plots as per agreement. Section 50C is applicable when consideration received or accruing is as per result of transfer of capital asset being land or building or both. Section 50C is deeming provision which incorporates legal fiction to adopt stamp duty value as full consideration for transfer of capital asset being and building. legal fiction cannot extend beyond purpose for which it is enacted. Hence legal fiction created in Section 50C cannot be applied in respect of transfer of capital asset other than land or building including rights in land and building just like tenancy right. In instant case, assessee has not received consideration on account of transfer of land and building but has received consideration in respect of tranfer of purchase agreements. Jaipur Bench in case of Vijay Luxmi Dhadia, 20 DTR 365 held that Section 50C will not apply if transfer document is not stamped. plots are still to be registered with Stamp Valuation authorities. Ld. CIT(A) has clearly observed that word assessable has been inserted in Section 50C of Income Tax Act by Finance (No.2) Act, 2009 w.e.f. 01.10.2009. consideration as adopted by stamp valuation authority can be taken as full consideration if value adopted by stamp valuation authority is assessable w.e.f. 1.10.2009. assessment year under (8 of 13) [ITA-75/2014] reference is 2006-07 and therefore, amended provisions of Section 50C is not applicable. In memo explaining provisions of Finance (No.2) Act, 2009, it was mentioned as under for making amendment in Section 50C of Income Tax Act. existing provisions of Section 50C provide that where consideration received or accruing as result of transfer of capital asset, being land or building or both, is less than value adopted or assessed by authority of State Government (Stamp valuation authority) for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed shall be deemed to be full value of consideration received or accruing as result of such transfer for computing capital gain. However present scope of provisions does not include transactions which are not registered with stamp duty authority, and executed through agreement to sell or power of attorney. With view to preventing leakage of revenue, it is proposed to amend Section 50C so as to provide that where consideration received or accruing as result of transfer of capital asset, being land or building or both is less than value adopted or assessed or assessable by authority of State Government for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed or assessable shall be deemed to be full value of consideration received or accruing as result of such transfer for computing capital gain. Further, it is proposed to insert new Explanation so as to clarify meaning of term assessable . This amendment will take effect from 1 October, 2009 as shall accordingly apply in st relation to transactions undertaken on or after such date. Hence in instant case, AO was not justified in applying provisions of Section 50C of I.T. Act for increasing short terms capital gain. Ld. CIT(A) was justified in deleting increase in value of short term capital gain. It is not case of Revenue that assessee has received more consideration as shown in agreement. In case there was any evidence to show that consideration received by assessee was more than consideration mentioned in agreement then Revenue could have increased short term capital gain. On basis of Section 50C of Act, AO was not justified in enhancing short term capital gain. We therefore, hold that Ld. CIT(A) was justified in deleting enhancement in quantum of short term capital gain and accordingly appeal of Revenue is dismissed. (9 of 13) [ITA-75/2014] 2.9 assessee has raised cross objection. In C.O., it is mentioned that ld. CIT(A) is not justified in holding that transaction is regarded as transfer attracting Section 50C of Act. We had already discussed this issue. We had already held that it is case of transfer of land. Section 50C of Act is not applicable because substituted word assessable is applicable in respect of transfer of transaction after 1-10- 2009. Thus C.O. of assessee is partly allowed. 6. He contended that Tribunal has committed serious error in interpreting Section 50(C) and has travelled beyond observations which are made by CIT(A) in para 2.3. Same reads thus:- 2.3 I have carefully considered facts of case and submissions of Ld. AR. However, on perusal of relevant material on record, In find that contentions/ submissions/ arguments of Ld. AR, raised in support of this ground of appeal, are not fully acceptable. In this regard, following observations are made. (i) As far as claim of Ld. AR that purchase and sale of agricultural land, in question, by appellant is only in nature of finance arrangement, not involving real purchase and sale, is concerned, I find that said claim of Ld. AR is contrary to facts on record. In this regard, it is seen that appellant purchased agricultural land, measuring 1.80 Hectares (located at village Murlipura, Tehsil Sanganer), Jaipur, from Smt. Pushpa Kedia and Smt. Gulab Devi (sellers), for 62,70,975/, and also passed on sale consideration to said sellers, as well as, obtained possession of that property. fact that appellant had actually purchased aforesaid property from Smt. Pushpa Devi Kedia and Smt. Gulab Devi is evident from contents of para 2 on page 2 of sale agreement dated 13.11.2006, entered into between appellant and M/s Rising Build Estate Pvt. Ltd., Jaipur, wherein appellant has confirmed to have purchased, and also to have taken possession, of aforesaid property from Smt. Pushpa Kedia and Smt. Gulab Devi. Therefore, said transaction has to be treated as transfer in terms of provisions of S.2(47) of I.T. Act. Thus, aforesaid transaction was found to be in nature of purchase of land and, hence, contention of Ld. AR that said transaction was only part of financial arrangement, and not actual purchase, is rejected. However, it is observed that at time of registration of aforesaid transaction of agricultural land (purchase by appellant/sale by Smt. Pushpa Kedia and Smt. Gulab (10 of 13) [ITA-75/2014] Devi), value property was taken by Sub Registrar at Rs. 1,35,00,000/- for stamp duty purposes. Therefore, as appellant was buyer in that transaction, provisions of S.50C of I.T. Act were not applicable in his case. However, as provisions of S.50C of Act are applicable in case of seller , applicability of S.50C of Act was required to be considered in hands of sellers , i.e. Smt. Pushpa Devi Kedia and Smt. Gulab Devi. (ii) Further, it is observed that appellant has sold aforementioned agricultural land, to M/s Rising Build Estates Pvt. Ltd., Jaipur for Rs.70,00,000/-, vide agreement for sale deed dated 13.11.2006. On perusal of said agreement, it is noticed that appellant had received entire sale consideration and had also handed over possession of said property to buyer on 13.11.2006. Therefore, said transaction is also to be treated as transfer in terms of provision of S.2(47) of I.T. Act. Hence, contention of Ld. AR that said transaction was merely part of financial arrangement, and not actual sale, is rejected. However, it is noted that there is no dispute regarding fact that said sale agreement dated 13.11.2006 was not registered and, therefore, concerned Registering Authority had not determined value of sold property for Stamp Duty purposes, with reference to aforesaid sale agreement dated 13.11.2006 (wherein appellant is seller ). Hence, there is substance in argument of Ld. AR that provisions of S.50C of Act were not applicable in such situation, because where Registering Authority had not determined value of sold property, actual sale amount (as per sale agreement) cannot be substituted by some other amount. It is observed that said contention of ld.AR is supported by decisions of Hon ble ITAT Jaipur Bench in case of ITO v/s Sh. Anurag Mishra, ITA No.878/JP/2007, dated 20.06.2008 and of Hon ble ITAT Jodhpur Bench, in case of Navneet Kumar Thakkar v/s ITO, 112 TTJ 76. Therefore, it is to be held that Ld. AO was not justified in applying provisions of S.50 of I.T. Act in respect of aforementioned sale of property by appellant (made vide sale agreement dated 13.11.2006) to M/s Real Build Estates Pvt. Ltd., Jaipur and thereby in substituting sale value shown at Rs. 70,00,000/- in sale agreement dated 13.11.2006 by Rs. 1,35,00,000/-. 7. He contended that Tribunal has committed serious error in holding that transaction under (11 of 13) [ITA-75/2014] Section 50(C) was assessable which has now been incorporated in amendment Act of 2009 w.e.f. 1.10.2009 and he has wrongly invoked same and benefits are wrongly granted in favour of assessee. 8. Counsel for respondent contended that argument put forward by department is misconceived, inasmuch as transaction which is taken place was through power of attorney holder. property was never transferred. Even before initiating proceeding under Section 50(C), assessee has already paid short term capital gain to tune of Rs.10 lacs and therefore assessment which was made on complete consideration is without jurisdiction and therefore while interpreting assessment, CIT(A) has rightly observed in para 2.3 which was reproduced hereinabove and correctly interpreted provisions while relying on decision of Jaipur Bench in case of ITO Vs. shri Anurag Mishra (ITA No.878/JP/2007) dated 20 June, 2008 and has rightly th held value of property determined as 1.35 crores. 9. He has further contended that Tribunal while considering case of assessee in cross objection has taken into consideration provisions of Section 50(C) and in view of decision rendered by Madras High Court reported in (2013) 32 Taxmann.com 274(Madras) has held in para 7,8,9 and 10 which reads as under:- 7.Learned counsel for assessee placed circular in Circular No.5/2010/(F.No.142/13/2010-SO(TPL)) dated 03.06.2010 issued by Board and submitted that as per circular, it is made clear that amendment made by Finance (No.2) Act, 2009 is only prospective in nature and cannot be applied retrospectively. 8.We have perused above circular. It is stated therein that scope of provisions does not include transaction which are not registered with stamp duty valuation authority and executed through agreement to sell or power of attorney. Consequently, it is made clear therein that amendments have been made applicable with effect from 01.10.2009 and therefore, they will apply only in relation to transaction undertaken on or after such date. relevant portion of circular is extracted hereunder: (12 of 13) [ITA-75/2014] "23.4. Applicability:- These amendments have been made applicable with effect from 1st October, 2009 and will accordingly, apply in relation to transactions undertaken on or after such date." 9.Learned counsel for Revenue is not disputing about existence of such circular issued by Board. If Board has issued circular clarifying applicability of Section 50C in pursuance of amendment made by Amendment Act 2 of 2009, we fail to understand as to how Revenue can canvass same issue in this case which in effect is against circular issued by Board. Certainly, Revenue is bound by circular issued by Board. At this juncture, it is pertinent to note that in decision made in case of State of Tamil Nadu and another Vs. India Cements Ltd. and another reported in (2011) 40 VST 225 (SC), Honourable Supreme Court has held that circulars issued by Revenue are binding on Department and therefore, they cannot repudiate that they are inconsistent with statutory provisions. Relevant paragraphs 21 and 22 are extracted hereunder: "21.It is manifest from highlighted portion of circular that as per clarification issued by Commissioner of Commercial Taxes, in exercise of power conferred on him under Section 28A of TNGST Act, benefit of sales tax deferral scheme would be available to dealer from date of reaching of BPV or BSV, whichever is earlier, as is pleaded on behalf of first respondent. It is trite law that circulars issued by Revenue are binding on departmental authorities and they cannot be permitted to repudiate same on plea that it is inconsistent with statutory provisions or it mitigates rigour of law. 22.In Paper Products Ltd. Vs. Commissioner of Central Excise ((2001) 247 ITR 128 SC: (1999) 7 SCC 84), while interpreting Section 37B of Central Excise Act, 1944, which is in pari materia with Section 28A of TNGST Act, this Court had held that circulars issued by Central Board of Excise and Customs are binding on Department and Department is precluded from challenging correctness of said circulars, even on ground of same being inconsistent with statutory provision. It was further held that Department is precluded from right to file appeal against correctness of binding nature of circulars and Department's action has to be consistent with circular which is in force at relevant point of time." (13 of 13) [ITA-75/2014] 10. Before proceeding with matter, it will not be out of place to mention here that those transactions which are shown as transaction under Section 50 [Explanation-2], even if taken into consideration, transaction which take place as short term capital gain in total consideration of payment after sale agreement was determined as Rs.1.35 crores and it cannot be assessed. Therefore, both authorities have committed no error in reaching conclusion. 11. Neither stamp authority has assessed complete charges because transaction has not taken place, and in our considered opinion, valuation which was determined by AO is nothing but harassment to honest tax payers of transaction which has been rightly reversed by CIT(A) and confirmed by Tribunal. In view of above, issue is answered in favour of assessee and against department. appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/73 Powered by TCPDF (www.tcpdf.org) Commissioner of Income-tax, Jaipur-II, Jaipur v. Satya Dev Sharma