The Commissioner of Income-tax, Chennai v. Vummudi Amarendran
[Citation -2020-LL-0928-63]

Citation 2020-LL-0928-63
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name Vummudi Amarendran
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 28/09/2020
Assessment Year 2014-15
Judgment View Judgment
Keyword Tags transfer of immovable property • full value of consideration • stamp valuation authority • deemed sale consideration • computing capital gain • retrospective effect • date of registration • agreement for sale • date of agreement • deferred payment • guideline value • banking channel • cheque payment • undue hardship • capital asset • market value • bank draft
Bot Summary: Accordingly, the assessment was completed under Section 143(3) of the Act vide order dated 29.12.2016 by adopting the full value of consideration at Rs.27 Crores and the Capital Gain was recomputed and tax was demanded. 329 of 2020 in question vide Agreement for Sale dated 04.08.2012, wherein agreed sale consideration was Rs.19 Crores and the assessee had received Rs.6 Crores by way of account payee cheque on the date of signing the Agreement. The only reason for the Assessing Officer to adopt higher value is based upon the guideline value fixed by the State Government. The guideline value is a rate fixed by the authorities under the Stamp Act for the purpose of determining the true market value of the property disclosed in an instrument requiring payment of stamp duty. Section 50C(1) proviso reads as follows: ''Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capita asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer. Under the existing provisions contained in Section 50C, in case of transfer of a capital asset being land or building on both, the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation of capital gains. 329 of 2020 assessee therein contended that the date of agreement should be taken as date on which the property was transferred by bringing the same within the ambit of Section 2(47) of the Act, which is not the case before us.


T.C.A.No.329 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 28.09.2020 CORAM HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE MRS.JUSTICE V.BHAVANI SUBBARAYON T.C.A.No.329 of 2020 Commissioner of Income Tax, Chennai. Appellant Versus Shri Vummudi Amarendran New No.4, Old No.19, Valmiki Street, T.Nagar, Chennai 600 017. .. Respondent Prayer:- Tax Case Appeal filed under Section 260-A of Income Tax Act, 1961, against order of Income Tax Appellate Tribunal, ''D'' Bench, Chennai dated 27.02.2020 in I.T.A.No.2933/Chny/2019. For Appellant : Mr.T.Ravikumar Senior Standing Counsel JUDGMENT [Order of Court was made by T.S.SIVAGNANAM, J.] This appeal filed by Revenue under Section 260 of Income Tax Act, 1961 ('the Act' for brevity) is directed against order dated 1/22 http://www.judis.nic.in T.C.A.No.329 of 2020 27.02.2020 passed by Income Tax Appellate Tribunal, Madras 'D' Bench ('the Tribunal') in I.T.A.Nos.2933/Chny/2019 for Assessment Year 2014- 15 and Revenue has filed this Appeal raising following Substantial Questions of Law: 1. Whether on facts and in circumstances of case, Tribunal was right in holding that amendment to Section 50C which was introduced with effect from 2017-18 prospectively was applicable retrospectively for assessment year 2014-15 when language used in proviso does not indicate that it was inserted as clarification? 2. Is not reasoning and finding of Tribunal bad by holding that prospective amendment to provisions Section 50C for assessment year 2017-18 is applicable retrospectively to assessment year 2014-15 without appreciating fact that unless explicity stated piece of legislation is presumed not to be intended to have retrospective operation based on principle ''lex prospicit non respicit'' meaning that law look forward and not backwards? 2/22 http://www.judis.nic.in T.C.A.No.329 of 2020 2. facts which are necessary for answering questions raised before us are set out hereunder. respondent/assessee is individual filed its original return of income on 28.09.2014, admitting total income of Rs.7,40,50,990/-. case was selected for scrutiny and Notice under Section 143(2) of Act dated 28.08.2015 was issued. Subsequently since there was change in Officer, Notice under Section 142(1) read with Section 129 of Act was issued. assessee was represented by his authorized representative before Assessing Officer and submitted details called for. assessee had owned 44,462 sq.ft of land in Neelankarai Village and property was sold by Sale Deed dated 02.05.2013 registered on file of Sub Registrar, Neelangarai. assessee had entered into Agreement for Sale on 04.08.2012 agreeing to sell property for total sale consideration of Rs.19 Crores and in terms of conditions contained therein, assessee had received sum of Rs.6 Crores as advance consideration and same was effected by Cheque payment by purchaser. Assessing Officer found that on date of execution and registration of Sale Deed i.e., on 02.05.2013, guideline value of 3/22 http://www.judis.nic.in T.C.A.No.329 of 2020 property as fixed by State Government was Rs.27 Crores. Thus, Assessing Officer came to conclusion that since assessee had not parted with possession and had received only Rs.6 Crores as advance which was not disclosed during relevant financial year, held that Agreement for Sale cannot be regarded as transfer for purpose of Section 2(47)(V) of Act. assessee while computing Capital Gain had taken sale consideration for property at Rs.19 crores. This according to Assessing Officer was not full value of consideration because on date when property was sold, i.e., date on which Deed of conveyance was executed and registered, guideline value was much higher than agreed sale price and therefore, said amount should be reckoned for all purposes as full value of consideration and Capital Gain thereon ought to have been computed. 3. assessee before Assessing Officer did not seek to bring his case under ambit of Section 2(47)(V) of Act. argument was that proviso to Section 50(C) of Act would stand attracted. Though it was applied with effect from 01.04.2017, it would have retrospective effect as 4/22 http://www.judis.nic.in T.C.A.No.329 of 2020 proviso seeks to mitigate undue hardship faced by assessee. Assessing Officer did not agree with statement of assessee on ground that proviso applied only with effect from 01.04.2017, applicable for assessment year 2017-18 and same is prospective. Further Assessing Officer held that conditions laid down for proviso to be applicable, is absent in assessee's case. Assessing Officer came to such conclusion on ground that proviso would be applicable if at first place Agreement has been treated as transfer of capital asset which was absent in assessee's case, on date when Agreement for sale was entered into. Accordingly, assessment was completed under Section 143(3) of Act vide order dated 29.12.2016 by adopting full value of consideration at Rs.27 Crores and Capital Gain was recomputed and tax was demanded. assessee filed appeal before Commissioner of Income Tax (Appeals)-6, Chennai [CIT(A)]. appeal was allowed by order dated 25.07.2019. Revenue preferred appeal before Tribunal which was dismissed vide order dated 27.02.2020, which is impugned in this appeal. 5/22 http://www.judis.nic.in T.C.A.No.329 of 2020 4. We have elaborately heard Mr.T.Ravikumar, learned Senior Standing Counsel for Revenue. 5. It is submission of Mr.T.Ravikumar, learned Senior Standing counsel that amendment to Section 50(C) of Act introduced by Finance Act 2016 is effective only from 01.04.2017, prospectively. In this regard, learned Senior Counsel referred to legal maxim 'lex prospicit non respicit' which means law look forward and not backwards. learned Senior Counsel referred to Circular issued by Central Board of Direct Taxes ('CBDT') in Circular No.3/2017 dated 20.01.2017 and has drawn attention of this Court to paragraph no.29 which deals with Rationalization of Section 50C in case sale consideration is fixed under agreement executed prior to date of registration of immovable property. It is submitted that CBDT has clarified that amendment shall take effect from 01.04.2017 and would accordingly apply from assessment year 2017-18 and subsequent years. Further it is submitted that language of proviso is clear and it does not indicate it is either clarificatory to be held to argue that 6/22 http://www.judis.nic.in T.C.A.No.329 of 2020 proviso would have retrospective effect. Reliance was placed on decision of Hon'ble Supreme Court in case of Commissioner of Income Tax, (Central)-1, New Delhi Vs. Vatika Township Private Limited [2014 (367) ITR 466 (SC)] and our attention was drawn to paragraph no.39 of judgment, in support of his contention that Statute has to be held to be prospective from date fixed by legislature. 6. Reliance was also placed on decision of High Court of Calcutta in case of Bagri Impex (P.) Ltd., Vs. Assistant Commissioner of Income-tax, Circle-9, Kolkata;2013 (31) Taxmann.com 39 (Calcutta), in support of his contention that where date of Sale was registered in year, subsequent to year in which consideration was received, applying Section 50(C) of Act, value assessed by stamp valuation authority in subsequent years should be taken as full value of consideration. Reliance is also placed on decision of Honble Division Bench of this Court in Ambattur Clothing Company Limited Vs. Assistant Commissioner of Income Tax [2010 (326) ITR 0245] to support contention that Assessing Officer was justified in treating value adopted by stamp 7/22 http://www.judis.nic.in T.C.A.No.329 of 2020 valuation authority as deemed sale consideration received / accruing as result of transfer. Reliance was also placed on decision of Hon'ble Supreme Court in R.Saibharathi Vs. J.Jayalalitha [2004 (2) SCC 9], with regard to effect of guideline value fixed by Government. As pointed out by us, assessee sought to take benefit of proviso inserted to Section 50C of Act. It is no doubt true and as clarified by CBDT vide Circular No.3 of 2017 dated 20.01.2017 that amendment to Section 50C would start effect from 01.04.2017 and will accordingly apply from assessment year 2017-18 and subsequent assessment years. However one important factor which needs to be noted is that amendment seeks to relieve assessee from undue hardship caused on account of computation of higher rate of capital gains. 7. Before we proceed to consider as to whether proviso inserted in Section 50C of Act has to be read retrospective or prospective, we need to point out that Assessing Officer did not doubt bonafides of transaction done by assessee, since Assessing Officer accepted fact that assessee had entered into Agreement for Sale of property 8/22 http://www.judis.nic.in T.C.A.No.329 of 2020 in question vide Agreement for Sale dated 04.08.2012, wherein agreed sale consideration was Rs.19 Crores and assessee had received Rs.6 Crores by way of account payee cheque on date of signing Agreement. This fact was noted by CIT(A) and held that Agreement cannot be treated to be ante-dated as assessee had received Rs.6 crores as advance on date of Agreement through banking channel. only reason for Assessing Officer to adopt higher value is based upon guideline value fixed by State Government. question would be as to what is effect of guideline value fixed by Government and purpose behind fixing same. This aspect was clearly explained in case of J.Jayalalitha. It has been pointed out that guideline value has relevance only in context of Section 47A of Indian Stamp Act (as amended by Tamil Nadu Act 24 of 1967) which provides for dealing with instruments of conveyance which are undervalued. guideline value is rate fixed by authorities under Stamp Act for purpose of determining true market value of property disclosed in instrument requiring payment of stamp duty. Thus guideline value fixed is not final but only prima facie rate prevailing in area to ascertain true or correct market value. It is open to Registering 9/22 http://www.judis.nic.in T.C.A.No.329 of 2020 Authority as well as person seeking registration to prove actual market value of property. authorities cannot regard guideline valuation as last word on subject of market value but only factor to be taken note of, if at all available in respect of area in which property transferred lies . It was further pointed out that this position is made clear in explanation to Rule 3 of Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968; this explanation also will have to be read in conjunction with explanation to Section 47(A) of Indian Stamp Act (as amended by Tamil Nadu Act 24/1967). It was further pointed out that undue emphasis on guideline value without referred to setting in which it is to be viewed will obscure issue for consideration. Further it was held that in any event, if for purpose of Stamp Act, guideline value alone is not factor to determine value of property, its worth will not be any higher in context of assessing true market value of properties in question to ascertain whether transaction has resulted in any offense so as to give pecuniary advantage to one party or other. 8. Thus, Assessing Officer could not have based his conclusion solely based on guideline value which has been held to be only prima 10/22 http://www.judis.nic.in T.C.A.No.329 of 2020 facie rate prevailing in area to ascertain true or correct market value and it is not last word on subject of market value but only factor to be taken note of. As pointed out earlier, genuinity of transaction done by assessee was not doubted and receipt of advance was through banking channel by way of demand draft. 9. Therefore, in our considered view Assessing Officer could not have based his finding solely relying upon guideline value especially when Assessing Officer is not person who is computing stamp duty under provisions of Indian Stamp Act on Deed of conveyance. Having observed so we need to take note of next issue would be as to whether proviso to Section 50C could be read to be prospective or retrospective. Section 50C(1) proviso reads as follows: ''Provided that where date of agreement fixing amount of consideration and date of registration for transfer of capita asset are not same, value adopted or assessed or assessable by stamp valuation authority on date of agreement may be taken for purposes of computing full value of consideration for such transfer.'' 10. Reading of above proviso would show that legislature 11/22 http://www.judis.nic.in T.C.A.No.329 of 2020 took note of fact that there are several occasions where Agreements are entered into between willing vendor and willing purchaser on agreed sale consideration, Agreement is reduced into writing and in many cases substantive portion of sale consideration is given to vendor as advance on date of execution of Agreement. There are other types of transaction where vendor executes Power of Attorney in favour of intending purchaser empowering him to sell property at any time he proposes to do so. In fact this was also subject matter of consideration, when legislature though to introduce amendment to Section 50C of Act. There may be cases where sale consideration will be taken as deferred payment subject to certain contingencies. However case on hand is very straight forward case, where there is Agreement for Sale, agreeing to sell property at Rs.19 Crores and sum of Rs.6 Crores has been received as advance sale consideration. proviso to Section 50C(1) of Act deals with cases where date of agreement, fixing amount of consideration and date of registration for transfer of capital assets are not same, value adopted or assessed or assessable by stamp valuation authority on date of agreement may be taken for purposes of 12/22 http://www.judis.nic.in T.C.A.No.329 of 2020 computing full value of consideration for such transfer. Thus amendment by insertion of proviso seeks to relieve assessee from undue hardship. 11. Hon'ble Supreme Court in Commissioner of Income Tax, Kolkata Vs. Calcutta Export Company [2018 (404) ITR 654(SC)], considered question as to whether amendment made by Finance Act 2010 to Proviso of Section 40(a)(ia) of Act is curative in nature and it has to given retrospective operation from date of insertion of said proviso i.e., with effect from Assessment Year 2005-06. It was pointed out that purpose of amendment made by Finance Act 2010 is to solve anomalies with instrument of Section 40(a)(ia) of Act, caused to bona fide tax payer. It was further held that amendment even if not given any operation retrospectively, may not materially to be of consequence to Revenue when tax rates are stable and uniform or in cases of big assesses having substantial turnover and equally huge expenses and necessary cushion to absorb effect; however marginal and medium tax payer who work at low gross product rate and when expenditure becomes subject matter of order under Section 40(a)(ia) is substantial, can suffer severe adverse 13/22 http://www.judis.nic.in T.C.A.No.329 of 2020 consequence if amendment made in 2010 is not given retrospective operation i.e., from date of substitution of provision. Thus, amendment made by Finance Act 2010 being curative in nature was held to be retrospective in operation. In above decision, Hon'ble Supreme Court took note of fact that statutory amendment was being made to remove undue hardship to assessee or held to be retrospective. 12. Honble Supreme Court in Kolkata Export Company took note of earlier decisions on same issue in case of Allied Motors Private Limited Vs. CIT [1997 (224) ITR 677 (SC)], Whirlpool of India Limited Vs. CIT, New Delhi [2000 (245) ITR 3], CIT Vs. Amrid Banaspati Company Limited [2002 (255) ITR 114] and CIT vs. Alom Enterprises [2009 (319) ITR 306] and held that new proviso should be given retrospective effect from insertion on ground that proviso was added to remedy unintended consequences and supply obvious omission. proviso ensured reasonable interpretation and retrospective effect would serve object behind enactment. Thus by taking note of above decisions, we have no hesitation to hold that proviso to Section 50C(1) of 14/22 http://www.judis.nic.in T.C.A.No.329 of 2020 Act should be taken to be retrospective from date when proviso exists. CIT(A) while allowing assessee's appeal vide order dated 25.07.2019, took note of submissions made by assessee wherein they placed reliance on decision of Ahmadabad Bench of Tribunal in case of Dharamshi bhai Sonani Vs. ACIT [2016 75 taxmann.com 141 (Ahmedabad- Trib)]; order of Delhi Bench of ITAT in case of Income Tax officer Vs. Modipon Limited [2015 (57) taxmann.com 360 (Delhi Tribunal)]. 13. On reading of order passed by CIT(A), it is interesting to note report submitted by Income Tax Simplification Committee set up in 2015, headed by Former Judge of High Court, Delhi. 14. Mr.T.Ravikumar, learned Senior Standing Counsel is right in submission that this report is not binding or cannot be taken to have statutory force. Nevertheless Simplification Committee was consisted of experts in field of taxation and it would be worthwhile and interesting to note as to why they have considered insertion of proviso to Section 50(C) of Act should be held to be retrospective; In report there is 15/22 http://www.judis.nic.in T.C.A.No.329 of 2020 extract of Memorandum explaining provisions of Finance Bill 2016 which reads as follows: ''Rationalization of Section 50C in case sale consideration is fixed under agreement executed prior to date of registration of immovable property. Under existing provisions contained in Section 50C, in case of transfer of capital asset being land or building on both, value adopted or assessed by stamp valuation authority for purpose of payment of stamp duty shall be taken as full value of consideration for purposes of computation of capital gains. Income Tax Simplification Committee (Easwar Committee) has in its first report, pointed out that this provision does not provide any relief where seller has entered into agreement to sell property much before actual date of transfer of immovable property and sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of Act i.e. When immovable property is sold as stock-in-trade. It is proposed to amend provisions of section 50C so as to provide that where date of agreement fixing amount of consideration for transfer of immovable property and date of registration are not same, stamp duty value on date of agreement may be taken 16/22 http://www.judis.nic.in T.C.A.No.329 of 2020 for purposes of computing full value of consideration. It is further proposed to provide that this provision shall apply only in case where amount of consideration referred to therein, or part thereof, has been paid by way of account payee cheque or account payee bank draft or use of electronic clearing system through bank account, on or before date of agreement for transfer of such immovable property. These amendments are proposed to be made effective from 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.'' 15. Taking note of above Memorandum, it was pointed out that once statutory amendment is being made to remove undue hardship to assessee or to remove apparent incongruity, such amendment has to be treated as effective from date on which law, containing such undue hardship or incongruity, was introduced. report also referred to decision in case of Alom Enterprises [2009 (319) ITR 306]. 16. Reverting back to decisions relied on by Revenue, decision in Bagri Impex (P.) Ltd., supra is distinguishable on facts as 17/22 http://www.judis.nic.in T.C.A.No.329 of 2020 assessee therein contended that date of agreement should be taken as date on which property was transferred by bringing same within ambit of Section 2(47) of Act, which is not case before us. In Ambattur Clothing Company Limited, assessee contended that since buyer wanted Sale Deed to be released after registration, they had paid stamp duty as per guideline value which is higher than sale consideration agreed to be paid on instruments. This explanation offered by assessee was found to be factually incorrect and rejected and in background of said facts, Honble Supreme Court observes that Assessing Officer was justified in treating value adopted by stamp valuation authority as deemed sale consideration, received/ accruing as result of transfer. 17. On going through facts of case on hand, we find that no such observation was made by Assessing Officer. assessee's consistent case was that sale consideration agreed to be paid to him by purchaser was Rs.19 crores and Rs.6 crores was received as advance on date of entering into Agreement for Sale. However, Assessing Officer disbelieved same and applied guideline value at Rs.27 crores on 18/22 http://www.judis.nic.in T.C.A.No.329 of 2020 date when Sale Deed was executed and registered. Therefore, in our considered view, decision in Ambattur Clothing Company Limited cannot be applied with facts and circumstances of case on hand. 18. Mr.T.Ravikumar, learned counsel is right in submission that observations made by Tribunal qua decision of Honble Supreme Court in Vatika Township is incorrect. In fact we find that Tribunal did not assign any reasons as to why decision in Vatika Township do not apply to facts of case. In fact decision in Vatika Town Ship should be referred for purpose as to when Statute can be treated to be clarificatory and when not?. legal principle laid down therein ought to have been taken note of by Tribunal. Therefore, Tribunal may not be fully right in stating that judgment in Vatika Township will not be applicable to facts as judgment needs to be looked into to consider legal principle of retrospectivity, retro activity or prospectivity. In any event, ultimate conclusion arrived at by Tribunal confirming above order passed by CIT(A) cannot be found faulted with. 19/22 http://www.judis.nic.in T.C.A.No.329 of 2020 19. For all above reasons, appeal filed by Revenue is dismissed. Substantial Questions of Law raised in these appeals are answered against Revenue and in favour of assessee. No costs. (T.S.S.,J) (V.B.S.,J) 28.09.2020 sk Index: Yes / No Internet: Yes / No Speaking Order/Non-Speaking Order To Commissioner of Income Tax, Chennai. 20/22 http://www.judis.nic.in T.C.A.No.329 of 2020 T.S.SIVAGNANAM. J, AND V.BHAVANI SUBBARAYON, J. sk T.C.A.No.329 of 2020 21/22 http://www.judis.nic.in T.C.A.No.329 of 2020 28.09.2020 22/22 http://www.judis.nic.in Commissioner of Income-tax, Chennai v. Vummudi Amarendran
Report Error