Whether the consideration u/s 50C should be determined on the basis of circle-rate prevailing on the date of execution of sale deed or date of execution of the sale deed?

DELHI BENCH “D”: NEW DELHI

BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER

AND

SHRI A. T. VARKEY, JUDICIAL MEMBER

ITA No. 2049/Del/2009

(Assessment Year: 2005-06)

ITO

Ward-5(1)

New Delhi

(Appellant)

Versus.

M/s. Modipon Ltd.,

Modinagar-201204

Gaziabad (UP)

PAN:AAACM2069E

(Respondent)

ITA No. 2171/Del/2009

(Assessment Year: 2005-06)

M/s. Modipon Ltd.,

Modinagar-201204

Gaziabad (UP)

PAN:AAACM2069E

(Appellant)

Versus.

ITO

Ward-5(1)

New Delhi

(Respondent)

Appellant by :VivekNangia, Sr. DR

Respondent by :SantoshAgarwal, Adv

O R D E R

PER A. T. VARKEY, JUDICIAL MEMBER

These are cross-appeals against the order of the ld CIT(A), VIII, New Delhi dated 2nd March 2009, for Assessment Year 2005-06.

2. First of all, we will take up the matter of the assessee, i.e. ITA No.2171/Del/2009 Ground No.1 is general so it is dismissed.

3. Ground No.2 to 2.3, relates to determination of capital gain on transfer of plot of land at Ghaziabad.

4. Briefly stated the facts are that during the previous year relevant to the Assessment Year 2005-06, the assessee company had sold a plot of land as per sale-deed dated 16.09.2004. The sale price on which capital gain has been worked out was taken at Rs.2,57,76,000/- (Rs.2,62,08,000 less brokerage of Rs.4,32,000/-). As per the sale deed of the said plot filed during the assessment proceedings, it is seen that the circle rate of the said plot was Rs.40,32,000/- on which stamp duty had been charged by the sub-registrar, GDA, Ghaziabad. The assessee was asked by AO, to clarify vide order sheet entry dated 20.12.2007 as to why in terms of provisions of section 50C(1) of the Income Tax Act, 1961 (herein after ‘the Act’), the circle rate may not be adopted for computing the capital gain on sale of above property.

5. Not satisfied with the reply of the assessee company, the AO enhanced the long term capital gain and worked out the same as under:-

Sale price or Circle rate whichever is higher                  40320000

Brokerage paid                                                     432000

Less                                                                      39888000

6. Cost of acquisition of land (indexed

Year of acquisition/

improvement                 Cost            Cost of inflation index  

1994-95                         9365739               259                                17357354

1995-96                         1156063               281                                1974770

1996-97                         675625                 305                                1063278

1997-98                         199500                 351                                272821

Index Cost of acquisition                                                                  20668223

Long term capital gain                                                                      19219777

7. Before the ld CIT(A), it was submitted that assessee sold the land vide registered agreement dated 27th May 2004, for consideration of Rs.2,62,08,000/- and on the said date the circle rate was Rs.13,000/- per sq meter. However, on the date of registration of sale-deed, i.e. 16th September 2004, the circle-rate enhanced to Rs.20,000/- per sq meter. It was thus prayed that the AO was not justified to enhance the sale consideration, on the basis of circle-rate prevailing on the date of execution of sale deed. The ld CIT(A) however rejected the said submission and held that u/s 50C of the Act, the circle-rate has to be adopted on the date of transfer of the property, which is the date of sale-deed. He held as follows:-

“Mere signing/registration of "agreement to sale" cannot be treated as "transfer" of property under consideration. Even by executing the 'agreement to sale', all the rights continued to vest with the assessee company. From a reading of the said 'agreement to sale', It IS evident that there was no extinguishment of the rights of the appellant company on Its execution. Therefore, there was no "transfer" within the meaning of section 2(47), such transfer taking place only when the "sale agreement" was executed in September, 2004. This view is found supported by the decision of Delhi High in the of CIT Vs. Atam Prakash& Sons 175 Taxman 499 (Del) in which it has been laid down by the Hon'ble Court that grant of permissive right to construct building on the plot of land would not amount to "transfer" of capital asset in terms of section 2(47).

The value or circle rate at the time of execution of "agreement to sale" is of no consequence for the purpose of the application of the provisions of section 50C. The "agreement to sale" may bind the parties' inter-se but does not override the statutory provision as are applicable on the "date of transfer"; which in the instant case had been 16.09.04. Section 50C has been introduced to cover those cases where the consideration received or accruing as a result of transfer is less than the value adopted by the stamp duty authority in respect of such transfer and therefore, the case of the appellant is covered by ambit of these provisions.

In view of the above, I hold that “full value of consideration” is the value of Rs.4,03,20,000/-; being the value adopted by the stamp duty authority as on the date of transfer which is 16.09.2004 and that the same shall be aodpt4ed for the purpose of computing capital gain u/s 48.”

8. Before us, the ld counsel for the assessee, submitted that the circle-rate as on the date of agreement to sale is to be taken instead of circle-rate on the date of sale. He relied on the decision of Vishakapatnam Bench in the following case:-

To read the full judgment, please find the attached file:

Attached file:

http://www.itatonline.in:8080/itat/upload/473179038497943161613$5%5E1REFNOITA_No.2049,_2171-Del-2009-Modipon_Ltd..pdf