By TIOL News Service

AHMEDABAD, OCT 19, 2016: THE issue is - Whether the present amendment in section 50C introduced only with prospective effect from 1st April 2017, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect. YES is the answer.

Facts of the case

During the course of reopened assessment proceedings, the AO took note of fact that the assessee, along with a co -owner, had sold certain land at consideration of Rs.45,00,000/- whereas on that day, according to the stamp duty valuation authority, this land was valued at Rs.76,21,800/-. It was in this backdrop that the AO sought to add Rs.15,60,900/- to the value of sale consideration, for the purpose of computing capital gains, received by the assessee. It was claimed by the assessee that though a registered "agreement to sell" was executed on 29.06.2005, the sale deed of land could finally be executed only on 24.04.2007 because the land was required to be converted into non-agricultural land before execution of sale deed. What, according to the AO, was relevant was the date on which sale deed being executed. The AO proceeded to adopt sale consideration, u/s 50C, at stamp duty valuation rate. The CIT(A) dismissed the Appeal.

Having heard the parties, the Tribunal held that,

++ the present amendment in section 50C, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect. Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. The proviso to Section 50 C should also be treated as curative in nature and with retrospective effect from 1st April 2003;

++ the matter remanded to the AO. In case he finds that a registered agreement to sell, as claimed by the assessee, was actually executed on 29.6.2005 and the partial sale consideration was received through banking channels, the AO, so far as computation of capital gains is concerned, will adopt stamp duty valuation, as on 29.6.2005, of the property sold as it existed at that point of time. In case the assessee is not content with this value being adopted u/s 50C, he will be at liberty to seek the matter being referred to the DVO for valuation. The subsequent developments in respect of the property sold (e.g. the conversion of use of land) are to be ignored;

++ it is possible that, at first sight, first proviso to Section 50C may seem to work to the disadvantage of the assessee in certain situation in the event of the word ‘may’ being construed as mandatory in application, but then one cannot be oblivious to the fact that this proviso states that "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 ,making it clearly optional to the assessee, and that, in any event, what has been brought by the lawmakers as a measure of relief to the taxpayers cannot be construed as resulting in a higher tax burden on the taxpayers.

(See 2016-TIOL-1787-ITAT-AHM)