By Jagdish D. Shah | Jagdish T. Punjabi | Chartered Accountants
13. Maria Fernandes Cheryl vs. ITO (Mumbai) Pramod Kumar (V.P.) and Saktijit Dey (J.M.) ITA No. 4850/Mum/2019 A.Y.: 2011-12 Date of order: 15th January, 2021 Counsel for Assessee / Revenue: None / Vijaykumar G. Subramanyam
Third proviso to section 50C(1) – Insertion of the proviso and subsequent enhancement in its limit to 10% is curative in nature to take care of unintended consequences of the scheme of section 50C, hence relate back to the date when the statutory provision of section 50C was enacted, i.e., 1st April, 2003
FACTS
During the year under appeal, the assesse had sold her flat for a consideration of Rs. 75 lakhs. The valuation of the property for the purpose of charging stamp duty was Rs. 79.91 lakhs. She computed capital gains based on the sale consideration of Rs. 75 lakhs. But according to the A.O., the assessee had to adopt the Stamp Duty Valuation (SDV) which was Rs. 79.91 lakhs for the purpose of computing the capital gains. The CIT(A), on appeal, confirmed the A.O.’s order.
On appeal by the assessee, the Tribunal noted that the variation in the sale consideration as disclosed by the assessee vis-à-vis the valuation adopted by the SDV authority was only 6.55%. The Tribunal then queried the Departmental Representative (DR) as to why the assessee not be allowed the benefit of the third proviso to section 50C(1) as the variation was much less than the prescribed permissible variation of up to 10%.
In reply, the DR contended that the said provision is applicable by virtue of the Finance Act, 2018 with effect from 1st April, 2019. And for the permissible variation of 10%, as against variation of 5% as per the originally enacted third proviso to section 50C, it was contended that the enhancement is effective only from 1st April, 2021. Reference was also made to the Explanatory Notes to the Finance Act, 2020 with regard to increase in the safe harbour limit of 5% under sections 43CA, 50C and 56 to 10%. According to the DR, the insertion of the third proviso to section 50C could not be treated as retrospective in nature.
In conclusion, the DR also submitted that in case the Tribunal was in favour of granting relief to the assessee, then the relief may be provided as a special case and it may be clarified that this decision should not be considered as a precedent.
HELD
According to the Tribunal if the rationale behind the insertion of the third proviso to section 50C(1) was to provide a remedy for unintended consequences of the main provision, then the insertion of the third proviso should be considered as effective from the same date on which the main provision, i.e., section 50C, was brought into effect.
The Tribunal noted that the CBDT itself, in Circular No. 8 of 2018, has accepted that there could be various bona fide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the assessee vis-à-vis the SDV. Further, it also noted that the Tribunals as well as the High Courts in the following cases have held that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically:
• Agra Bench of the Tribunal in the case of Rajeev Kumar Agarwal vs. ACIT (45 taxmann.com 555);
• Delhi High Court in CIT vs. Ansal Landmark Township Pvt. Ltd. (61 taxmann.com 45);
• Ahmedabad Tribunal in the case of Dharmashibhai Sonani vs. ACIT (161 ITD 627); and
• Madras High Court in CIT vs. Vummudi Amarendran (429 ITR 97).
According to the Tribunal, the insertion of the third proviso to section 50C(1) was in the nature of a remedial measure to address a bona fide situation, where there was little justification for invoking an anti-avoidance provision – a curative amendment to take care of unintended consequences of the scheme of section 50C.
As for the enhancement of the tolerance band to 10% by the Finance Act, 2020, the Tribunal noted that the CBDT Circular itself acknowledges that it was done in response to the representations of the stakeholders for enhancement in the tolerance band. According to the Tribunal, once the Government acknowledged this genuine hardship of the taxpayer and addressed the issue by a suitable amendment in law, there was no reason to justify any particular time frame for implementing this enhancement of the tolerance band or safe harbour provision.
Therefore, the Tribunal held that the insertion of the third proviso to section 50C and the enhancement of the tolerance band to 10% were curative in nature and, therefore, the same relate back to the date when the related statutory provision of section 50C, i.e., 1st April, 2003, was enacted.
The Tribunal did not agree with the DR’s submission to mention in the order that ‘relief is being provided as a special case and this decision may not be considered as a precedent’. According to the Tribunal, ‘Nothing can be farther from a judicious approach to the process of dispensation of justice, and such an approach, as is prayed for, is an antithesis of the principle of “equality before the law,” which is one of our most cherished constitutional values. Our judicial functioning has to be even-handed, transparent, and predictable, and what we decide for one litigant must hold good for all other similarly placed litigants as well. We, therefore, decline to entertain this plea…’
