Section 2(47) r/w/s 50C – If there is a gap between the date of execution of sale agreement and the sale deed and if the guidance value changes, the guidance value as on the date of agreement has to be considered as the full consideration

FACTS
The assessee was an HUF that had acquired a property by participating in a BDA auction. The agreement for acquisition of the property took place on 24th July, 1984 and the assessee had acquired possession on 29th August, 1984.

One R.K. Sipani (RKS) acquired the aforesaid property from the assessee through M/s K. Prakashchand Bethala Properties Pvt. Ltd. (KPCBBL) through an oral agreement in the month of September, 1989 for the consideration of Rs. 9.80 lakhs. The assessee gave the possession of the property to RKS on 24th October, 1989. Thereafter, on 8th March, 1993, an unregistered sale agreement was made between the assessee and RKS to bring clarity on the aforementioned transaction. Then, on 9th March, 2007, a sale deed was executed in which the aforesaid site was sold to M/s Suraj Properties (a proprietary concern of RKS’s wife) for the consideration of Rs. 9.80 lakhs.

The A.O. noticed that the guidance value of the property as per the executed sale deed on 9th March, 2007 was Rs. 2.77 crores and the sale consideration was less than the guidance value; thus, the provisions of section 50C were attracted. On appeal, the CIT(A) also confirmed the action of the A.O. Aggrieved by the order, the assessee filed an appeal before the Tribunal.

HELD
The question before the Tribunal was what could be the full value of such consideration, i.e., whether the value on which the stamp duty was paid at the time of the sale deed or the value declared in the sale agreement.

The Tribunal observed that the assessee had entered into the sale agreement on 8th March, 1993 and a major portion of the agreed consideration had been received by the assessee through account payee cheque and possession of the property was also handed over to RKS on 24th October, 1989. There is no dispute regarding these facts. The only action pending was actual registration of the sale deed.

The Tribunal observed that section 50C(1) provides that if there is a gap between the date of execution of the sale agreement and the sale deed and if the guidance value changes, the guidance value as on the date of the agreement has to be considered as the full consideration of the capital asset. In the present case,
1) the enforceable agreement was entered into on 8th March, 1993 by payment of a major portion of the sale consideration,
2) the possession of the property had already been handed over on 24th October, 1989,
3) only the formal sale deed was executed on 9th March, 2007.

Therefore, the Tribunal held that the transfer had taken place vide the sale agreement dated 8th March, 1993 and full value of consideration for the purpose of computing long-term capital gain in the hands of the assessee has to be adopted only on the basis of the guidance value of the property as on the date of the sale agreement, i.e., 8th March, 1993, and not on the date of the sale deed of 9th March, 2007. Accordingly, there was no applicability of section 50C in the year 2007-08.