Section 50C – Enhancement in circle rates between the date of agreement to sell and date of sale deed not relevant.
Facts:
The assessee sold a plot of land vide agreement to sell, dated 27th May 2004, for consideration of Rs. 2,62,08,000/-. The agreement to sell was duly registered on the same date. On the said date, the circle rate was Rs.13,000/- per sq mt. However, on the date of execution of sale-deed, i.e. 16th September 2004, the circle-rate enhanced to Rs. 20,000/- per sq mt resulting into stamp duty value of Rs. 4,03,20,000/-.
The assessee computed the capital gains on the basis of the circle rate on the date of agreement to sell and not the circle rate on the date of execution of sale deed.
However, the A.O. did not accept the above computation and he computed capital gains on the basis of circle rate prevailing on the date of execution of sales deed, i.e Rs. 20,000/- and enhanced the capital gains by the difference of Rs.1,41,12,000/-.
On further appeal, the CIT(A) upheld the A.O.’s view on the ground that the “agreement to sell” may bind the parties inter-se but does not override the statutory provision of section 50C as are applicable on the “date of transfer”; which in the instant case had been 16th September 2004.
Held:
It was held that the enhancement in the circle rate from Rs.13,000/- to Rs.20,000/- per sq mt was beyond the control of the assessee (seller). It is also not the case of the revenue, that the buyer has given more than the consideration that has been accepted by the parties when they executed the agreement to sale.
Further, reliance was placed on the Supreme Court’s decision in Sanjeev Lal Etc. vs. CIT (2014) 269 CTR 1 wherein it was held that the question whether the entire property can be said to have been sold at the time when an agreement to sell is entered into has to be answered in the negative in normal circumstances. However, looking at the provisions of section 2(47) which defines the word ‘transfer’ in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred.
Having regard to the above factual and judicial position, the additions made by A.O. were deleted.
