Capital gain: Section 50C: A. Y. 2005-06: Amendment by Finance (No. 2) Act, 2009, w.e.f. 01/10/2009 is prospective: Amended provision not applicable to transactions completed prior to 01/10/2009:

In the A. Y. 2005-06, the assessee had transferred a property to a third party under an agreement for sale. Physical possession was given to the buyer but the agreement was not registered. The assessee computed the capital gain without applying the provisions of section 50C. The Assessing Officer applied section 50C and adopted the guideline value given by the stamp valuation authority as the sale consideration instead of the consideration admitted by the assessee. The Commissioner (Appeals) held that section 50C can be invoked only when the property was transferred by way of registered sale deed and assessed for stamp valuation purposes. The Tribunal held that section 50C could not be invoked as the property was not transferred by way of registered sale deed.

On appeal by the Revenue, the Madras High Court upheld the decision of the Tribunal and held as under: 

“i) The insertion of the words “or assessable” in section 50C of the Income-tax Act, 1961, w.e.f. 1st October, 2009, is neither a clarification nor an explanation to the existing provision and it is only an inclusion of new class of transactions, namely, the transfer of properties without or before registration.

ii) Before the amendment, only transfer of properties where the value was adopted or assessed by the stamp valuation authority were subjected to section 50C application. However, after introduction of the words ”or assessable” such transfers where the value is assessable by the valuation authority are also brought into the ambit of section 50C. Thus such introduction of a new set of class of transfer would certainly have prospective application only. The amendments have been made applicable w.e.f. 1st October, 2009 and will apply only in relation to transactions undertaken on or after such date.

iii) Since the transfer in the assessee’s case was admittedly made prior to the amendment, section 50C, as amended w.e.f. 1st October, 2009, was not applicable.”