Capital gains – Sections 45 and 50C – Computation – Law applicable – Amendment of section 50C w.e.f. 1st April, 2017 – Amendment retrospective

26. CIT vs. Vummudi Amarendran [2020]
429 ITR 97 (Mad.) Date
of order: 28^th September, 2020 A.Y.:
2014-15

Capital
gains – Sections 45 and 50C – Computation – Law applicable – Amendment of
section 50C w.e.f. 1^st April, 2017 – Amendment retrospective

The
assessee owned 44,462 sq. ft. of land and entered into an agreement for sale on
4^th August, 2012 to sell the land for a total sale consideration of
Rs. 19 crores. He received a sum of Rs. 6 crores as advance consideration by
cheque payment from the purchaser. The sale deed was registered on 2^nd
May, 2013. The A.O. found that on the date of execution and registration of the
sale deed, i.e., on 2^nd May, 2013, the guideline value of the
property as fixed by the State Government was Rs. 27 crores. Applying the
provisions of section 50C, the A.O. adopted the full value of consideration at
Rs. 27 crores and recomputed the capital gains and raised a tax demand.

The case
of the assessee was that the guideline value on the date of the agreement i.e.,
4^th August, 2012 should be taken as per proviso
to section 50C(1). The Commissioner (Appeals) and the Tribunal accepted the
assessee’s claim.

In appeal
by the Revenue, the following questions of law were raised:

‘(1)
Whether on the facts and in the circumstances of the case, the Tribunal was
right in holding that the amendment to section 50C which was introduced with
effect from A.Y. 2017-18 prospectively was applicable retrospectively from the
A.Y. 2014-15 when the language used in the proviso
does not indicate that it was inserted as a clarification?

(2) Is not
the reasoning and finding of the Tribunal bad by holding that the prospective
amendment to provisions of section 50C for the A.Y. 2017-18 are applicable
retrospectively to A.Y. 2014-15 without appreciating the fact that unless
explicitly stated a piece of legislation is presumed not to be intended to have
retrospective operation based on the principle lex
prospicit non respicit, meaning that the law looks
forward and not backwards?’

The Madras
High Court upheld the decision of the Tribunal and held as under:

‘i) Once a
statutory amendment is made to remove an undue hardship to the assessee or to
remove an apparent incongruity, such an amendment has to be treated as
effective from the date on which the law, containing such an undue hardship or
incongruity, was introduced.

ii) The proviso to section 50C(1) deals with
cases where the date of the agreement, fixing the amount of consideration, and
the date of registration for the transfer of the capital assets are not the
same and 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. The amendment by
insertion of the proviso seeks to
relieve the assessee from undue hardship.

iii) The Commissioner
(Appeals) and the Tribunal were justified in setting aside the order of the
A.O.’