By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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23 (2007) 112 TTJ 76 (Jd)
Navneet Kumar Thakkar v. ITO
ITA No. 679 (Jd) of 2006
A.Y. 2003-04. Dated : 8-3-2007
S. 50C of the Income-tax Act, 1961 — S. 50C does not apply to
cases in which the transferred property is not the subject-matter of
registration and the question of valuation for stamp duty purposes has not
arisen.
For the relevant assessment year, the Assessing Officer
observed that the fair market value of the plot of land sold by the assessee
seemed to be much higher than the sale consideration shown in the sale
agreement. He referred the matter to the Asst. Valuation Officer u/s.55A and
made additions for the differential amount. The CIT(A) accepted the sale value
adopted by the Assessing Officer and confirmed the additions.
The Tribunal, applying the decisions in the following cases,
held that unless the property transferred has been registered by sale deed and
for that purpose the value has been assessed and stamp duty has been paid by the
parties, S. 50C cannot come into operation :
(a) CIT v. Amarchand N. Shroff, (1963) 48 ITR 59
(SC)
(b) CIT v. Mother India Refrigeration Industries Pvt.
Ltd., (1985) 48 CTR 176/155 ITR 711 (SC)
The Tribunal noted as under :
(1) A legal fiction has been created in S. 50C only in
respect of the cases where the consideration received by the assessee is less
than the value adopted or assessed by the stamp valuation authority of the
State Government for the purpose of payment of stamp duty ‘in respect of such
transfer’.
(2) It is a trite law that the legal fiction cannot be
extended beyond the purpose for which it is enacted. S. 50C embodies the legal
fiction by which the value assessed by the stamp duty authorities is
considered as the full value of consideration for the property transferred. It
does not apply to cases in which the transferred property has not become the
subject-matter of registration and the question of valuation for stamp duty
purposes has not arisen.
(3) What is relevant for the attractability of S. 50C is
that the property which is under transfer from the assessee to another person,
should have been assessed at a higher value for stamp valuation purpose than
that received or accruing to the assessee.
(4) Unless the property transferred has been registered by
a sale deed and for that purpose the value has been assessed and stamp duty
has been paid by the parties, S. 50C cannot come into operation. In such a
situation, the position existing prior to insertion of S. 50C would apply and
the onus would be upon the Revenue to establish that the sale consideration
declared by the assessee was understated. In such cases the decisions in the
cases of K. P. Verghese v. ITO, (1981) 24 CTR 358 (SC)/131 ITR 597 and
CIT v. Shivakami Co. (P.) Ltd., (1986) 52 CTR 108 (SC)/ 159 ITR 71
would come into operation and govern the determination of the full value of
consideration.
(5) As the Assessing Officer has not embarked upon making
enquiries from the purchaser about the actual sale consideration, and has not
brought on record any other material worth the name to show that the sale
consideration declared by the assessee was understated, the addition was
wrongly made and sustained.
