D.b. Income Tax Appeal v. Shri Sher Singh Sunda, Anand Nagar, Sikar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 328 / 2011COMMISSIONER OF INCOME TAX, JAIPUR-II ,JAIPUR ----Appellant Versus Shri Sher Singh Sunda, Anand Nagar, Sikar. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sameer Jain. For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana. _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Order 24/07/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the tribunal hasdismissed the appeal of the department and the C.O. of theassessee is partly allowed. 2.While admitting the appeal, this court on 13.04.2012 framedthe following substantial question of law:- “Whether the Hon’ble ITAT was right in law indeleting the addition of Rs.65.00 lacs made u/s 50Cafter having held that the transaction was transferu/s 2(47) of I.T. Act read with Section 50(c) andwhere the value of the property was assessed forthe purpose of Stamp Duty payment and thetransaction was covered by explanation 2 to Section50C of the I.T. Act, 1961?” 3.For the sake of convenience, Section 50(C) Explanation 2 which is strongly relied upon by the appellant and Section 2(47) ofthe Income Tax Act is reproduced as under:- “50C. (1) Where the consideration received or accruingas a result of the transfer by an assessee of a capitalasset, being land or building or both, is less than the value adopted or assessed 86[or assessable] by anyauthority of a State Government (hereafter in thissection referred to as the "stamp valuation authority")for the purpose of payment of stamp duty in respect ofsuch transfer, the value so adopted or assessed 86[orassessable] shall, for the purposes of section 48, bedeemed to be the full value of the considerationreceived or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section(1), where— (a) the assessee claims before any Assessing Officerthat the value adopted or assessed 86[or assessable]by the stamp valuation authority under sub-section (1)exceeds the fair market value of the property as onthe date of transfer; (b) the value so adopted or assessed 86[orassessable] by the stamp valuation authority undersub-section (1) has not been disputed in any appeal orrevision or no reference has been made before anyother authority, court or the High Court, the AssessingOfficer may refer the valuation of the capital asset to aValuation Officer and where any such reference ismade, the provisions of sub-sections (2), (3), (4), (5)and (6) of section 16A, clause (i) of sub-section (1)and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 andsection 37 of the Wealth-tax Act, 1957 (27 of 1957),shall, with necessary modi-fications, apply in relationto such reference as they apply in relation to areference made by the Assessing Officer under sub-section (1) of section 16A of that Act. 87 [Explanation 1].—For the purposes of this section,"Valuation Officer" shall have the same meaning as inclause (r) of section 2 of the Wealth-tax Act, 1957 (27of 1957). 88 [Explanation 2.—For the purposes of this section, theexpression "assessable" means the price which thestamp valuation authority would have, notwithstandinganything to the contrary contained in any other law forthe time being in force, adopted or assessed, if it werereferred to such authority for the purposes of thepayment of stamp duty.] [Explanation 1].—For the purposes of this section,"Valuation Officer" shall have the same meaning as inclause (r) of section 2 of the Wealth-tax Act, 1957 (27of 1957). 88 [Explanation 2.—For the purposes of this section, theexpression "assessable" means the price which thestamp valuation authority would have, notwithstandinganything to the contrary contained in any other law forthe time being in force, adopted or assessed, if it werereferred to such authority for the purposes of thepayment of stamp duty.] (3) Subject to the provisions contained in sub-section(2), where the value ascertained under sub-section (2)exceeds the value adopted or assessed 88[orassessable] by the stamp valuation authority referredto in sub-section (1), the value so adopted or assessed88[or assessable] by such authority shall be taken asthe full value of the consideration received or accruingas a result of the transfer.] “Section 2(47)Transfer—U/s 2(47) of Income-tax Act 1961,the term ‘transfer’ has been defined as Transfer in relation toa capital asset includes : (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as stock-in-trade of a business carried on by him, such conversion or treatment; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882; or (vi) any transaction (whether by way of becoming a member of, a acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of, any immovable property. (vii) maturity or redemption of a zero coupon bond. 4.He and contended that the tribunal has seriously committed an error in dismissing the appeal of the department in as much as the grounds raised by the revenue in para 2.1 reads as under:- “2.1 The ground of appeal raised by the Revenue is asunder:- “On the facts and in the circumstances of the case, theLd. CIT(A) has erred in law in holding that theprovisions of Section 50C of the I.T. Act, 1961 are notapplicable in the case of the assessee and therebydeleting the addition of Rs.65.00 lacs made by the AOu/s 50C of the I.T. Act, 1961.” The contentions raised by the assessee are as under: “2.2 The assessee has shown the long term capitalgains of Rs.7,29,025/- on sale of agriculture land atJaipur. The assessee was asked to file the RegisteredSale Deed and the assessee filed the copy of the saleagreement and power of attorney issued in favour ofassessee by Smt. Pushpa Devi and Smt. Gulab Devi.The power of attorney was registered in the office ofSub-Registrar, Sanganer-1, Jaipur. As per registeredpower of attorney, the value of sold property wasdetermined at Rs.1.35 Crores u/s 54 of the StampDuty Act. The assessee was asked to explain as to whythe sale consideration of the property be not adoptedat Rs.1.35 crores as provided u/s 50C of the Act. Inresponse to show-cause notice issued by the AO, theassessee filed the reply and the same is reproduced bythe AO at page 2 of the assessment order. Thecontentions of the assessee are summarized asunder:- 1.The power of attorney was executed in favour ofthe assessee by Smt. Pushpa Kedia and the assesseemade payment of Rs.62,70,975/- to Smt. PushpaKedia on execution of power of attorney in his favour.The power of attorney was duly registered before theSub-Registrar and the Sub-Registrar has assessed thevalue for registration of power of attorney at Rs.1.35crores. 1.The power of attorney was executed in favour ofthe assessee by Smt. Pushpa Kedia and the assesseemade payment of Rs.62,70,975/- to Smt. PushpaKedia on execution of power of attorney in his favour.The power of attorney was duly registered before theSub-Registrar and the Sub-Registrar has assessed thevalue for registration of power of attorney at Rs.1.35crores. 2.The assessee executed an agreement in favour ofM/s. Rising Build Estate Ltd. and transferred all theright acquired under the power of attorney onconsideration of Rs.70.00 lacs. This Registration waspresented for registration before the Stamp Dutyauthority. 3.The assessee has not transferred any immovableproperty but has transferred the right of purchase ofimmovable property. The assessee neither received thepossession of property nor has any control beenacquired on the property. 4.Section 50C is applicable in respect of transfer ofcapital asset being land or building or both while in theinstant case the assessee has neither transferred anyland nor transferred any building. 5.The assessee has not presented the agreementexecuted in favour of M/s. Rising Build Estate Ltd. forregistration before the Stamp Duty Authority to assessor adopt any value of the transaction. Hence, Section50C is not applicable. 6.Section 50C is a fiction made in the Act foradoption of value in certain specific cases. The fictioncannot be read in wider sense. No value is adopted or accepted by Stamp Duty Authority. Therefore, the provisions of Section 50C isnot applicable. It was further argued that capital gainis not chargeable in in case the asset which istransferred has no cost at all.” 5.He has taken to us the observations made by the Tribunal in para 2.6 2.8 and 2.9 which are as under:- 5.The assessee has not presented the agreementexecuted in favour of M/s. Rising Build Estate Ltd. forregistration before the Stamp Duty Authority to assessor adopt any value of the transaction. Hence, Section50C is not applicable. 6.Section 50C is a fiction made in the Act foradoption of value in certain specific cases. The fictioncannot be read in wider sense. No value is adopted or accepted by Stamp Duty Authority. Therefore, the provisions of Section 50C isnot applicable. It was further argued that capital gainis not chargeable in in case the asset which istransferred has no cost at all.” 5.He has taken to us the observations made by the Tribunal in para 2.6 2.8 and 2.9 which are as under:- “2.6We have heard both the parties. The copy ofgeneral power of attorney is available at pages 12 to 14of paper book filed by the ld. AR. As per this generalpower of attorney, the assessee was given authority toget different actions executed on behalf of the owner.The genera power of attorney was authorized to applyfor approval u/s 90B and was also given authority to lookafter the land and to get NOC from JDA and to get thepatta issued from JDA. It is true that general power wasexecuted on stamp paper of Rs.500/-. The Sub-Registrarregistered this power of attorney at Rs.1,07,800/-against stamp duty of Rs.500/-. This general power ofattorney has been cancelled vide cancellation deed dated03.01.2007. The copy of this cancellation is available atpages 15 to 20 of the paper book. In the cancellationdeed, it is not mentioned that general power of attorneyhas entered into an agreement for sale of land with M/s.Rising Build Estate Ltd. The copy of sale agreement isavailable at pages 1 to 4 of the paper book. Theagreement has been made on 13.11.2006. In thisagreement, it is mentioned that the assessee has sold theland which he has purchased. In this agreement, it isstated that the assessee has purchased the land throughagreement and has also obtained the possession. Theagreement with M/s. Rising Build Estate Ltd. by theassessee is not in the capacity of general power ofattorney holder but has entered into an agreement as aperson who has purchased the land through agreementfor purchase of land. From these, it is clear that theassessee has transferred the rights in land and buildingand we are not inclined to accept that the assessee hasnot transferred the immovable property. Section 50C hasbeen amended by the Finance Act, 2009 and the word‘assessable’ has been included w.e.f. 1-10-2009. Thememo explaining provision of Finance (No.2) Bill, 2009(refer to 314 ITR 214 St.) states that the word‘assessable’ has been added so that the transactionswhich are executed through agreement to sell power ofattorney are covered u/s 50C of the Act. It will be usefulto reproduce the relevant portion from the memoexplaining the provisions of Finance (No.2) Bill, 2009. “The existing provisions of Section 50C provide thtwhere the consideration received or accruing as a result of the transfer of a capital asset, being land or building orboth, is less than the value adopted or assessed by anauthority of a State Government (stamp valuationauthority) for the purpose of payment of stamp duty inrespect of such transfer, the value so adopted or assessedshall be deemed to be the full value of the considerationreceived or accruing as a result of such transfer forcomputing capital gain. However, the present scope ofthe provisions does not include transactions which are notregistered with stamp duty authority, and executedthrough agreement to sell or power of attorney. “The existing provisions of Section 50C provide thtwhere the consideration received or accruing as a result of the transfer of a capital asset, being land or building orboth, is less than the value adopted or assessed by anauthority of a State Government (stamp valuationauthority) for the purpose of payment of stamp duty inrespect of such transfer, the value so adopted or assessedshall be deemed to be the full value of the considerationreceived or accruing as a result of such transfer forcomputing capital gain. However, the present scope ofthe provisions does not include transactions which are notregistered with stamp duty authority, and executedthrough agreement to sell or power of attorney. With a view to preventing the leakage of revenue,it is proposed to amended the Section 50C so as toprovide that where the consideration received or accruingas a result of transfer of a capital asset, being land orbuilding or boht is less than the value adopted orassessed or assessable by an authority of a StateGovernment for the purpose of payment of stamp duty inrespect of such transfer, the value so adopted or assessedor assessable shall be deemed to be the full value of theconsideration received or accruing as a result of suchtransfer for computing capital gain. Further, it is proposed to insert a new Explanationso as to clarify the meaning of the term “assessable”. This amendment will take effect from 1[st] October,2009 and shall accordingly apply in relation totransactions undertaken on or after such date;” 2.8The Jaipur Bench had occasion to consider theapplicability of Section 50C in the case of transfer of landwhich has not registered. The Tribunal vide order dated08.04.2011 in ITA No.1356/JP/2010 has held that Section50C will not be applicable when transaction has not beenregistered with Stamp Duty Authority. It will be useful toreproduce para 2.4 of the Tribunal in the case of ITO Vs.Shri Shailendra Soni. “2.4 We have heard both the parties. During the courseof hearing before us, the Ld. AR stated that the issueunder reference is covered by the order or the Tribunal inITA No.42/JP/2010 dated 08.06.2010. The Ld. AR filedthe copy of the order. It will be useful to reproduce para 5of the order dated 8[th] June, 2010 in the case of ShriDinesh Kumar Khatoria. “5.We have heard both the parties. Section 50C isapplicable when consideration received or accruing is aresult of transfer of capital asset being land or building orboth. The word capital asset is defined in Section 2(14) ofthe I.T. Act and according to which capital assets meansproperty of any kind held by an assessee. The assesseeentered into purchase agreement for purchase ofproperty. The assessee sold such agreements. Thus whatthe assessee has transferred is his right to purchase plots “5.We have heard both the parties. Section 50C isapplicable when consideration received or accruing is aresult of transfer of capital asset being land or building orboth. The word capital asset is defined in Section 2(14) ofthe I.T. Act and according to which capital assets meansproperty of any kind held by an assessee. The assesseeentered into purchase agreement for purchase ofproperty. The assessee sold such agreements. Thus whatthe assessee has transferred is his right to purchase plots as per agreement. Section 50C is applicable whenconsideration received or accruing is as per result oftransfer of capital asset being land or building or both.Section 50C is a deeming provision which incorporates alegal fiction to adopt the stamp duty value as fullconsideration for transfer of capital asset being andbuilding. The legal fiction cannot extend beyond thepurpose for which it is enacted. Hence the legal fictioncreated in Section 50C cannot be applied in respect oftransfer of capital asset other than land or buildingincluding the rights in land and building just like tenancyright. In the instant case, the assessee has not receivedconsideration on account of transfer of land and buildingbut has received consideration in respect of tranfer ofpurchase agreements. The Jaipur Bench in the case ofVijay Luxmi Dhadia, 20 DTR 365 held that Section 50Cwill not apply if the transfer document is not stamped.The plots are still to be registered with Stamp Valuationauthorities. The Ld. CIT(A) has clearly observed that theword ‘assessable’ has been inserted in Section 50C of theIncome Tax Act by the Finance (No.2) Act, 2009 w.e.f.01.10.2009. The consideration as adopted by the stampvaluation authority can be taken as full consideration ifthe value adopted by the stamp valuation authority isassessable w.e.f. 1.10.2009. The assessment year underreference is 2006-07 and therefore, the amendedprovisions of Section 50C is not applicable. In the memoexplaining the provisions of Finance (No.2) Act, 2009, itwas mentioned as under for making the amendment inSection 50C of the Income Tax Act. “The existing provisions of Section 50C provide thatwhere the consideration received or accruing as a resultof the transfer of a capital asset, being land or building orboth, is less than the value adopted or assessed by anauthority of a State Government (Stamp valuationauthority) for the purpose of payment of stamp duty inrespect of such transfer, the value so adopted or assessedshall be deemed to be the full value of the considerationreceived or accruing as a result of such transfer forcomputing capital gain. However the present scope of theprovisions does not include transactions which are notregistered with stamp duty authority, and executedthrough agreement to sell or power of attorney. With a view to preventing the leakage of revenue, it isproposed to amend the Section 50C so as to provide thatwhere the consideration received or accruing as a resultof transfer of a capital asset, being land or building orboth is less than the value adopted or assessed orassessable by an authority of a State Government for thepurpose of payment of stamp duty in respect of suchtransfer, the value so adopted or assessed or assessableshall be deemed to be the full value of the considerationreceived or accruing as a result of such transfer for computing capital gain. Further, it is proposed to insert a new Explanationso as to clarify the meaning of the term “assessable”. This amendment will take effect from 1[st] October,2009 as shall accordingly apply in relation to transactionsundertaken on or after such date.” computing capital gain. Further, it is proposed to insert a new Explanationso as to clarify the meaning of the term “assessable”. This amendment will take effect from 1[st] October,2009 as shall accordingly apply in relation to transactionsundertaken on or after such date.” Hence in the instant case, the AO was not justified inapplying the provisions of Section 50C of the I.T. Act forincreasing the short terms capital gain. The Ld. CIT(A)was justified in deleting the increase in the value of shortterm capital gain. It is not the case of the Revenue thatthe assessee has received more consideration as shownin the agreement. In case there was any evidence toshow that the consideration received by the assessee wasmore than the consideration mentioned in the agreementthen the Revenue could have increased the short termcapital gain. On the basis of Section 50C of the Act, theAO was not justified in enhancing the short term capitalgain. We therefore, hold that the Ld. CIT(A) was justifiedin deleting the enhancement in the quantum of shortterm capital gain and accordingly the appeal of theRevenue is dismissed.” 2.9The assessee has raised the cross objection. In theC.O., it is mentioned that the ld. CIT(A) is not justified inholding that transaction is regarded as transfer attractingSection 50C of the Act. We had already discussed thisissue. We had already held that it is case of transfer ofland. Section 50C of the Act is not applicable because thesubstituted word “assessable” is applicable in respect oftransfer of transaction after 1-10-2009. Thus the C.O. ofthe assessee is partly allowed.” 6.He contended that the Tribunal has committed serious errorin interpreting Section 50(C) and has travelled beyond theobservations which are made by the CIT(A) in para 2.3. Same reads thus:- “2.3 I have carefully considered the facts of the caseand submissions of Ld. AR. However, on perusal of therelevant material on record, In find that thecontentions/ submissions/ arguments of the Ld. AR,raised in support of this ground of appeal, are not fullyacceptable. In this regard, the following observationsare made. (i)As far as the claim of Ld. AR that the purchaseand sale of agricultural land, in question, by theappellant is only in the nature of a finance 6.He contended that the Tribunal has committed serious errorin interpreting Section 50(C) and has travelled beyond theobservations which are made by the CIT(A) in para 2.3. Same reads thus:- “2.3 I have carefully considered the facts of the caseand submissions of Ld. AR. However, on perusal of therelevant material on record, In find that thecontentions/ submissions/ arguments of the Ld. AR,raised in support of this ground of appeal, are not fullyacceptable. In this regard, the following observationsare made. (i)As far as the claim of Ld. AR that the purchaseand sale of agricultural land, in question, by theappellant is only in the nature of a finance arrangement, not involving real purchase and sale, isconcerned, I find that the said claim of Ld. AR iscontrary to the facts on record. In this regard, it isseen that the appellant purchased agricultural land,measuring 1.80 Hectares (located at village Murlipura,Tehsil Sanganer), Jaipur, from Smt. Pushpa Kedia andSmt. Gulab Devi (sellers), for 62,70,975/, and alsopassed on the sale consideration to the said sellers, aswell as, obtained possession of that property. The factthat the appellant had actually purchased the aforesaidproperty from Smt. Pushpa Devi Kedia and Smt. GulabDevi is evident from the contents of para 2 on page 2of the sale agreement dated 13.11.2006, entered intobetween the appellant and M/s Rising Build Estate Pvt.Ltd., Jaipur, wherein the appellant has confirmed tohave purchased, and also to have taken possession, ofthe aforesaid property from Smt. Pushpa Kedia andSmt. Gulab Devi. Therefore, the said transaction hasto be treated as “transfer” in terms of the provisions ofS.2(47) of the I.T. Act. Thus, the aforesaid transactionwas found to be in the nature of purchase of land and,hence, the contention of Ld. AR that the saidtransaction was only a part of a financial arrangement,and not actual purchase, is rejected. However, it isobserved that at the time of the registration of theaforesaid transaction of agricultural land (purchase bythe appellant/sale by Smt. Pushpa Kedia and Smt.Gulab Devi), the value the property was taken by theSub Registrar at Rs. 1,35,00,000/- for stamp dutypurposes. Therefore, as the appellant was a “buyer” inthat transaction, the provisions of S.50C of the I.T. Actwere not applicable in his case. However, as theprovisions of S.50C of the Act are applicable in thecase of the “seller”, the applicability of S.50C of theAct was required to be considered in the hands of “thesellers”, i.e. Smt. Pushpa Devi Kedia and Smt. GulabDevi. (ii) Further, it is observed that the appellant has soldthe aforementioned agricultural land, to M/s RisingBuild Estates Pvt. Ltd., Jaipur for Rs.70,00,000/-, videagreement for sale deed dated 13.11.2006. Onperusal of the said agreement, it is noticed that theappellant had received the entire sale considerationand had also handed over the possession of the saidproperty to the buyer on 13.11.2006. Therefore, thesaid transaction is also to be treated as “transfer” interms of the provision of S.2(47) of the I.T. Act.Hence, the contention of Ld. AR that the said (ii) Further, it is observed that the appellant has soldthe aforementioned agricultural land, to M/s RisingBuild Estates Pvt. Ltd., Jaipur for Rs.70,00,000/-, videagreement for sale deed dated 13.11.2006. Onperusal of the said agreement, it is noticed that theappellant had received the entire sale considerationand had also handed over the possession of the saidproperty to the buyer on 13.11.2006. Therefore, thesaid transaction is also to be treated as “transfer” interms of the provision of S.2(47) of the I.T. Act.Hence, the contention of Ld. AR that the said transaction was merely a part of a financialarrangement, and not actual sale, is rejected.However, it is noted that there is no disputeregarding the fact that the said sale agreement dated13.11.2006 was not registered and, therefore, theconcerned Registering Authority had not determinedthe value of the sold property for the Stamp Dutypurposes, with reference to the aforesaid saleagreement dated 13.11.2006 (wherein the appellantis a “seller”). Hence, there is substance in theargument of Ld. AR that the provisions of S.50C of theAct were not applicable in such situation, becausewhere the Registering Authority had not determinedthe value of the sold property, the actual sale amount(as per the sale agreement) cannot be substituted bysome other amount. It is observed that the saidcontention of ld.AR is supported by the decisions ofHon’ble ITAT Jaipur Bench in the case of ITO v/s Sh.Anurag Mishra, ITA No.878/JP/2007, dated20.06.2008 and of Hon’ble ITAT Jodhpur Bench, in thecase of Navneet Kumar Thakkar v/s ITO, 112 TTJ 76.Therefore, it is to be held that Ld. AO was not justifiedin applying the provisions of S.50 of the I.T. Act inrespect of the aforementioned sale of property by theappellant (made vide sale agreement dated13.11.2006) to M/s Real Build Estates Pvt. Ltd., Jaipurand thereby in substituting the sale value shown atRs. 70,00,000/- in the sale agreement dated13.11.2006 by Rs. 1,35,00,000/-.” 7.He contended that the Tribunal has committed serious errorin holding that the transaction under Section 50(C) was assessablewhich has now been incorporated in the amendment Act of 2009w.e.f. 1.10.2009 and he has wrongly invoked the same and thebenefits are wrongly granted in favour of the assessee. 8.Counsel for the respondent contended that the argument putforward by the department is misconceived, inasmuch as thetransaction which is taken place was through power of attorneyholder. The property was never transferred. Even before initiatingproceeding under Section 50(C), the assessee has already paidthe short term capital gain to the tune of Rs.10 lacs and therefore the assessment which was made on complete consideration iswithout jurisdiction and therefore while interpreting theassessment, CIT(A) has rightly observed in para 2.3 which wasreproduced hereinabove and correctly interpreted the provisionswhile relying on the decision of the Jaipur Bench in the case of ITOVs. shri Anurag Mishra (ITA No.878/JP/2007) dated 20[th] June,2008 and has rightly held the value of the property determined as 1.35 crores. 9.He has further contended that the Tribunal while consideringthe case of assessee in cross objection has taken intoconsideration the provisions of Section 50(C) and in view of thedecision rendered by the Madras High Court reported in (2013) 32Taxmann.com 274(Madras) has held in para 7,8,9 and 10 which reads as under:- “7.Learned counsel for the assessee placed a circularin Circular No.5/2010/(F.No.142/13/2010-SO(TPL))dated 03.06.2010 issued by the Board and submittedthat as per the circular, it is made clear that theamendment made by the Finance (No.2) Act, 2009 isonly prospective in nature and cannot be appliedretrospectively. 1.35 crores. 9.He has further contended that the Tribunal while consideringthe case of assessee in cross objection has taken intoconsideration the provisions of Section 50(C) and in view of thedecision rendered by the Madras High Court reported in (2013) 32Taxmann.com 274(Madras) has held in para 7,8,9 and 10 which reads as under:- “7.Learned counsel for the assessee placed a circularin Circular No.5/2010/(F.No.142/13/2010-SO(TPL))dated 03.06.2010 issued by the Board and submittedthat as per the circular, it is made clear that theamendment made by the Finance (No.2) Act, 2009 isonly prospective in nature and cannot be appliedretrospectively. 8.We have perused the above circular. It is statedtherein that the scope of the provisions does notinclude transaction which are not registered withstamp duty valuation authority and executed throughagreement to sell or power of attorney. Consequently,it is made clear therein that the amendments havebeen made applicable with effect from 01.10.2009 andtherefore, they will apply only in relation to transactionundertaken on or after such date. The relevant portionof the circular is extracted hereunder: "23.4. Applicability:- These amendments have beenmade applicable with effect from 1st October, 2009 and will accordingly, apply in relation to transactionsundertaken on or after such date." 9.Learned counsel for the Revenue is not disputingabout the existence of such circular issued by theBoard. If the Board has issued a circular clarifying theapplicability of Section 50C in pursuance of theamendment made by Amendment Act 2 of 2009, wefail to understand as to how the Revenue can canvassthe same issue in this case which in effect is againstthe circular issued by the Board. Certainly, theRevenue is bound by the circular issued by the Board.At this juncture, it is pertinent to note that in adecision made in the case of State of Tamil Nadu andanother Vs. India Cements Ltd. and another reportedin (2011) 40 VST 225 (SC), the Honourable SupremeCourt has held that the circulars issued by theRevenue are binding on the Department andtherefore, they cannot repudiate that they areinconsistent with the statutory provisions. Relevantparagraphs 21 and 22 are extracted hereunder: "21.It is manifest from the highlighted portion of thecircular that as per the clarification issued by theCommissioner of Commercial Taxes, in exercise of thepower conferred on him under Section 28A of theTNGST Act, the benefit of the sales tax deferralscheme would be available to a dealer from the date ofreaching of BPV or BSV, whichever is earlier, as ispleaded on behalf of the first respondent. It is trite lawthat circulars issued by the Revenue are binding on thedepartmental authorities and they cannot be permittedto repudiate the same on the plea that it isinconsistent with the statutory provisions or itmitigates the rigour of the law. 22.In Paper Products Ltd. Vs. Commissioner of CentralExcise ((2001) 247 ITR 128 SC: (1999) 7 SCC 84),while interpreting Section 37B of the Central ExciseAct, 1944, which is in pari materia with Section 28A ofthe TNGST Act, this Court had held that the circularsissued by the Central Board of Excise and Customs arebinding on the Department and the Department isprecluded from challenging the correctness of the saidcirculars, even on the ground of the same beinginconsistent with the statutory provision. It was furtherheld that the Department is precluded from the right to file an appeal against the correctness of the bindingnature of the circulars and the Department's actionhas to be consistent with the circular which is in forceat the relevant point of time." 22.In Paper Products Ltd. Vs. Commissioner of CentralExcise ((2001) 247 ITR 128 SC: (1999) 7 SCC 84),while interpreting Section 37B of the Central ExciseAct, 1944, which is in pari materia with Section 28A ofthe TNGST Act, this Court had held that the circularsissued by the Central Board of Excise and Customs arebinding on the Department and the Department isprecluded from challenging the correctness of the saidcirculars, even on the ground of the same beinginconsistent with the statutory provision. It was furtherheld that the Department is precluded from the right to file an appeal against the correctness of the bindingnature of the circulars and the Department's actionhas to be consistent with the circular which is in forceat the relevant point of time." 10.Before proceeding with the matter, it will not be out of placeto mention here that those transactions which are shown astransaction under Section 50© [Explanation-2], even if taken intoconsideration, the transaction which take place as short termcapital gain in total consideration of the payment after saleagreement was determined as Rs.1.35 crores and it cannot beassessed. Therefore, both the authorities have committed no errorin reaching the conclusion. 11.Neither the stamp authority has assessed the completecharges because transaction has not taken place, and in ourconsidered opinion, the valuation which was determined by the AOis nothing but harassment to the honest tax payers of atransaction which has been rightly reversed by the CIT(A) andconfirmed by the Tribunal. 12.In this view of the matter, both the CIT(A) and Tribunal havenot committed any error. The issue is answered in favour of theassessee and against the department. The appeal stands dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Mohit GroverSr. No. 64.