Pr. Commissioner Of Income Tax, Alwar v. By Way Of This Appeal, The Appellant Has Assailed Thejudgment And Order Of The Tribunal Whereby Tribunal Has Partlyallowed The Appeal Filed By The Assessee

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 342 / 2017 Pr. Commissioner of Income Tax, Alwar. ----Appellant Versus Smt. Savitra Singh, W/o Rao Sajjan Singh, C/o Rao Education Academy, Village- Kothi Narayanpur, Rajgarh, Alwar. ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 27/02/2018 1.By way of this appeal, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has partlyallowed the appeal filed by the assessee. 2.Counsel for the appellant has framed following substantialquestions of law:- “(1) Whether under the facts andcircumstances of the case the AO was justifiedin computing long term capital gain on theadmitted transfer of the capital asset by giftdeed dated 03.04.2008 by considering thesale consideration at Rs.92,80,860/- on thebasis of the adjudication by Collector (Stamps)Alwar by order dated 15.02.2013 and theorder dated 15.02.2013 has attained finalityby which the assessee has admitedlydeposited the stamp duty of Rs.6,21,846/-? (2) Whether under the facts andcircumstances of the case the Tribunal hascommitted an error of law in deleting theadditions made on account of long term capitalgain on admitted fact that assessee has paidstamp duty of Rs.6,21,846/- after adjudication by Collector (Stamps) Alwar and thereforewould expose the assessee to pay long termcapital gain u/s.50C read with Section 2(47) ofthe I.T. Act? (3) Whether on the facts and circumstances ofthe case the ITAT was justified in holding thatthe provisions of section 50C are not attractedin the case and deleted the addition on thelong term capital gain of Rs.91,71,313/- madeby AO when the transaction is coveredu/s.2(47)(v) of the I.T. Act, 1961?” 3.The facts of the case are that the assessee vide lease deeddated 22.02.2007 leased out 2,950 sq. mtrs of land along with theconstruction thereon on 1500 sq. mtrs to Rao Shiksha Samiti for30 years at rent of Rs. 1 lakh per annum w.e.f. 01.03.2007. Thisdeed was registered with the SubRegistrar, Rajgarh. Thereafter,vide 2 separate deeds dated 03.04.2008, the assessee donatedthe said land to Rao Shiksha Samiti.The Accountant General(Audit), Rajasthan raised an objection that at the time ofexecuting the lease deed, value of this property should have beenconsidered at Rs. 1,43,91,000/- and accordingly there is a shortlevy of Rs. 9,52,914/-. The assessee raised the objection andthereafter the Collector (Stamps), Alwar vide order dated15.02.2013 determined the value of the property at Rs.92,80,860/- and directed the assessee to pay stamp duty ofRs.6,21,846/-. The AO on the basis of the order of Collector(Stamps) issued notice u/s 148 on 11.03.2014 and the reasons forreopening were communicated to the assessee on 05.09.2014wherein it wasstated that the lease was made for more than 20years and the stamp duty was charged on market value treating itas conveyance deed and not lease deed. Later, this property wasgifted to Rao Shiksha Samiti. Therefore, the conduct of the assessee was to transfer the property. As per Section 2(47)(v), itshould be treated as conveyance deed and not as lease deed. Theassessee has, therefore, failed to compute the capital gain as perSection 50C of the Act and income chargeable to tax has escapedassessment for AY 2007-08.The assessee raised objection againstthe initiation of reassessment proceedings u/s 147. The AOhowever, rejected the objection of the assessee vide his orderdated 06.02.2015 for the reason that as the lease was made formore than 20 years, there is a transfer u/s 2(47)(v) andtherefore, capital gains is liable to be taxed in terms of Section50C of the Act. assessee was to transfer the property. As per Section 2(47)(v), itshould be treated as conveyance deed and not as lease deed. Theassessee has, therefore, failed to compute the capital gain as perSection 50C of the Act and income chargeable to tax has escapedassessment for AY 2007-08.The assessee raised objection againstthe initiation of reassessment proceedings u/s 147. The AOhowever, rejected the objection of the assessee vide his orderdated 06.02.2015 for the reason that as the lease was made formore than 20 years, there is a transfer u/s 2(47)(v) andtherefore, capital gains is liable to be taxed in terms of Section50C of the Act. 4. Vide order dt. 6.2.2018, the court passed the followingorder:- “Counsel for the appellant will find out whetherthe judgment in the case of ITO vs. Tara ChandJain (2015) 155 ITD 956 (Jaipur) (Trib.) whichhas been relied upon by the tribunal has beenchallenged by the department or not.” 5.In pursuance of the said order, the judgment in the case of ITO vs. Tara Chand Jain (2015) 155 ITD 956 (Jaipur) (Tri.) isproduced before us which reads as under:- Section 50C of Income-Tax Act, 1961(2015) 85[Special provision for full valueof consideration in certain cases. 50C. (1) Where the consideration received oraccruing as a result of the transfer by anassessee of a capital asset, being land orbuilding or both, is less than the valueadopted or assessed 86[or assessable] by anyauthority of a State Government (hereafter inthis section referred to as the "stampvaluation authority") for the purpose ofpayment of stamp duty in respect of suchtransfer, the value so adopted or assessed [or assessable] shall, for the purposes of section48, be deemed to be the full value of theconsideration received or accruing as a resultof such transfer. 2 -------------------------------------------------- 6.8. On going through the above provisions, ittranspires that if the full value considerationshown to have been received or accruing ontransfer of a capital asset being land orbuilding or both is less than the value adoptedor assessed or assessable (w.e.f. 1.10.2009)by Stamp Valuation Authority, the value soadopted etc. shall for the purpose of section48 be deemed to be the full value ofconsideration received or accruing as a resultof such transfer. This section 50 C wasinserted by the Finance Act, 2002 with effectfrom 1.4.2003 with a view to substitute thedeclared full value consideration in respect ofland or building or both transferred by theassessee with the value adopted or assessedor assessable by the Stamp ValuationAuthority. Except for this provision, there isnothing in the Act which require for treatingthe value adopted by the Stamp ValuationAuthority to replace the full valueconsideration taken by the assessee. 6.9. Section 50C is a deeming provision and itis only applicable in respect of capital assetswhich are land or building or both. It is thusclear that this deeming provision of section50C will come into play only if the capital assettransferred by the assessee is a land orbuilding or both. If, in the absence of capitalasset transferred is neither the land norbuilding nor both, this deeming provision shallnot be applicable to such transfer. 6.10. It is seen from the above mentionedstatement of fact i.e. the ownership of theland is with the State Government. The land isacquired and the assessee is merely a Kastkar,this clearly shows that the assessee is onlyhaving the limited rights in the land sold. Thelimited rights of Kastkar on the land cannot beequated with the ownership of land or withbuilding or with both. The Income Tax Actclearly recognized the distinction between theland or building or any right in the land orbuilding under section 50C of the Act. Thusthe Act has given the separate treatment toland, building and rights in the land. 6.10. It is seen from the above mentionedstatement of fact i.e. the ownership of theland is with the State Government. The land isacquired and the assessee is merely a Kastkar,this clearly shows that the assessee is onlyhaving the limited rights in the land sold. Thelimited rights of Kastkar on the land cannot beequated with the ownership of land or withbuilding or with both. The Income Tax Actclearly recognized the distinction between theland or building or any right in the land orbuilding under section 50C of the Act. Thusthe Act has given the separate treatment toland, building and rights in the land. 6.11. In the opinion of the Bench, the rights inland cannot be equated with the land orbuilding. Therefore, it is concluded that section50C is applicable to transfer of capital assetonly in respect of land or building or both andis not applicable to right in land. In thepresent case, the assessee has onlytransferred the right in land for a valuableconsideration, therefore, in the opinion of theBench, the long term capital gain cannot becalculated by invoking the deeming provisionsprovided under section 50C. Therefore we holdthat section 50 C is not applicable to presentcase. This is also of view of Mumbai Tribunal inthe case of Atul G. Puranik vs. ITO (2011) 11ITR (Trib.) 120. 6.12. Even otherwise, the assessee has soldthe property on 18.04.2007 and has filed thereturn of income on 31.07.2008. At the timeof selling the property to the purchaser thesale consideration shown by the assessee inthe document executed was Rs. 74,91,000/-only and has shown the capital gain to theextent of 50% in the return of income, beingthe half ownership rights in the property. Theagreement was neither registered nor properlystamped and was merely executed on thestamp paper of Rs. 100/-. Section 50C asavailable ,in the rule book ,on the date of filingof the return or on the date of transfer of theland provides as under :- -Section 50C as per IT Act 2007 : “ Section 50C. (1) Where the considerationreceived or accruing as a result of the transferby an assessee of a capital asset, being landor building or both, is less than the valueadopted or assessed by any authority of aState Government (hereafter in this sectionreferred to as the “stamp valuation authority”)for the purpose of payment of stamp duty inrespect of such transfer, the value so adoptedor assessed shall, for the purposes of section48, be deemed to be the full value of theconsideration received or accruing as a resultof such transfer. (2) Without prejudice to the provisions of sub-section (1), where— (a) the assessee claims before any AssessingOfficer that the value adopted or assessed bythe stamp valuation authority under sub-section (1) exceeds the fair market value of theproperty as on the date of transfer; (b) the value so adopted or assessed by thestamp valuation authority under sub-section(1) has not been disputed in any appeal orrevision or no reference has been made beforeany other authority, court or the High Court, the Assessing Officer may refer the valuationof the capital asset to a Valuation Officer andwhere any such reference is made, theprovisions of sub-sections (2), (3), (4), (5)and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) ofsection 23A, sub-section (5) of section 24,section 34AA, section 35 and section 37 of theWealth-tax Act, 1957 (27 of 1957), shall, withnecessary modifications, apply in relation tosuch reference as they apply in relation to areference made by the Assessing Officer undersub-section (1) of section 16A of that Act. Explanation.—For the purposes of this section,“Valuation Officer” shall have the samemeaning as in clause (r) of section 2 of theWealth-tax Act, 1957 (27 of 1957). the Assessing Officer may refer the valuationof the capital asset to a Valuation Officer andwhere any such reference is made, theprovisions of sub-sections (2), (3), (4), (5)and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) ofsection 23A, sub-section (5) of section 24,section 34AA, section 35 and section 37 of theWealth-tax Act, 1957 (27 of 1957), shall, withnecessary modifications, apply in relation tosuch reference as they apply in relation to areference made by the Assessing Officer undersub-section (1) of section 16A of that Act. Explanation.—For the purposes of this section,“Valuation Officer” shall have the samemeaning as in clause (r) of section 2 of theWealth-tax Act, 1957 (27 of 1957). (3) Subject to the provisions contained in sub-section (2), where the value ascertained undersub-section (2) exceeds the value adopted orassessed by the stamp valuation authorityreferred to in sub-section (1), the value soadopted or assessed by such authority shall betaken as the full value of the considerationreceived or accruing as a result of the transfer. With effect from 1.10.2009 by the Finance(No. 2) Act 2009 the word “assessable” wasinserted with effect from 1.10.2009 andthereafter section 50-C provides as under :- Section 50-C as per IT Act 2010 : “Section 50C (1) Where the considerationreceived or accruing as a result of thetransfer by an assessee or a capital asset,being land or building or both, is less thanthe value adopted or assessed (orassessable) by any authority or a StateGovernment (hereafter in this sectionreferred to as the “stamp valuationauthority”) for the purpose of payment ofstamp duty in respect of such transfer, thevalue so adopted or assessed (orassessable) shall, for the purposes of section 48, be deemed to be the full valueof the consideration received or accruingas a result of such transfer. (2) Without prejudice to the provisions ofsub-section (1), where – (a) the assessee claims before anyAssessing Officer that the value adoptedor assessed (or assessable) by the stampvaluation authority under sub-section (1)exceeds the fair market value of theproperty as on the date of transfer; (b) the value so adopted or assessed (orassessable) by the stamp valuationauthority under sub-section (1) has notbeen disputed in any appeal or revision orno reference has been made before anyother authority, court or the High Court, The Assessing Officer may refer the valueof the capital asset to a Valuation Officerand where any such reference is made,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) ofsection 24, section 34AA, section 35 andsection 37 of the Wealth-tax Act, 1957 (27of 1957), shall, with necessarymodifications, apply in relation to suchreference as they apply in relation to areference made by the Assessing Officerunder sub-section (1) of section 16A ofthat Act. Explanation (1) For the purposesof this section, “Valuation Officer” shallhave the same meaning as in clause (r) ofsection 2 of the Wealth-tax Act, 1957 (27of 1957). Explanation 2. For the purposes of thissection, the expression “assessable”means the price which the stampvaluationauthoritywouldhave,notwithstanding anything to the contrarycontained in any other law for the timebeing in force, adopted or assessed, if itwere referred to such authority for thepurposes of the payment of stamp duty. (3) Subject to the provisions contained insub-section (2), where the valueascertained under sub-section (2) exceedsthe value adopted or assessed forassessable by the stamp valuation Explanation 2. For the purposes of thissection, the expression “assessable”means the price which the stampvaluationauthoritywouldhave,notwithstanding anything to the contrarycontained in any other law for the timebeing in force, adopted or assessed, if itwere referred to such authority for thepurposes of the payment of stamp duty. (3) Subject to the provisions contained insub-section (2), where the valueascertained under sub-section (2) exceedsthe value adopted or assessed forassessable by the stamp valuation authority referred to in sub-section (1),the value so adopted or assessed (orassessable) by such authority shall betaken as the full value of the considerationreceived or accruing as a result of thetransfer. In the matter of CIT vs. R. SuganthaRavindram, 352 ITR 488, the Hon’bleMadras High Court after referring to theCircular issued by the Board hasconcluded that the word “assessable” isonly prospective in nature and notapplicable in respect of the transfer whichhad taken place prior to the insertion ofword “assessable” in section 50C. Therelevant para of the judgment in the caseof R. Sugantha Ravindram (supra) is asunder :- 8. We have perused the above circular. Itis stated therein that the scope of theprovisions does not include transactionwhich are not registered with stamp dutyvaluation authority and executed throughagreement to sell or power of attorney.Consequently, it is made clear therein thatthe amendments have been madeapplicable with effect from October 1,2009, and, therefore, they will apply onlyin relation to transaction undertaken on orafter such date. The relevant portion ofthe circular is extracted hereunder (page319 of 324 ITR) : "23.4. Applicability.—These amendmentshave been made appli cable with effectfrom 1st October, 2009, and willaccordingly, apply in relation totransactions undertaken on or after suchdate." 9. Learned counsel for the Revenue is notdisputing about the existence of suchcircular issued by the Board. If the Boardhas issued a circular clarifying theapplicability of section 50C in pursuance ofthe amendment made by the AmendmentAct 2 of 2009, we fail to understand as tohow the Revenue can canvass the sameissue in this case which in effect is againstthe circular issued by the Board. Certainly,the Revenue is bound by the circularissued by the Board. At this juncture, it ispertinent to note that in a decision made in the case of State of Tamilnadu v. IndiaCements Ltd. reported in [2011] 40 VST225 (SC), the honourable Supreme Courthas held that the circulars issued by theRevenue are binding on the Departmentand, therefore, they cannot repudiate thatthey are inconsistent with the statutoryprovisions. The relevant paragraphs 21and 22 are extracted hereunder (page237) : "21. It is manifest from the highlightedportion of the circular that as per theclarification issued by the Commissioner ofCommercial Taxes, in exercise of thepower conferred on him under section 28Aof the TNGST Act, the benefit of the salestax deferral scheme would be available toa dealer from the date of reaching of BPVor BSV, which ever is earlier, as is pleadedon behalf of the first respondent. It is tritelaw that circulars issued by the Revenueare binding on the Depart mentalauthorities and they cannot be permittedto repudiate the same on the plea that itis inconsistent with the statutoryprovisions or it mitigates the rigour of thelaw. "21. It is manifest from the highlightedportion of the circular that as per theclarification issued by the Commissioner ofCommercial Taxes, in exercise of thepower conferred on him under section 28Aof the TNGST Act, the benefit of the salestax deferral scheme would be available toa dealer from the date of reaching of BPVor BSV, which ever is earlier, as is pleadedon behalf of the first respondent. It is tritelaw that circulars issued by the Revenueare binding on the Depart mentalauthorities and they cannot be permittedto repudiate the same on the plea that itis inconsistent with the statutoryprovisions or it mitigates the rigour of thelaw. 22. In Paper Products Ltd. v. CCE [2001]247 ITR 128 (SC) ; [1999] 7 SCC 84),while interpreting section 37B of theCentral Excise Act, 1944, which is in parimateria with section 28A of the TNGSTAct, this court had held that the circularsissued by the Central Board of Excise andCustoms are binding on the Departmentand the Department is pre cluded fromchallenging the correctness of the saidcirculars, even on the ground of the samebeing inconsistent with the statutoryprovision. It was further held that theDepartment is precluded from the right tofile an appeal against the correctness ofthe binding nature of the circulars and theDepartment's action has to be consistentwith the circular which is in force at therelevant point of time." 10. Even otherwise, we are of the firmview that the insertion of the words "orassessable" by amending section 50C witheffect from October 1, 2009, is neither aclarification nor an explanation to thealready existing provision and it is only an inclusion of new class of transactions,namely, the transfers of properties withoutor before registration. Before introducingthe said amendment, only the transfers ofproperties where the value adopted orassessed by the stamp valuation authoritywere subjected to section 50C application.However, after introduction of the words"or assessable" after the words "adoptedor assessed", such transfers where thevalue assessable by the stamp valuationauthority are also brought into the ambitof section 50C. Thus, such introduction ofnew set of class of transfer would certainlyhave the prospective application only andnot otherwise. Hence, the assessee'stransfer admittedly made earlier to suchamendment cannot be brought undersection 50C ." Thus it is clear that the amended provisionof section 50C is not applicable to thetransfer which had already taken placeprior to the amendment. In the presentcase the assessee has transferred thecapital asset for a consideration of Rs.74,91,000/- and the document wasneither registered nor evaluated for thepurpose of stamp duty purposes by theStamp Valuation Authority at the time ofexecution of said document . Therefore,there was no evaluation of stamp dutypayable on the document. Thus in ourview the deeming provision of section 50Cdo not come in to play thereby replacingthe full valuation of consideration of thedocument with the value calculated by theStamp Valuation Authority / registeringAuthority. In the absence of any adoptionor assessment by the authority of stategovernment for the purposes of the Stampduty in respect of subject transfer ( as thedocument was not registered ), there wasno occasion for the AO to either refer thematter to the Registering Authority or tothe Stamp Valuation Authority for thepurpose of arriving at the valuation of theproperty. 6.13. Therefore, in the interest of justicewe set aside this issue to the AssessingOfficer and directed to apply theprovisions of Income Tax including Section55A to determine the correct capital gainin this transaction and decided the case after considering the above observationsof this Bench and also give reasonableopportunity of being heard to the assesseeafter bringing of required evidences onrecord. 6.13. Therefore, in the interest of justicewe set aside this issue to the AssessingOfficer and directed to apply theprovisions of Income Tax including Section55A to determine the correct capital gainin this transaction and decided the case after considering the above observationsof this Bench and also give reasonableopportunity of being heard to the assesseeafter bringing of required evidences onrecord. 6.14. The assessee challenged in thesecond ground of appeal that the ld CIT(A)is allowed the appeal partly by applyingDVO’s valuation in coowners case U/s 50Cbut Section 50C is not applicable in thecase of assessee. Therefore, the order ofthe ld CIT(A) is reversed to that extent asobserved in preceding paras. Accordingly,the revenue’s appeal as well as assessee’sappeal are set aside to the AssessingOfficer. “ 6.Counsel for the appellant-department submits that the saidjudgment will not apply in the facts of the present case. 7.In our considered opinion, the appropriate remedy availablefor the appellant is to approach the tribunal and point out thetribunal that judgment in Tara Chand (supra) will not apply in thefacts of the case. 8.In case ROM is moved by the appellant, it will open for thedepartment to challenge both the orders. 9.The period taken for filing of this appeal will be taken intoconsideration while considering the ROM. 10.With the above observations, the appeal stands disposed of. (VIJAY KUMAR VYAS)J. (K.S. JHAVERI)J. Brijesh 7.