The Commissioner Of Income Tax, Chennai v. Shri Vummudi Amarendran New

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBARAYON T.C.A.No.329 of 2020 The Commissioner of Income Tax,Chennai... Appellant/AppellantVersus Shri Vummudi AmarendranNew No.4, Old No.19, Valmiki Street,T.Nagar, Chennai 600 017... Respondent/Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal, ''D'' Bench, Chennai dated 27.02.2020 inI.T.A.No.2933/Chny/2019 for the Assessment Year 2014-15. against the Order of the Commissioner of Income Tax(Appeals)-6, dated 25/07/2019 made in ITA.No. 471(CIT (A)-6/2016-17 for the assessment Year 2014-15 and against the Orderof the Assistant Commissioner of Income Tax, Non CorporateCircle 1 (1), Chennai – 34, dated 29/12/2016 made in GIR.No.PANAAEPA3310M for the Assessment Year 2014-15. For Appellant: Mr.T.Ravikumar Senior Standing Counsel JUDGMENT [Order of the Court was made by T.S.SIVAGNANAM, J.] This appeal filed by the Revenue under Section 260 A ofthe Income Tax Act, 1961 ('the Act' for brevity) is directedagainst the order dated 27.02.2020 passed by the Income TaxAppellate Tribunal, Madras 'D' Bench ('the Tribunal') inI.T.A.Nos.2933/Chny/2019 for the Assessment Year 2014-15 and theRevenue has filed this Appeal raising the following SubstantialQuestions of Law: 1. Whether on the facts and in thecircumstances of the case, the Tribunal was right inholding that the amendment to Section 50C which wasintroduced with effect from 2017-18 prospectively wasapplicable retrospectively for the assessment year https://hcservices.ecourts.gov.in/hcservices/ 2014-15 when the language used in the proviso does notindicate that it was inserted as a clarification? 2. Is not the reasoning and finding of theTribunal bad by holding that the prospective amendmentto provisions Section 50C for the assessment year2017-18 is applicable retrospectively to assessmentyear 2014-15 without appreciating the fact that unlessexplicity stated a piece of legislation is presumednot to be intended to have retrospective operationbased on the principle ''lex prospicit non respicit''meaning that the law look forward and not backwards? https://hcservices.ecourts.gov.in/hcservices/ 2014-15 when the language used in the proviso does notindicate that it was inserted as a clarification? 2. Is not the reasoning and finding of theTribunal bad by holding that the prospective amendmentto provisions Section 50C for the assessment year2017-18 is applicable retrospectively to assessmentyear 2014-15 without appreciating the fact that unlessexplicity stated a piece of legislation is presumednot to be intended to have retrospective operationbased on the principle ''lex prospicit non respicit''meaning that the law look forward and not backwards? 2. The facts which are necessary for answering thequestions raised before us are set out hereunder. Therespondent/assessee is an individual filed its original returnof income on 28.09.2014, admitting a total income ofRs.7,40,50,990/-. The case was selected for scrutiny and Noticeunder Section 143(2) of the Act dated 28.08.2015 was issued.Subsequently since there was a change in the Officer, Noticeunder Section 142(1) read with Section 129 of the Act wasissued. The assessee was represented by his authorizedrepresentative before the Assessing Officer and submitteddetails called for. The assessee had owned 44,462 sq.ft of landin Neelankarai Village and the property was sold by the SaleDeed dated 02.05.2013 registered on the file of the SubRegistrar, Neelangarai. The assessee had entered into anAgreement for Sale on 04.08.2012 agreeing to sell the propertyfor a total sale consideration of Rs.19 Crores and in terms ofthe conditions contained therein, the assessee had received asum of Rs.6 Crores as advance consideration and the same waseffected by Cheque payment by the purchaser. The AssessingOfficer found that on the date of execution and registration ofthe Sale Deed i.e., on 02.05.2013, the guideline value of theproperty as fixed by the State Government was Rs.27 Crores.Thus, the Assessing Officer came to the conclusion that sincethe assessee had not parted with possession and had receivedonly Rs.6 Crores as advance which was not disclosed during therelevant financial year, held that the Agreement for Sale cannotbe regarded as a transfer for the purpose of Section 2(47)(V) ofthe Act. The assessee while computing Capital Gain had taken thesale consideration for the property at Rs.19 crores. Thisaccording to the Assessing Officer was not a full value ofconsideration because on the date when the property was sold,i.e., date on which the Deed of conveyance was executed andregistered, the guideline value was much higher than the agreedsale price and therefore, the said amount should be reckoned forall purposes as a full value of consideration and Capital Gainthereon ought to have been computed. 3. The assessee before the Assessing Officer did not seekto bring his case under the ambit of Section 2(47)(V) of theAct. The argument was that the proviso to Section 50(C) of theAct would stand attracted. Though it was applied with effectfrom 01.04.2017, it would have retrospective effect as theproviso seeks to mitigate the undue hardship faced by theassessee. The Assessing Officer did not agree with the statementof the assessee on the ground that the proviso applied only witheffect from 01.04.2017, applicable for the assessment year 2017-18 and the same is prospective. Further the Assessing Officerheld that the conditions laid down for the proviso to beapplicable, is absent in the assessee's case. The AssessingOfficer came to such conclusion on the ground that the provisowould be applicable if at the first place Agreement has beentreated as a transfer of a capital asset which was absent in theassessee's case, on the date when the Agreement for sale wasentered into. Accordingly, the assessment was completed underSection 143(3) of the Act vide order dated 29.12.2016 byadopting the full value of consideration at Rs.27 Crores and theCapital Gain was recomputed and tax was demanded. The assesseefiled an appeal before the Commissioner of Income Tax (Appeals)-6, Chennai [CIT(A)]. The appeal was allowed by order dated25.07.2019. The Revenue preferred an appeal before the Tribunalwhich was dismissed vide order dated 27.02.2020, which isimpugned in this appeal. 4. We have elaborately heard Mr.T.Ravikumar, learnedSenior Standing Counsel for the Revenue. 5. It is the submission of Mr.T.Ravikumar, learned SeniorStanding counsel that the amendment to Section 50(C) of the Actintroduced by the Finance Act 2016 is effective only from01.04.2017, prospectively. In this regard, the learned SeniorCounsel referred to the legal maxim 'lex prospicit non respicit'which means law look forward and not backwards. The learnedSenior Counsel referred to the Circular issued by the CentralBoard of Direct Taxes ('CBDT') in Circular No.3/2017 dated20.01.2017 and has drawn the attention of this Court to theparagraph no.29 which deals with the Rationalization of Section50C in case sale consideration is fixed under agreement executedprior to the date of registration of immovable property. It issubmitted that CBDT has clarified that the amendment shall takeeffect from 01.04.2017 and would accordingly apply fromassessment year 2017-18 and subsequent years. Further it issubmitted that the language of the proviso is clear and it doesnot indicate it is either clarificatory to be held to argue thatthe proviso would have retrospective effect. Reliance was placedon the decision of the Hon'ble Supreme Court in the case ofCommissioner of Income Tax, (Central)-1, New Delhi Vs. VatikaTownship Private Limited [2014 (367) ITR 466 (SC)] and our attention was drawn to paragraph no.39 of the judgment, insupport of his contention that the Statute has to be held to beprospective from the date fixed by the legislature. attention was drawn to paragraph no.39 of the judgment, insupport of his contention that the Statute has to be held to beprospective from the date fixed by the legislature. 6. Reliance was also placed on the decision of the HighCourt of Calcutta in the case of Bagri Impex (P.) Ltd., Vs.Assistant Commissioner of Income-tax, Circle-9, Kolkata;2013(31) Taxmann.com 39 (Calcutta), in support of his contentionthat where the date of Sale was registered in the year,subsequent to the year in which consideration was received,applying Section 50(C) of the Act, value assessed by stampvaluation authority in subsequent years should be taken as fullvalue of consideration. Reliance is also placed on the decisionof the Honble Division Bench of this Court in Ambattur ClothingCompany Limited Vs. Assistant Commissioner of Income Tax [2010(326) ITR 0245] to support the contention that the AssessingOfficer was justified in treating the value adopted by the stampvaluation authority as the deemed sale consideration received /accruing as a result of transfer. Reliance was also placed onthe decision of the Hon'ble Supreme Court in R.Saibharathi Vs.J.Jayalalitha [2004 (2) SCC 9], with regard to the effect of theguideline value fixed by the Government. As pointed out by us,the assessee sought to take the benefit of the proviso insertedto Section 50C of the Act. It is no doubt true and as clarifiedby the CBDT vide Circular No.3 of 2017 dated 20.01.2017 that theamendment to Section 50C would start effect from 01.04.2017 andwill accordingly apply from assessment year 2017-18 andsubsequent assessment years. However one important factor whichneeds to be noted is that amendment seeks to relieve theassessee from undue hardship caused on account of thecomputation of higher rate of capital gains. 7. Before we proceed to consider as to whether provisoinserted in Section 50C of the Act has to be read retrospectiveor prospective, we need to point out that the Assessing Officerdid not doubt the bonafides of the transaction done by theassessee, since the Assessing Officer accepted the fact that theassessee had entered into an Agreement for Sale of the propertyin question vide Agreement for Sale dated 04.08.2012, whereinagreed sale consideration was Rs.19 Crores and the assessee hadreceived Rs.6 Crores by way of account payee cheque on the dateof signing the Agreement. This fact was noted by the CIT(A) andheld that the Agreement cannot be treated to be ante-dated asthe assessee had received Rs.6 crores as advance on the date ofAgreement through banking channel. The only reason for theAssessing Officer to adopt higher value is based upon theguideline value fixed by the State Government. The questionwould be as to what is the effect of the guideline value fixedby the Government and the purpose behind fixing the same. Thisaspect was clearly explained in the case of J.Jayalalitha. It has been pointed out that the guideline value has relevance onlyin the context of Section 47A of the Indian Stamp Act (asamended by Tamil Nadu Act 24 of 1967) which provides for dealingwith instruments of conveyance which are undervalued. Theguideline value is a rate fixed by the authorities under theStamp Act for the purpose of determining the true market valueof the property disclosed in an instrument requiring payment ofstamp duty. Thus the guideline value fixed is not final but onlya prima facie rate prevailing in an area to ascertain the trueor correct market value. It is open to the Registering Authorityas well as the person seeking registration to prove the actualmarket value of the property. The authorities cannot regard theguideline valuation as the last word on the subject of marketvalue but only a factor to be taken note of, if at all availablein respect of an area in which the property transferred lies .It was further pointed out that this position is made clear inthe explanation to Rule 3 of the Tamil Nadu Stamp (Prevention ofUndervaluation of Instruments) Rules, 1968; this explanationalso will have to be read in conjunction with explanation toSection 47(A) of the Indian Stamp Act (as amended by the TamilNadu Act 24/1967). It was further pointed out that undueemphasis on the guideline value without referred to the settingin which it is to be viewed will obscure the issue forconsideration. Further it was held that in any event, if for thepurpose of the Stamp Act, guideline value alone is not a factorto determine the value of the property, its worth will not beany higher in the context of assessing the true market value ofthe properties in question to ascertain whether the transactionhas resulted in any offense so as to give a pecuniary advantageto one party or other. 8. Thus, the Assessing Officer could not have based hisconclusion solely based on the guideline value which has beenheld to be only a prima facie rate prevailing in the area toascertain the true or correct market value and it is not thelast word on the subject of market value but only a factor to betaken note of. As pointed out earlier, the genuinity of thetransaction done by the assessee was not doubted and the receiptof advance was through banking channel by way of a demand draft. 9. Therefore, in our considered view the AssessingOfficer could not have based his finding solely relying upon theguideline value especially when the Assessing Officer is not aperson who is computing stamp duty under the provisions ofIndian Stamp Act on the Deed of conveyance. Having observed sowe need to take note of the next issue would be as to whetherthe proviso to Section 50C could be read to be prospective orretrospective. Section 50C(1) proviso reads as follows: ''Provided that where the date of theagreement fixing the amount of consideration and thedate of registration for the transfer of the capita asset are not the same, the value adopted or assessedor assessable by the stamp valuation authority on thedate of agreement may be taken for the purposes ofcomputing full value of consideration for suchtransfer.'' ''Provided that where the date of theagreement fixing the amount of consideration and thedate of registration for the transfer of the capita asset are not the same, the value adopted or assessedor assessable by the stamp valuation authority on thedate of agreement may be taken for the purposes ofcomputing full value of consideration for suchtransfer.'' 10. Reading of the above proviso would show that thelegislature took note of the fact that there are severaloccasions where the Agreements are entered into between awilling vendor and willing purchaser on an agreed saleconsideration, the Agreement is reduced into writing and in manya cases a substantive portion of the sale consideration is givento the vendor as advance on the date of execution of theAgreement. There are other types of transaction where the vendorexecutes Power of Attorney in favour of the intending purchaserempowering him to sell the property at any time he proposes todo so. In fact this was also a subject matter of consideration,when the legislature though to introduce the amendment toSection 50C of the Act. There may be cases where the saleconsideration will be taken as deferred payment subject tocertain contingencies. However the case on hand is very straightforward case, where there is an Agreement for Sale, agreeing tosell the property at Rs.19 Crores and a sum of Rs.6 Crores hasbeen received as advance sale consideration. The proviso toSection 50C(1) of the Act deals with cases where the date of theagreement, fixing the amount of consideration and the date ofregistration for the transfer of the capital assets are not thesame, the value adopted or assessed or assessable by the stampvaluation authority on the date of agreement may be taken forthe purposes of computing full value of consideration for suchtransfer. Thus an amendment by insertion of proviso seeks torelieve the assessee from undue hardship. 11. The Hon'ble Supreme Court in Commissioner of IncomeTax, Kolkata Vs. Calcutta Export Company [2018 (404) ITR 654(SC)], considered the question as to whether the amendment madeby the Finance Act 2010 to Proviso of Section 40(a)(ia) of theAct is curative in nature and it has to given retrospectiveoperation from the date of insertion of the said proviso i.e.,with effect from Assessment Year 2005-06. It was pointed outthat the purpose of the amendment made by the Finance Act 2010is to solve the anomalies with the instrument of Section 40(a)(ia) of the Act, caused to the bona fide tax payer. It wasfurther held that the amendment even if not given any operationretrospectively, may not materially to be of consequence to theRevenue when the tax rates are stable and uniform or in cases ofbig assesses having substantial turnover and equally hugeexpenses and necessary cushion to absorb the effect; however amarginal and medium tax payer who work at low gross product rateand when expenditure becomes subject matter of an order underSection 40(a)(ia) is substantial, can suffer severe adverse consequence if the amendment made in 2010 is not givenretrospective operation i.e., from the date of substitution ofthe provision. Thus, the amendment made by the Finance Act 2010being curative in nature was held to be retrospective inoperation. In the above decision, the Hon'ble Supreme Court tooknote of the fact that the statutory amendment was being made toremove undue hardship to the assessee or held to beretrospective. consequence if the amendment made in 2010 is not givenretrospective operation i.e., from the date of substitution ofthe provision. Thus, the amendment made by the Finance Act 2010being curative in nature was held to be retrospective inoperation. In the above decision, the Hon'ble Supreme Court tooknote of the fact that the statutory amendment was being made toremove undue hardship to the assessee or held to beretrospective. 12. The Honble Supreme Court in Kolkata Export Companytook note of the earlier decisions on the same issue in the caseof Allied Motors Private Limited Vs. CIT [1997 (224) ITR 677(SC)], Whirlpool of India Limited Vs. CIT, New Delhi [2000 (245)ITR 3], CIT Vs. Amrid Banaspati Company Limited [2002 (255) ITR114] and CIT vs. Alom Enterprises [2009 (319) ITR 306] and heldthat the new proviso should be given retrospective effect fromthe insertion on the ground that the proviso was added to remedyunintended consequences and supply an obvious omission. Theproviso ensured reasonable interpretation and retrospectiveeffect would serve the object behind the enactment. Thus bytaking note of the above decisions, we have no hesitation tohold that the proviso to Section 50C(1) of the Act should betaken to be retrospective from the date when the proviso exists.The CIT(A) while allowing the assessee's appeal vide order dated25.07.2019, took note of the submissions made by the assesseewherein they placed reliance on the decision of the AhmadabadBench of the Tribunal in the case of Dharamshi bhai Sonani Vs.ACIT [2016 75 taxmann.com 141 (Ahmedabad- Trib)]; order of theDelhi Bench of the ITAT in the case of Income Tax officer Vs.Modipon Limited [2015 (57) taxmann.com 360 (Delhi Tribunal)]. 13. On a reading of the order passed by the CIT(A), it isinteresting to note the report submitted by the Income TaxSimplification Committee set up in 2015, headed by a FormerJudge of the High Court, Delhi. 14. Mr.T.Ravikumar, learned Senior Standing Counsel isright in a submission that this report is not binding or cannotbe taken to have a statutory force. Nevertheless SimplificationCommittee was consisted of experts in the field of taxation andit would be worthwhile and interesting to note as to why theyhave considered the insertion of the proviso to Section 50(C) ofthe Act should be held to be retrospective; In the report thereis an extract of Memorandum explaining provisions of FinanceBill 2016 which reads as follows: ''Rationalization of Section 50C in case saleconsideration is fixed under agreement executed priorto the date of registration of immovable property.Under the existing provisions contained in Section50C, in case of transfer of a capital asset being 14. Mr.T.Ravikumar, learned Senior Standing Counsel isright in a submission that this report is not binding or cannotbe taken to have a statutory force. Nevertheless SimplificationCommittee was consisted of experts in the field of taxation andit would be worthwhile and interesting to note as to why theyhave considered the insertion of the proviso to Section 50(C) ofthe Act should be held to be retrospective; In the report thereis an extract of Memorandum explaining provisions of FinanceBill 2016 which reads as follows: ''Rationalization of Section 50C in case saleconsideration is fixed under agreement executed priorto the date of registration of immovable property.Under the existing provisions contained in Section50C, in case of transfer of a capital asset being land or building on both, the value adopted orassessed by the stamp valuation authority for thepurpose of payment of stamp duty shall be taken asthe full value of consideration for the purposes ofcomputation of capital gains. The Income TaxSimplification Committee (Easwar Committee) has inits first report, pointed out that this provisiondoes not provide any relief where the seller hasentered into an agreement to sell the property muchbefore the actual date of transfer of the immovableproperty and the sale consideration is fixed in suchagreement, whereas similar provision exists insection 43CA of the Act i.e. When an immovableproperty is sold as a stock-in-trade. It is proposedto amend the provisions of section 50C so as toprovide that where the date of the agreement fixingthe amount of consideration for the transfer ofimmovable property and the date of registration arenot the same, the stamp duty value on the date of theagreement may be taken for the purposes of computingthe full value of consideration. It is furtherproposed to provide that this provision shall applyonly in a case where the amount of considerationreferred to therein, or a part thereof, has been paidby way of an account payee cheque or account payeebank draft or use of electronic clearing systemthrough a bank account, on or before the date of theagreement for the transfer of such immovableproperty. These amendments are proposed to be madeeffective from the 1[st] day of April, 2017 and shallaccordingly apply in relation to assessment year2017-18 and subsequent years.'' 15. Taking note of the above Memorandum, it was pointedout that once a statutory amendment is being made to remove anundue hardship to the assessee or to remove an apparentincongruity, such an amendment has to be treated as effectivefrom the date on which the law, containing such an unduehardship or incongruity, was introduced. The report alsoreferred to the decision in the case of Alom Enterprises [2009(319) ITR 306]. 16. Reverting back to the decisions relied on by theRevenue, the decision in Bagri Impex (P.) Ltd., supra isdistinguishable on facts as the assessee therein contended thatthe date of agreement should be taken as date on which theproperty was transferred by bringing the same within the ambitof Section 2(47) of the Act, which is not the case before us. InAmbattur Clothing Company Limited, the assessee contended thatsince the buyer wanted the Sale Deed to be released after https://hcservices.ecourts.gov.in/hcservices/ registration, they had paid stamp duty as per the guidelinevalue which is higher than the sale consideration agreed to bepaid on the instruments. This explanation offered by theassessee was found to be factually incorrect and rejected and inthe background of the said facts, the Honble Supreme Courtobserves that the Assessing Officer was justified in treatingthe value adopted by the stamp valuation authority as the deemedsale consideration, received/ accruing as a result of transfer. https://hcservices.ecourts.gov.in/hcservices/ registration, they had paid stamp duty as per the guidelinevalue which is higher than the sale consideration agreed to bepaid on the instruments. This explanation offered by theassessee was found to be factually incorrect and rejected and inthe background of the said facts, the Honble Supreme Courtobserves that the Assessing Officer was justified in treatingthe value adopted by the stamp valuation authority as the deemedsale consideration, received/ accruing as a result of transfer. 17. On going through the facts of the case on hand, wefind that no such observation was made by the Assessing Officer.The assessee's consistent case was that the sale considerationagreed to be paid to him by the purchaser was Rs.19 crores andRs.6 crores was received as advance on the date of entering intothe Agreement for Sale. However, the Assessing Officerdisbelieved the same and applied the guideline value at Rs.27crores on the date when the Sale Deed was executed andregistered. Therefore, in our considered view, the decision inAmbattur Clothing Company Limited cannot be applied with thefacts and circumstances of the case on hand. 18. Mr.T.Ravikumar, learned counsel is right in asubmission that the observations made by the Tribunal qua thedecision of the Honble Supreme Court in Vatika Township isincorrect. In fact we find that the Tribunal did not assign anyreasons as to why the decision in Vatika Township do not applyto the facts of the case. In fact the decision in Vatika TownShip should be referred for the purpose as to when a Statute canbe treated to be clarificatory and when not?. The legalprinciple laid down therein ought to have been taken note of bythe Tribunal. Therefore, the Tribunal may not be fully right instating that the judgment in Vatika Township will not beapplicable to the facts as the judgment needs to be looked intoto consider the legal principle of retrospectivity, retroactivity or prospectivity. In any event, the ultimate conclusionarrived at by the Tribunal confirming the above order passed bythe CIT(A) cannot be found faulted with. 19. For all the above reasons, the appeal filed by theRevenue is dismissed. The Substantial Questions of Law raised inthese appeals are answered against the Revenue and in favour ofthe assessee. No costs. Sd/- Assistant Registrar (CO) //True Copy// sk Sub Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1.The Commissioner of Income Tax Appeals-6, 121, Mahatma Gandhi Road, Nungambakkam, Chennai-34. 121, Mahatma Gandhi Road, Nungambakkam, Chennai-34. 2.The Income Tax Appellate Tribunal, Madras “ D “ Bench, Chennai. Madras “ D “ Bench, Chennai. 3.The Assistant Commissioner of Income Tax, Non Corporate Circle – (1), Chennai. Non Corporate Circle – (1), Chennai. +1cc to Mr.T.Ravikumar, Advocate, S.R.No. 31968 T.C.A.No.329 of 2020VG II(CO)GN(18/11/2020)