Presentation Transcript

1. Provisions of Sec. 50C
2. Sec. 50C Background History – Govt’s worry about black money in real estate transactions. Sec. 52(2) & K.P. Varghese’s case (SC) Deeming provision of sec. 50C brought in by the Finance Act, 2002. Constitutional Validity upheld by the Bombay High Court in 334 ITR 145 & by Madras High Court in 306 ITR 61
3. Provisions in brief of sec. 50C Sub Sec. (1) : Provides that if transfer of land or building or both is at lesser than valuation under stamp duty ready reckoner, then stamp duty value to be adopted as full value of consideration for capital gains calculations. Sub Secs (2) & (3) : Provides for mechanism to address grievances relating to excess valuation under stamp duty.
4. Sec. 50C Highlights of provision – Applicable to all assessees Transfer of capital asset being land or building or both If consideration in document is less than market value for stamp duty Market Value Assessed or Assessable Applicable for both LTCG & STCG
5. Land or Building or Both Applicability to Rights in land or building Provisions of sec. 50D Applicability to Development Agreements : Held Applicable Mumbai Tribunal in ChiranjeevlalKhanna Mumbai Tribunal in ArifAkhtarHussain(140 TTJ 413)
6. Land or Building or Both Sale of TDR/Additional FSI : Held not applicable Bombay High Court in Chedda Housing Development vs. Banijan Sheikh Farid 2007 (3) MLJ 402 in held that TDR is an immovable property. Yet Mumbai Tribunal in ITO vs. Prem Rattan Gupta ITA No.5803/M/2009 A.Y. 2006-07 dated 28-3-2012 held that 50C not applicable to sale of TDR/FSI – Bom H.C. considered
7. Land or Building or Both Leasehold/Tenancy Rights : In Atul G. Puranik vs. ITO 132 ITD 499 - Plot lease of 65 years – Held Not Applicable. In DCIT vs. Tejinder Singh ITA No. 1459/Kol./2011– House lease for 99 years – Held Not Applicable. In ShavoNorgren (P) Ltd. vs. DCIT 58 SOT 23 – MIDC lease of 95 years : Held Applicable In KishoriSharadGiatonde vs. ITO ITA No. 1561/ M/09 dated 27-11-2009 - Tenancy Rights – Held Not Applicable.
8. Land or Building or Both Booking Rights In ITO vs. YasinMoosaGodil 72 DTR 167 transferred booking rights in flat by a tripartite agreement. Held that S. 50C not applicable. Sathekhat on Sathekhat If possession Given If possession not given – Poser?
9. Valuation on the date of Agreement (Sathekhat) or Sale Deed (Kharedikhat) If possession Given on Agreement : No question arises, value on agreement date. If possession not given on Agreement – No provision like 43CA or 56(2)(vii) in case of agreement supported by other than cash payments Transfer takes place on possession/Sale Deed – valuation on sale deed date (214 Taxman 305 – Cal). Challenge valuation u/s 50C(2) as encumberred by agreement value
10. S. 50C & S. 45(3) Two deeming fictions S. 45(3) Deems value entered in firm’s books as full value of consideration S. 50C deems stamp duty valuation What if both differ – None is non obstante – Rule of interpretation ITAT (Luck) in Carlton Hotel P. Ltd. vs. ACIT (122 TTJ 515) – A.Y. 2004-05 - held -
11. S. 50C & S. 45(3)- Contd. S. 50C not applicable because book entry not liable to stamp duty However, w.e.f. 01.10.2009 even ‘assessable’ is covered.
12. S. 50C & S. 50 Applicability of S.50C to S.T. C.G. on Depreciable asset u/s 50 r.w.s. 43(6)(c) –defi. of WDV Special Bench in ITO vs. United Marine Academy 130 ITD 113held that S. 50C is applicable to transfer of depreciable capital asset covered by S. 50 At which stage? S. 48 comes in play only where sale price exceeds WDV.
13. S.50C & S.50B Slump sale taxable u/s 50B – Lump sum price - - Include land, building or both - Price for each asset not ascertainable The Special Bench in Dy. CIT vs. Summit Securities Ltd. (2012) 135 ITD 99 held that it is not applicable.
14. S. 50C & S. 54, 54B, 54F, etc. Example : Net sale consideration 1 0,00,000 Indexed cost of acquisition 5,00,000 Stamp Duty value 20,00,000 Capital Gains (normal) 5,00,000 Capital Gains (u/s 50C) 15,00,000 Now, if cost of new asset is ` 6,00,000 then whether entire cap gain of 15,00,000 or only 5,00,000 or 6,00,000
15. S. 50C & S. 54, 54B, 54F, etc.- contd Assessee cannot be expected to do impossible In 49 SOT 160 (Jp) – If entire normal C.G. reinv. in 54EC – Entire C.G u/s 50C exempt In 133 TTJ (Jp) 482– If entire actual sale consideration reinvested in 54F - Entire C.G. u/s 50C exempt In 356 ITR 90 (Karn) HC applied 50C for 54F calculations – since no objection u/s 50C(2) was raised agst stamp valuation.
16. S. 50C & S. 69, etc Issue of 69, etc. arises in the hands of buyer Buyer, if Ind or HUF, now covered u/s 56(2)(vii) Other assessees not covered by S. 56(2)(vii) In 256 CTR 371 (Del) & 323 ITR 510 (P & H) - for S. 69, etc. 50C held not applicable. Thus, now double taxation in both buyer & seller – Possible - 204 ITR 146 (Bom.)
17. Spared? In 56 SOT 12 (Mum.) - only direct transfer of land or building or both is hit. Sale of land/ building by transfer of shares of company & not subjected to stamp duty not covered by 50C. Tax Planning or evasion? GAAR? What if flat/shop from housing company or housing co-op scty is transferred, where transfer document is subjected to stamp duty?
18. Disputing Stamp Duty Valuation In practice sale can be at lesser than stamp value for genuine multiple reasons – Distress sale – Difficulties under both remedies Valuation under stamp laws are not location specific but area specific - Disadvantageous locations like surrounded by slum or bad social elements or adjacent to say Sewage plant are not
19. Disputing Stamp Duty Valuation – contd. Remedies two but alternate – Under Stamp Law & u/s 50C(2) of I.T. Act. Under Stamp Law : If Market Value is challenged under Stamp Duty Law, then any variation in market value in any appeal, revision or reference under Stamp Duty Law will be given effect to in Income Tax by passing order u/s 154 (sec. 155(15)) within the period of 4 yrs from end of the yr in which order of appeal, revision or reference is passed - Distress sale has difficulty.
20. Disputing Stamp Duty Valuation – contd. Remedy u/s 50C(2) of I.T. Act If assessee claims that - Stamp duty valuation exceeds FMV & If no dispute on valuation under Stamp Act is raised then A.O. ‘may’ refer valuation to the DVO In 34 SOT 57 (Mum) it is held that ‘may’ to be read as ‘shall’ i.e. On assessee claiming FMV lower than stamp valuation A.O. must refer to DVO.
21. Disputing Stamp Duty Valuation – contd. No procedure laid for claiming lesser FMV Claim in Return Obtain valuation report from registered valuer Apply different methods of valuation, as circumstances demand Take care in drafting of the document – mention factors affecting FMV in the document in recitals or in the portion dealing with adequacy of sale price.
22. Disputing Stamp Duty Valuation – S.50C(2) & 3) On reference to DVO – If DVO arrives at lesser FMV than stamp valuation, then lesser value must be adopted by A.O, as DVO’s report is binding on him. However, if DVO arrives at more FMV than stamp duty valuation, then valuation by DVO to be ignored by A.O. & stamp duty valuation to be adopted by A.O. as per s. 50C(3)
23. Disputing Stamp Duty Valuation in Appeals Road does not end on adverse valuation by DVO. Challenge it before CIT(A) – In 142 ITD 428 it is held that CIT(A) can go below the valuation given by DVO. In Abbas T. Reshamwala vs. ITO, ITA No. 892/ M/2012, dated 20-2-2013 it is held that, DVO valuation is not binding on ITAT & ITAT can arrive at different value. In 326 ITR 229 – Time barring period for asstt extended in writ, pending DVO report – 154 is also possible.
24. Penalty u/s 271(1)(c) for 50C Valuation In 260 CTR 75 (Cal HC) – FACTS : 1. In ROI s. 50C not considered 2.FMV not challenged u/s 50C(2) 3. Asstt. completed at stamp duty valuation 4. Asstt. not disputed High Court deleted penalty on the ground that no evidence of assessee receiving any sum above document price.
25. Penalty u/s 271(1)(c) for 50C Valuation In Shri ChimanlalManilal Patel vs.ACIT ITA No. 508/Ahd/2010 dated 22-6-2012 In original ROI Sec. 50C not followed In ROI u/s 148, Sec. 50C value adopted Penalty u/s 271(1)(c) held not leviable because Assessee agreeing to addition on the basis of deeming provisions cannot be construed as furnishing of inaccurate particulars of income.
26. Provisions u/s 50C Thank you