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Purpose of Insertion of proviso to Sec 50C by Finance Act; 2016 w.e.f 1st April 2017 (AY 2017-18) and its effective date - Whether Retrospectively or Prospectively?
*BACK GROUND*:
Why Sec 50C was introduced in the Act?.
The fundamental purpose of introducing section 50C was to counter suppression of sale consideration on sale of immovable properties and this section was introduced in the light of widespread belief that sale consideration of land and building are often under valued resulting in leakage of legitimate tax revenues.
This section provides for a presumtion that the value for the purpose of computing stamp duty adopted by the stamp duty valuation authority represents fair indication of the market price of the property.
Accordingly where the sale consideration received or accruing in tranfer of immovable property is less than the stamp duty valuation than Stamp Duty Valuation shall be deemed to the value of consideration for the purpose of Capital Gain.
SEC 50C was introduced by the FIN.ACT 2002 w .e.f AY 2003-04 to cover sale of immovable properties including land and building.
Later W.E.F A.Y 2010-11 this Sec 50C was extended to the transaction which were executed through Agreement to Sell or Power of Attorney.
The Trouble is that in the case of Agreement to Sell or Sell in the case of Power of Attorney " While the sale consideration is fixed at the point of time when agreement to sell is entered in to ; there is some times considerable gap between the date of signing the agreement to sell and the actual execution of the transaction by Sale Deed.
Sec 50C only recognised the stamp duty value on the date when Sale Deed was executed where as the value was agreed between the parties on the basis of agreement to sell .
Finance Act 2016 w.e.f 1st April 2017 i.e AY 2017-18 inserted a proviso under Sec 50C to cover up the Stamp Duty Valuation between the agreement to sell and execution of Sale Deed which is as under:
" Provided that where the agreement fixing the amount of consideration and date of registration for the transfer of the capital asset are not the same; the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purpose of computing full value of consideration for such transfer ."
Provided that this proviso shall apply where either full value of agreed consideration or part there of was received through banking channel either on or before signing of the sell agreement .
With this back ground please consider the following issue.
Whether Insertion of proviso to Sec 50C by Finance Act 2016 w.e.f 1st April 2017 is applicable prospectively w.e.f AY 2017-18 or Retrospectively Starting from the very beginning date when Sec 50C was introduced in the Act i.e AY 2003-04.
*Answer*:
Proviso to Sec 50C introduced by Fin.Act 2016 w e.f 1st April 2017 w.e.f AY 2017-18 is Retrospective in nature that clarification is applicable from the date when Sec 50C was introduced in the Act w.e.f AY 2003-04.
There can not be any dispute that this amendment in Sec 50C was introduced by Fin.Act 2016 w.e f AY 2017-18 which was made to remove an ambiguity ; resulting in undue hardship to the assesee .
Once it is not in dispute that a statutory amendment is being made to remove an apparent anbigiuty such an amendnent has to be treated as effective from the date on which the law containing such an undue hard ship was introduced in the Act.
This view is supported by the judment of *Ahmedabad Tribunal* in the case of " DHARAMSHIBHAI SONANI VS ACIT" following SC Ruling in the case of " CIT VS ALOM EXTRUSION LTD."
Thus amendment in Sec 50C brought by Fin.Act 2016 w.e f AY 2017-18 in considering Stamp Duty Valuation on the date of signing agreement to sell is Retrospective in nature.
*Summary*:
Amendment or insertion of proviso to Sec 50C by the FIN.ACT 2016 w.e.f AY 2017-18 to cover the time gape between agreement to sell and execution of sale deed is applicable retrospectively from the very beginning date when Sec 50C was introduced in the Act w e f AY 2003-04.
This amendment was brought in Sec 50C to mitigate the hardship faced by Taxpayers hence same is applicable Retrospectively.
Hence stamp duty valuation on the date of agreement to sell shall be compared with the agreed sell price for Sec 50C Applicability. |
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