{"id":1840,"date":"2016-02-29T09:53:22","date_gmt":"2016-02-29T09:53:22","guid":{"rendered":"http:\/\/caindelhiindia.com\/blog\/?p=1840"},"modified":"2020-10-14T06:57:40","modified_gmt":"2020-10-14T06:57:40","slug":"corporate-and-professional-update-february-24-2016","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/corporate-and-professional-update-february-24-2016\/","title":{"rendered":"CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 24, 2016"},"content":{"rendered":"

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 24, 2016<\/span><\/h2>\n
\"www.caindelhiindia.com;<\/a>
www.caindelhiindia.com; CORPORATE UPDATES<\/figcaption><\/figure>\n

ROLE OF DEEMING FICTION OF SEC. 50C TO CLAIM RELIEF UNDER SEC. 54\/54F<\/strong><\/span><\/p>\n

    \n
  1. Introduction:<\/strong><\/span><\/li>\n<\/ol>\n

    Section 50C of the Income-tax Act (the Act) was introduced with effect from 1st<\/sup>\u00a0April, 2003 by the Finance Act, 2002. The purpose of this section was explained thus by the Memorandum to the Finance Bill 2002:<\/p>\n

    “The Bill proposes to insert a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property.<\/em><\/p>\n

    It is proposed to provide that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act<\/em>.”<\/p>\n

      \n
    1. Controversies relating to deeming fiction of Section 50C:<\/strong><\/span><\/li>\n<\/ol>\n

      When this provision was introduced the Legislature would not have envisaged that so much of controversy would arise as has happened already.<\/p>\n

      To illustrate the following few case laws may be gone through-<\/p>\n

      The Mumbai Bench of ITAT in the case of\u00a0Raj Babbar v. ITO<\/em>\u00a0<\/em>[2013] (Mumbai – Trib.)<\/em>\u00a0held that where investment in new asset was more than net consideration received as well as full value of consideration computed as per section 50C, assessee would not be chargeable to capital gains.<\/p>\n

      The Indore Bench of ITAT in the case of\u00a0Dhanveer Singh Gambhir v. ITO<\/em>\u00a0<\/em>[2015] \u00a0(Indore – Trib.)<\/em>\u00a0decided in favour of Revenue by holding that while allowing deduction under section 54 of the Act from long-term capital gain, provision of section 50C was not applicable.<\/p>\n

      The Bangalore Bench of ITAT in the case of\u00a0Gouli Mahadevappa v. ITO<\/em>\u00a0<\/em>[2011] 128 ITD 503\/[2010]<\/em>held that for computing Capital Gain, section 50C has to be taken into consideration but the exemption under section 54F or 54 of the Act being a complete Code in itself, exemption has to be worked out as per the provisions of that section itself. This decision which was cited before the Indore Bench in this case was distinguished after making the following observations at para.14 of its order<\/p>\n

      “As per the provisions of Section 54, exemption is allowable with reference to the amount of Capital Gain and not with reference to the amount of net consideration. Therefore, the issue which arose with reference to exemption under Section 54F wherein exemption is allowed with reference to amount of net consideration does not arise in granting exemption under Section 54.”<\/p>\n

      The decision of the Bangalore Bench in the case of\u00a0Gouli Mahadevappa<\/em>(supra) was approved by the Karnataka High Court on the point of allowing exemption with reference to section 54F of the Act inGouli Mahadevappa v. ITO<\/em>\u00a0<\/em>[2013] 33 <\/em>. The Karnataka High Court also enlarged the deduction under section 54F of the Act by holding that “where capital gain is assessed on notional basis, whatever amount is invested in new residential house within prescribed period under section 54F of the Act, entire amount so invested, would get benefit of deduction, irrespective of fact that funds from other sources are also utilized for new residential house.” The assessee had claimed, apart from investing the net consideration, a further sum of Rs.4 lakhs invested out of agricultural income under section 54F of the Act and this claim which was negatived till the Tribunal’s stage was allowed by the High Court.<\/p>\n

      The ITAT Jaipur Bench in the case of\u00a0Nand Lal Sharma v. ITO<\/em>\u00a0<\/em>[2015] (Jp. – Trib.)<\/em>following the decision of the Delhi High Court in the case of\u00a0CIT v. Smt. Nilofer I. Singh<\/em>\u00a0<\/em>[2009] (Delhi)<\/em>\u00a0held that while computing exemption under section 54 of the Act, actual sale consideration has to be taken into consideration and not stamp duty valuation under section 50C of the Act. The Delhi High Court in\u00a0Smt. Nilofer I. Singh’s<\/em>\u00a0case (supra<\/em>) held that “the expression ‘full value of consideration’ used in section 48 does not have any reference to market value but only to consideration referred to in sale deeds as sale price of assets which have been transferred”.<\/p>\n

      The Mumbai Bench of ITAT in the case of\u00a0Bhaidas Cursondas & Co. v. Addl. CIT<\/em>\u00a0<\/em>[2015] \u00a0(Mum.)<\/em>\u00a0has held that deeming provision under section 50C applies to compute capital gains and not to determine written down value of relevant block of assets.<\/p>\n

      III FURTHER CONTROVERSY IDENTIFIED BY TAX REFORMS PANEL<\/strong><\/span><\/p>\n

      “Amendment proposed in Section 50C:<\/strong>\u00a0<\/strong><\/span>The scope of section 50C was extended w.e.f. A.Y. 2010-11 to the transaction which were executed through agreement to sell or power of attorney. However, the present provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement. Hence, the Committee has suggested to amend the provisions of Section 50C to provide that where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value as on the date of the agreement shall be deemed to be the full value consideration of the property. Such provision shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before a date of agreement for transfer of the asset”<\/p>\n

      Actually this issue identified by the Reforms Panel arose in the case decided by the ITAT Kolkata Bench in the case of\u00a0Heilgers Development & Construction Co. (P.) Ltd. v. Dy. CIT<\/em>\u00a0<\/em>[2013] 32 taxmann.com 147 (Kol. – Trib.)<\/em>wherein the issue was decided against the assessee in the absence of official confirmation of increase in prices.<\/p>\n

      IV CONCLUDING REMARKS:<\/strong><\/span><\/p>\n

      It is suggested that suitable explanation may be added to section 50C of the Act clearly explaining that investment can be made in section 54\/54F in appropriate cases covering the deemed value as adopted in section 50C of the Act for the purpose of claiming exemption under these provisions. It is also suggested that the recommendation of the Tax Reforms Panel (with regard to adopting stamp duty value on the date of a genuine sale agreement) should be accepted, even if there is an increase in stamp value on the date of executing and registering sale deed.<\/p>\n

      The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances;Hope the information will assist you in your Professional \u00a0 endeavors. For query or help, contact: \u00a0info@caindelhiindia.com\u00a0or call at \u00a0011-233-43-333<\/p>\n","protected":false},"excerpt":{"rendered":"

      CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 24, 2016 ROLE OF DEEMING FICTION OF SEC. 50C TO CLAIM RELIEF UNDER SEC. 54\/54F Introduction: Section 50C of the Income-tax Act (the Act) was introduced with effect from 1st\u00a0April, 2003 by the Finance Act, 2002. The purpose of this section was explained thus by the Memorandum to the Finance …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[173,142],"tags":[502,501,569,572,179,546,180,561,214,181,735,562,560,550,538],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/1840"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=1840"}],"version-history":[{"count":4,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/1840\/revisions"}],"predecessor-version":[{"id":3009,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/1840\/revisions\/3009"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=1840"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=1840"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=1840"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}