Taxpublishers.in - InterestingDecision/Flash_014.htm - Tax Publishers Your Tax Solution Hub

Share via Whatsapp 190 Views


Tax Publishers Dulari Devi Hetamsaria v. ACIT [ITA No. 1290/Kol/2018, dt. 12-6-2020] : 2020 TaxPub(DT) 2506 (Kol-Trib) Retrospectivity of Proviso 3 to section 50C(1) thereof *Facts* Assessee had constructed his house and show room for Rs. 1.66 crores. Arising out of a reference to Departmental valuation officer by assessing officer the DVO estimated its cost to be Rs. 1.76 crores. The difference of Rs. 10 lakhs was added by Commissioner (Appeals) as unexplained investments under section 69. On higher appeal by assessee. Held by the ITAT in favour of the assessee holding that since the variation in valuation was not more than 10% no addition could be sustained. Proviso 3 to section 50C(1) which confers the benefit of 10% variation to assessee is not a substantive provision but only a clarificatory provision thus has to be read retrospective with effect from 1-4-2003 which is the date when section 50C was introduced. The said proviso was introduced with effect from 1-4-2019 vide Finance Act, 2018 conferring an tolerance of 5%. Now Finance Act, 2020 has amended the same with effect from 1-4-2021 to increase the 5% to 10%. *Applied* : Chandra Prakash Jhunjhunwala v. DCIT [ITA No. 2351/Kol/2017, dt. 9-8-2019] : 2019 TaxPub(DT) 5432 (Kol-Trib) "10.We note that now the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically. Hence the insertion of third proviso to section 50C must be given retrospective effect from the point of time when the related legal provision was introduced, as this amendment is procedural one to compute the value of property. At the cost of repetition, we again reproduce the third proviso to section 50C as follows: The following proviso shall be ins. by Finance Act, 2018 (with effect from 1-4-2019): Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. We note that this third proviso relates to determination of value of property therefore it cannot be a substantive amendment. Normally substantive amendments in law in applicable prospective. In view of these discussions, as also for the detailed reasons set out earlier, it is a procedural amendment in law to help the assessee to determine the value or to compute the value of property hence this amendment is not to punish the assessee just because there is minor variation between stamp duty value and the sale consideration. We note that the statute such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, for that we rely on the judgment of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (2009) 185 Taxman 416 (SC) : 2009 TaxPub(DT) 2109 (SC) wherein it was held as follows: Similar retrospective reading of proviso 3 to section 50C(1) was also done by Mumbai ITAT in M/s John Flower (India) Pvt. Ltd. in ITA No. 7545/Mum/2014, for assessment year 2010-11, order dated 25-1-2017 held that if the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%, the same should be ignored and no adjustments shall be made. Accordingly, we hold that the insertion of third proviso (noted above) to section 50C of the Act is declaratory and curative in nature. That is, the third proviso to section 50C of the Act relates to computation of value of property as explained by us above, hence it is not a substantive amendment, it is only a procedural amendment therefore the Coordinate Benches of the ITAT used to ignore the variation up to 10%, therefore, the said amendment should be retrospective. Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the third proviso to section 50C should be treated as curative in nature and with retrospective effect from 1-4-2003, i.e., the date effective from which section 50C was introduced". "We note that Finance Act, 2018, with effect from 1-4-2019 provided that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than 5% of the sale consideration. In the assessees case under consideration, the stamp duty valuation is Rs. 3,27,01,950 and sale consideration is Rs. 3,15,00,000. The difference of Rs. 12,01,950 is not more than 5% of the sale consideration. That is, it is at 3.81% [12,01,950 / 3,15,00,000 x 100] of sale consideration, therefore, we delete the addition of Rs. 12,01,950." *Editorial Note:* Section 43CA is also analogous to section 50C and thus proviso to section 43CA(1) will also need to be read retrospectively as Finance Act, 2020 has made amendment there as well so it was in Finance Act, 2018 as well where the proviso stood introduced. Section 43CA was introduced vide Finance Act, 2013 with effect from 1-4-2014 so retrospectivity has to be read from this date.

Tax Publishers

Dulari Devi Hetamsaria v. ACIT [ITA No. 1290/Kol/2018, dt. 12-6-2020] : 2020 TaxPub(DT) 2506 (Kol-Trib)

Retrospectivity of Proviso 3 to section 50C(1) thereof

Facts

Assessee had constructed his house and show room for Rs. 1.66 crores. Arising out of a reference to Departmental valuation officer by assessing officer the DVO estimated its cost to be Rs. 1.76 crores. The difference of Rs. 10 lakhs was added by Commissioner (Appeals) as unexplained investments under section 69. On higher appeal by assessee.

Held by the ITAT in favour of the assessee holding that since the variation in valuation was not more than 10% no addition could be sustained.

Proviso 3 to section 50C(1) which confers the benefit of 10% variation to assessee is not a substantive provision but only a clarificatory provision thus has to be read retrospective with effect from 1-4-2003 which is the date when section 50C was introduced. The said proviso was introduced with effect from 1-4-2019 vide Finance Act, 2018 conferring an tolerance of 5%. Now Finance Act, 2020 has amended the same with effect from 1-4-2021 to increase the 5% to 10%.

Applied : Chandra Prakash Jhunjhunwala v. DCIT [ITA No. 2351/Kol/2017, dt. 9-8-2019] : 2019 TaxPub(DT) 5432 (Kol-Trib)

"10.We note that now the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically. Hence the insertion of third proviso to section 50C must be given retrospective effect from the point of time when the related legal provision was introduced, as this amendment is procedural one to compute the value of property. At the cost of repetition, we again reproduce the third proviso to section 50C as follows:

The following proviso shall be ins. by Finance Act, 2018 (with effect from 1-4-2019): Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.

We note that this third proviso relates to determination of value of property therefore it cannot be a substantive amendment. Normally substantive amendments in law in applicable prospective. In view of these discussions, as also for the detailed reasons set out earlier, it is a procedural amendment in law to help the assessee to determine the value or to compute the value of property hence this amendment is not to punish the assessee just because there is minor variation between stamp duty value and the sale consideration. We note that the statute such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, for that we rely on the judgment of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (2009) 185 Taxman 416 (SC) : 2009 TaxPub(DT) 2109 (SC) wherein it was held as follows:

Similar retrospective reading of proviso 3 to section 50C(1) was also done by Mumbai ITAT in M/s John Flower (India) Pvt. Ltd. in ITA No. 7545/Mum/2014, for assessment year 2010-11, order dated 25-1-2017 held that if the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%, the same should be ignored and no adjustments shall be made.

Accordingly, we hold that the insertion of third proviso (noted above) to section 50C of the Act is declaratory and curative in nature. That is, the third proviso to section 50C of the Act relates to computation of value of property as explained by us above, hence it is not a substantive amendment, it is only a procedural amendment therefore the Coordinate Benches of the ITAT used to ignore the variation up to 10%, therefore, the said amendment should be retrospective. Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the third proviso to section 50C should be treated as curative in nature and with retrospective effect from 1-4-2003, i.e., the date effective from which section 50C was introduced".

"We note that Finance Act, 2018, with effect from 1-4-2019 provided that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than 5% of the sale consideration. In the assessees case under consideration, the stamp duty valuation is Rs. 3,27,01,950 and sale consideration is Rs. 3,15,00,000. The difference of Rs. 12,01,950 is not more than 5% of the sale consideration. That is, it is at 3.81% [12,01,950 / 3,15,00,000 x 100] of sale consideration, therefore, we delete the addition of Rs. 12,01,950."

Editorial Note: Section 43CA is also analogous to section 50C and thus proviso to section 43CA(1) will also need to be read retrospectively as Finance Act, 2020 has made amendment there as well so it was in Finance Act, 2018 as well where the proviso stood introduced. Section 43CA was introduced vide Finance Act, 2013 with effect from 1-4-2014 so retrospectivity has to be read from this date.