Due to the difference being less than 10%, ITAT deletes the addition under section 50C
Fact and issue of the case
The brief facts of the case are that, the assessee company is engaged in the business of exporters of Pharmaceuticals, formulations, neutraceuticals and medical equipments etc, filed its return of income for the assessment year 2012-13 on 12.09.2012, declaring the total income of Rs. 13,11,34,710/-. The assessment has been completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 06.01.2015 and determined total income of Rs. 13,18,89,331/-, by making additions of Rs. 6,29,504/- towards disallowance of interest expenses on term loan. The assessment has been subsequently re-opened u/s. 147 of the Act and the assessment has been completed u/s. 143(3) r.w.s. 147 of the Act on 18.08.2017 and determined total income of Rs. 14,04,25,531/-, by making additions towards difference between guideline value of the property and sale consideration u/s. 50C of the Act at Rs. 85,36,200/-. The assessee carried the matter in appeal before the first appellant authority and the Ld. CIT(A), for the reasons stated in their appellant order dated 26.04.2019, deleted additions made towards difference in value of consideration received for transfer of property on the ground that, the difference between guideline value and stated consideration is less than 10% and in view of 3rd proviso to section 50C(1) of the Act, if said difference is less than 10%, then no additions can be made. Aggrieved by the Ld. CIT(A) order, the revenue is in appeal before us.
The Ld. DR, Shri. P. Sajit Kumar, submitted that the ld. CIT(A) erred in allowing relief to the assessee by referring to provisions of section 55 of the Act, without appreciating fact that said provision is only with reference to ascertaining cost of the property, but, it does not change the legal position enumerated in section 50C of the Act. He further submitted that, assuming for a moment 10% tolerance limit is applicable on this issue, but fact remains that said amendment is w.e.f. assessment year 2019-20 and thus, same cannot be retrospectively applied for this assessment year.
The Ld. Counsel for the assessee, referring plethora of judicial precedence including the decision of ITAT, Chennai benches in the case of Duraisamy Suresh (HUF) vs PCIT in ITA 609/Chny/2020, submitted that if difference between guideline value and stated consideration is less than tolerance limit fixed by the statue by way of 3rd proviso to section 50C(1) of the Act, then no addition can be made. The Ld. CIT(A), after considering relevant facts has rightly deleted additions and their order should be upheld.
Observation by the tribunal
The tribunal has both the parties, perused materials available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that there is a difference between stated consideration for sale of property and guideline value fixed for payment of stamp duty. In fact, the assessee has admitted the fact that there is a difference of Rs. 85,36,200/-, when compared to guideline value of the property. The arguments of the assessee is that as per 3rd proviso to section 50C(1) of the Act, inserted by the Financial Act, 2018 w.e.f. 01.04.2019, if difference between stated consideration and guideline value does not exceed 10% 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 be deemed to be the full value of consideration. We find that, although said amendment came into statue by Finance Act, 2018 w.e.f. 01.04.2019, but the co-ordinate bench of the Tribunal in the case of Amrapalli Cinema vs ACIT  127 taxmann.com 376 (Delhi), held that amendment made in scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis-à-vis stamp duty valuation from 5% to 10% are effective from date on which section 50C, itself was introduced in the statue. A series of Tribunal decisions have reiterated said legal position and held that amendment in section 50C(1) is curative in nature and must be held to relate back to the date of introduction of section 50C i.e., 01.04.2003 onwards. The ITAT, Chennai benches in the case of Doraisamy Suresh, (HUF) vs ACIT, had also considered an identical issue and held that if difference between stated consideration and guideline value is less than 10% as prescribed under 3rd proviso to section 50C(1), then there cannot be any addition by substituting full value of consideration. In this case, there is no dispute with regard to the fact that difference between stated consideration and guideline value of the property is less than 10% and thus, we are of the considered view that there is no error in the reasons given by the Ld. CIT(A) to delete additions made towards difference between consideration received for sale of property and guideline value of the property and thus, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss the appeal filed by the revenue.
In the result, appeal filed by the revenue is dismissed.
Read the full order from hereDue-to-the-difference-being-less-than-10-ITAT-deletes-the-addition-under-section-50C
The tribunal has ruled in favour of the assessee and dismiss the appeal.