Legal Background:-
Section 50C of the Income Tax Act, 1961 was inserted by Finance Act (“FA”) 2002 w.e.f 01-04-2003. It provides that where the consideration received or accrued as a result of transfer of capital asset by the assesee being land or building or both is less that value adopted or assessed or assessable1 by stamp valuation authority for the purpose of payment of stamp duty then the value adopted or assessed or assessable shall deemed to be full value consideration for the purpose of computing the capital gain.
The very purpose of introducing the section is to counter suppression of sale consideration on sale of immovable properties, being land or building or both. The section provides for rebuttable presumption that the value adopted for the purpose of computing stamp duty by the competent authorities fairly indicates the market value of the property sold.
The Provisions of section 50C are applicable in case of transfer of Capital Asset. Similar provisions are contained in section 43CA which was introduced by FA 2013 w.e.f 01-04-2014. The said section deals with the immovable property, being land or building or both, held as a stock in trade.
Different dates and relief available:-
Section 43CA(3) provides that where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer are not the same then the value assessable for the purpose of payment of stamp duty on the date of agreement may be taken for computing the income.
This relief is available subject to the condition that the amount of consideration or part thereof has been received by a mode other than cash on or before the agreement for the transfer of asset. (Section 43CA (4)) .
However, similar relief was not available to the assesee under section 50C.
Amendment by FA 2016:-
The Income Tax Simplification Committee has in its first report point out that the provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of immovable property.
Considering the Tax Simplification Committee recommendations two provisos were added to the provisions of Section 50C.
The amendment was made applicable w.e.f 01-04-2017. The amendment by FA 2016 to the section 50C provides that:-
Where the date of agreement fixing the amount of consideration and the date of registration of capital asset are not same, the value adopted or assessed or assessable by the Stamp Valuation Authority on the date of agreement may be taken the purpose of computing the full value consideration for such transfer.
Provided that the amount of consideration or part thereof, has been received by way of account payee cheque or account payee draft or by use of electronic system through bank account on or before the date of agreement for transfer.
Issue:-
Whether the amendment brought by the FA 2016 has retrospective or prospective application?
The above issue was answered by the tribunal2 which held that the amendment has been made to remove the incongruity, resulting in undue hardship to the assesee, such amendment has be treated as effective from the date on which the law containing such undue hardship was introduced.
Reference was mad to the Judgement of Agra Bench of ITAT3 where in it was held that an amendment in law to cure shortcomings of provision and thus obviate the unintended hardships, in view of the well settled legal position to the effect that amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically. (Judgement summarized).
The present amendment, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect. 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 proviso to Section 50 C should also be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the date effective from which Section 50C was introduced.
Conclusion:- On the basis of above judgement and other relevant judgements4 on the issue of applicability of amendment retrospectively one can conclude that the amendment in law to cure shortcomings of provision and thus obviate the unintended hardships is to be applied retrospectively from the date on which the related provision was introduced.
