Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 30.06.2023 passed by the Income Tax Appellate Tribunal in ITA No. 9342/Del/2019 for Assessment Year 2014-15. The appeal arose from reassessment proceedings initiated under Section 147 read with Section 143(3), wherein the Assessing Officer made an addition of ₹20 crore under Section 50C of the Act.

The addition related to sale of an immovable property being Plot No. 9, measuring 20,000 square metres, located at Sector-132, Noida. The property was sold by M/s Living Media India Limited to M/s Maccons Infra Private Limited at ₹18,000 per square metre. Subsequently, Living Media India Limited merged with the assessee, Thomson Press (India) Ltd.

A search under Section 132 was conducted in the case of the Maccons Group on 27.11.2014, during which the sale deed dated 11.10.2013 was found. The Assessing Officer noted that the circle rate applicable on the date of sale deed had increased to ₹28,000 per square metre with effect from 01.08.2013 and accordingly computed the sale consideration at ₹56 crore by invoking Section 50C.

Issues Involved

Whether Section 50C could be applied by adopting the circle rate prevailing on the date of execution of the sale deed despite the existence of a prior registered agreement to sell, whether the subsequent enhancement of circle rate could justify addition under Section 50C, and whether any substantial question of law arose from deletion of the addition by the ITAT.

Petitioner’s Arguments

The Revenue argued that since the circle rate stood enhanced to ₹28,000 per square metre before execution of the sale deed on 11.10.2013, the Assessing Officer was justified in applying Section 50C and making an addition of ₹20 crore. It was further contended that the ITAT erred in granting relief by applying the proviso to Section 50C, which was introduced with effect from 01.04.2017 and was not applicable to Assessment Year 2014-15.

Respondent’s Arguments

The assessee contended that the registered agreement to sell was executed on 30.05.2013, prior to enhancement of the circle rate, and stamp duty of ₹72 lakh was paid on the same date based on the then prevailing circle rate of ₹18,000 per square metre. It was argued that the transaction was fully concluded at arm’s length and at the prevailing circle rate applicable on the date of agreement to sell, and therefore Section 50C could not be invoked merely because the circle rate increased subsequently. Reliance was placed on the Delhi High Court judgment in PCIT-6 vs. Modipon Limited.

Court Order / Findings

The Delhi High Court observed that it was undisputed that the registered agreement to sell was executed on 30.05.2013 and stamp duty was paid on that date at the circle rate then in force. The Court held that the transaction in question was entered into prior to enhancement of the circle rate and was at a value commensurate with the prevailing circle rate.

The Court rejected the Revenue’s contention that the circle rate as on the date of execution of the sale deed should alone be considered. It held that where there is adequate external evidence in the form of a registered agreement to sell and adherence to agreed payment schedules, subsequent enhancement of circle rates cannot trigger application of Section 50C. The Court relied on its earlier decision in PCIT-6 vs. Modipon Limited, where similar facts were considered and the Revenue’s appeal was dismissed.

The Court further held that in view of the factual finding that the transaction was not undervalued at the material time, the question of retrospective applicability of the proviso to Section 50C was irrelevant. It concluded that no substantial question of law arose for consideration.

Important Clarification

The Court clarified that Section 50C cannot be applied mechanically by adopting the circle rate as on the date of sale deed where a prior registered agreement to sell exists and stamp duty has been paid at the then prevailing circle rate. Application of Section 50C in such circumstances would lead to undue hardship and is contrary to settled judicial principles.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court upheld the order of the Income Tax Appellate Tribunal deleting the addition of ₹20 crore made under Section 50C for Assessment Year 2014-15. It was held that no substantial question of law arose for consideration, and the decision was rendered in favour of the assessee and against the Revenue.

 

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769595070_PR.COMMISSIONEROFINCOMETAXDELHI7VsTHOMSONPRESSINDIALTD.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.