N.K. Billaiya, Accountant Member - This appeal by the assessee is directed against the order of Ld. CIT (A)-XV, Ahmedabad dated 13.08.2012 pertaining to A.Y. 2006-07.
2. The substantive grievance of the assessee read as under:—
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The C.I.T. (Appeals) erred in upholding the addition of Rs. 7,66,666/- as deemed income u/s. 50C of the I.T. Act. |
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The C.I.T. (Appeals) failed to appreciate that sec.50C of the Act does not apply in the case of the assessee. |
3. Briefly stated the facts of the case are that the assessee entered into Banakhat for land at Village Vadaj having area of 489 square meters at the rate of 605 per square meter on 24.09.1993. This Banakhat was registered without possession of the land on 27.10.1993. On 22.11.1993, assessee entered into another Banakhat of the aforementioned land with Shri Vimal R. Ambani and Indravadan Barot @ 1000 per square meter. This Banakhat was registered on 19.03.1994 without giving any possession of the land. On 19.04.2005, Shri Prafulchandra P. Patel (HUF) from whom the assessee entered into Banakhat on 24.09.1993 (supra) entered into a sale transaction with Shri Vimal R. Ambani and Indravadan Barot to whom the assessee had entered into Banakhat on 22.11.1993 (supra). This sale deed was registered.
4. The A.O was of the firm belief that it is the assessee who has sold the property and, therefore, taking a leaf out of the provisions of Section 50C of the Act, The A.O adopted the stamp duty value of the registered sale deed as the full value of consideration and re-computed the capital gains.
5. Assessee carried the matter before the ld. CIT(A) but without any success. Before us, the ld. counsel for the assessee vehemently stated that what has been transferred is a right and, therefore, provisions of Section 50C of the Act are not at all applicable. It is the say of the ld. counsel that even in the impugned transaction the seller is Shri Prafulchandra P. Patel (HUF) and the assessee is only a consenting party and by giving consent, the assessee has only transferred his rights. The ld. D.R strongly supported the findings of the revenue authorities.
6. We have gone through the orders of the authorities below. We have also given a thoughtful consideration to the factual matrix as mentioned elsewhere. There is no denying that the purchase and sale transaction took place between Shri Prafulchandra P. Patel and Shri Vimal R. Ambani/Indravadan Barot. It is also an undisputed fact that for the impugned land, assessee had entered into a Banakhat on 24.09.1993 with Shri Prafulchandra Patel sold the land, assessee had only relinquished his right in property.
7. From the reading of Section 50C, it is evident that Section 50C is a deeming provision and it extends only to land or building or both. Section 50C can come into play only in a situation where the consideration received or accruing as a result of the transfer by an appellant of a capital asset, being land or building or both is less than the value adopted or assessed or assessable for the purpose of payment of stamp duty in respect of such transfer. It is settled legal proposition that deeming provision can be applied only in respect of the situation specifically given and, hence, cannot go beyond the explicit mandate of the section. Clearly, therefore, it is essential for application of Section 50C that the transfer must be of a capital asset, being land or building or both. If the capital asset under transfer cannot be described as 'land or building or both', then Section 50C will cease to apply.
8. From the facts of the case as mentioned elsewhere, it is seen that the assessee has transferred only rights in the impugned land which cannot be equated to land or building or both. Therefore, in our understanding of the fact qua the provisions of Section 50C, the action of the revenue authorities is erroneous. We, therefore, set aside the findings of the ld. CIT(A) and direct the A.O to delete the addition of Rs. 7,66,666/- ad deemed income u/s. 50C of the Act. In the result, the appeal filed by the assessee is allowed.
9. Before parting, it was brought to the notice that the CBDT has issued Circular No. 549, dated 31.10.1989 by which it has issued directions that total income of the assessee cannot be less than the returned income. The Hon'ble High Court of Gujarat in the case of Gujarat Gas Co. Ltd. v. Jt. CIT [2000] 245 ITR 84/111 Taxman 144has held that the Assessing Officer is not bound by the said Circular as the CBDT cannot issue instructions to the income tax authority to make a particular assessment or to dispose of a particular case in a particular manner as well as not to interfere with the discretion of the Commissioner in exercise of his appellate functions. Accordingly, the Circular was held to be ultra vires. We order accordingly.