Application of Section 50C is prospective in nature

Facts of the case:

1. Assessee sold one property during the previous year 2004-2005. The property was sold through agreement to sell and the agreement was not registered with stamp valuation authority.
2. Post agreement to sell, possession of property was handed over to the buyer and sales consideration was also received in full from buyer.
3. The assessee filed her return stating sales consideration to be less than stamp duty value.
4. The case was taken up for scrutiny by A.O. The A.O held that sales consideration shall be the stamp duty value and simultaneously held that property is intentionally sold at a price below fair value by the assessee.

Provisions/Rulings

1. Section 50C stipulates that Stamp Duty Value(SDV) shall be considered as sales consideration in case of immovable property when the sales consideration is less than the SDV. When the section was introduced in 2003, the section was applicable only in those cases where property gets registered. So what people used to do is to transfer property through “Agreement to sell” or “Power of Attorney” and not get property registered so as to get away from the clutches of Section 50C.
2. Consequently amendment was brought in to Section 50C by Finance Act, 2009 which stated that Section 50C shall be applicable also in those cases where value is assessable(earlier it used to be assessed) by Stamp Valuation Authorities. So cases of transfer through “Agreement to sell” or “Power of Attorney” will also get squarely covered by Section 50C.
3. The amendment in Section 50C was made applicable from 01.10.2009.
4. Circular No.5/2010 also elucidated that amendment in Section 50C is only prospective in nature and cannot be applied retrospectively.

Question of Dispute:

Whether provisions of Section 50C can also be made applicable retrospectively?

Madras HC Ruling:

1. Circulars issued by the Revenue are binding on the Department and therefore, they cannot repudiate that they are inconsistent with the statutory provisions.
2. The insertion of word “assessable” is a significant amendment and certainly will have prospective application.
3. Since in present case, transfer was made before 01.10.2009, provisions of Section 50C cannot be brought into force in the case in hand.

Essence of Above:

1. Departmental circulars are binding on the revenue and that department cannot contend that the circular are against the statutory provisions.
2. Amendment brought in Section 50C by Finance Act, 2009 is prospective in nature and cannot be applied to transactions undertaken prior to 01.10.2009.