Delhi High Court Rejects Income Tax Department’s Appeal Over Thomson Press Property Sale

The Delhi High Court has dismissed an appeal filed by the Income Tax Department against Thomson Press (India) over the sale of a Noida property in 2013. The department had alleged that the sale was made at a price lower than the applicable circle rate, suggesting underreporting of income to evade tax.

Background of the Case

According to the Income Tax Department, M/s Living Media India Ltd., which owns Thomson Press, sold a property in Noida to M/s Maccons Infra Pvt. Ltd. at a rate of ₹18,000 per square meter, while the prevailing circle rate was ₹28,000 per square meter. The department pointed out that Maccons Infra later merged into Living Media itself, raising doubts about the genuineness of the transaction.

Based on these suspicions, the tax department invoked Section 50C of the Income Tax Act, attempting to add nearly ₹20 crore to the taxable income of Living Media.

What is Section 50C?

Section 50C of the Income Tax Act deals with the sale of capital assets like land and buildings. If the declared sale price is less than the circle rate (used for stamp duty), the department can treat the higher circle rate as the actual sale price to calculate capital gains tax.

Court’s Observation on the Timing of the Sale

The court, led by Justices Vibhu Bakhru and Tejas Karia, noted that:

• The agreement to sell was executed on May 30, 2013
• The stamp duty was also paid on the same day
• The circle rate was increased only after that, with effect from August 1, 2013
• The sale deed was registered later on October 11, 2013

Given these facts, the court held that the sale price matched the circle rate that was valid at the time of the agreement, and the subsequent increase in circle rate could not be applied retrospectively to the earlier transaction.

ITAT’s Findings Upheld

The Income Tax Appellate Tribunal (ITAT) had already rejected the Revenue’s argument earlier, stating that the transaction was genuine and the payment had started even before the agreement to sell. The Delhi High Court agreed with ITAT’s view and said the circle rate at the time of the agreement is what matters, not the rate on the date of the sale deed.

The court emphasized that Section 50C cannot be applied retrospectively, and doing so would be unfair and legally incorrect.

Reference to Earlier Ruling

The bench referred to a previous decision in Principal Commissioner of Income Tax-6 v. Modipon Limited, where the court had ruled that the relevant circle rate is the one applicable at the time of agreement, not at the time of registration. Based on this precedent, the court found no merit in the tax department’s appeal.

Final Judgment

The Delhi High Court concluded that the property sale was conducted fairly and in accordance with the law at the time. It found no evidence of tax evasion or underreporting. As a result, the court dismissed the appeal filed by the Income Tax Department.

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