Delhi High Court Quashes Rs. 20 Crore Capital Gains Addition Over Pre-Circle Rate Property Deal
Court Rules Section 50C of Income Tax Act Not Applicable as Agreement to Sell Was Executed Before Rate Hike.
The Delhi High Court has dismissed the Income Tax Department’s appeal challenging the Income Tax Appellate Tribunal’s (ITAT) relief to M/s Thomson Press (India) Ltd. concerning a Rs. 20 crore capital gains addition made under Section 50C of the Income Tax Act.
The bench of Justice Vibhu Bakhru and Justice Tejas Karia relied on its earlier judgment in Principal CIT v. Modipon Ltd., reinforcing that Section 50C cannot be invoked when transactions are validly documented before a rate change, even if the sale deed is executed later.
The appeal was filed by the Principal Commissioner of Income Tax stemming from a 2014-15 reassessment in which the Assessing Officer (AO) alleged undervaluation in the sale of a Noida property by M/s Living Media India Ltd. (later merged with Thomson Press) to M/s Maccons Infra Pvt. Ltd. The AO invoked Section 50C, citing a circle rate increase from Rs. 18,000 to Rs. 28,000 per sq. meter effective August 1, 2013, shortly before the October 11, 2013 sale deed was executed.
However, both the ITAT and the Commissioner of Income Tax (Appeals) had previously ruled in the assessee's favour, noting that the registered agreement to sell was executed and stamp duty paid on May 30, 2013—prior to the circle rate hike. This date, being critical to the transaction, rendered the AO’s capital gains addition unsustainable.
The department contended that since circle rate had increased to Rs. 28,000 per square meter with effect from 01.08.2013 – which was prior to the execution of the sale deed on 11.10.2013 – the addition under Section 50C of the Income Tax Act was warranted.
The court held that the transaction in question was prior to the increase in the stamp duty and was at the value computed in accordance with the prevalent circle rate.
The Court further noted that applying Section 50C in such cases would result in “extreme hardship,” a scenario Parliament intended to remedy through the 2017 amendment inserting a proviso to the section.
Case Details
Case Title: PCIT Versus M/S Thomson Press (India) Ltd.
Case No.: ITA 192/2025
Date: 02.07.2025
Counsel For Petitioner: Puneet Rai
Counsel For Respondent: Salil Aggarwal, Sr Advocate
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
