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2016 (8) TMI 55 - AT - Income TaxCapital gain computation - determination by the stamp duty valuation authorities for stamp duty purpose - reference matter to DVO - Held that - In case the assessee disputes the value as adopted by the stamp duty valuation authorities for stamp duty purposes, the AO is bound to refer the matter to DVO for determining the fair market value of the property and in case DVO valued the fair market value of the property at a value higher than stamp duty value adopted by Stamp duty valuation authorities, then the value adopted for stamp duty by stamp duty valuation authorities shall be taken as full value of consideration for computing capital gains. In our considered view, the value of ₹ 1,77,12,000/- as determined by the stamp duty valuation authorities for stamp duty purposes shall be adopted as full value of consideration for the purposes of Section 48 of the Act for computing long term capital gains in the hands of the assessee due to deeming fiction of Section 50C of the Act, instead of the value of the land of ₹ 2,09,28,000/- as determined by the DVO, while on the other hand the actual sale consideration is ₹ 72,00,000/- . The assessee s share in the land is 13.5417% and hence full value of consideration will work out to ₹ 23,98,500/- which for the purposes of Section 48 of the Act shall be adopted as full value of consideration of sale of land as per provisions of Section 50C of the Act for computing long term capital gains chargeable to tax.
Issues Involved:
1. Assessing the sale of agricultural land under Section 45 of the Income Tax Act, 1961. 2. Application of Section 50C of the Income Tax Act, 1961. 3. Classification of the land as a capital asset or agricultural land. 4. Determination of the sale value of the land. 5. Adoption of enhanced value for the land. 6. Levy of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961. 7. Initiation of penalty under Section 271(1)(c) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Assessing the Sale of Agricultural Land under Section 45: The CIT(A) directed the sale of agricultural land to be assessed under Section 45 of the Income Tax Act, 1961, and applied Section 50C, after deleting the addition under Section 68. The assessee contended that the land was agricultural and should not be taxed as a capital asset. However, the CIT(A) observed that the land was within 2 km of Lonavala Municipality and did not have evidence of agricultural operations, classifying it as a capital asset under Section 2(14). 2. Application of Section 50C: The CIT(A) adopted the value determined by the DVO at ?2,09,28,000 instead of the sale value of ?72,00,000. The assessee argued that the value should be the stamp duty valuation of ?1,77,12,000 as per Section 50C(3). The Tribunal held that the value of ?1,77,12,000 should be adopted as the full value of consideration for computing long-term capital gains. 3. Classification of the Land: The assessee claimed the land was agricultural and exempt from capital gains tax. However, the Tribunal noted that the land was declared as forest land under the Maharashtra Private Forests (Acquisition) Act, 1975, and no agricultural operations were carried out. Thus, it was classified as a capital asset under Section 2(14) and subject to capital gains tax. 4. Determination of Sale Value: The AO initially added ?23,98,500 to the assessee's income under Section 68, while the CIT(A) assessed the value at ?28,33,651 based on the DVO's report. The Tribunal concluded that the stamp duty valuation of ?1,77,12,000 should be used, resulting in a proportionate share of ?23,98,500 for the assessee. 5. Adoption of Enhanced Value: The CIT(A) adopted the DVO's valuation, but the Tribunal held that the stamp duty valuation should be used as per Section 50C(3), resulting in a lower value than the DVO's assessment. 6. Levy of Interest: The Tribunal noted that the chargeability of interest under Sections 234A, 234B, and 234C is consequential and did not require separate adjudication. 7. Initiation of Penalty: The Tribunal found the initiation of penalty under Section 271(1)(c) to be premature and dismissed this ground. Conclusion: The appeal was partly allowed, with the Tribunal directing the adoption of the stamp duty valuation for computing long-term capital gains and dismissing the initiation of penalty as premature. The order was pronounced in the open court on 28th July 2016.
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