2011 (2) TMI 1284 - AT - Income Tax

Capital gains - Special provision for full value consideration in certain cases, Cost of acquisition

Summary

Issues Involved:
1. Applicability of Section 50C to the assignment of development rights.
2. Valuation adopted by the stamp duty authorities.
3. Credit for FSI of flats received back by the appellant.
4. Deduction under Section 54 for the fair market value of the flat allotted.
5. Reference to the District Valuation Officer (DVO).

Detailed Analysis:

1. Applicability of Section 50C to the Assignment of Development Rights:
The assessee contended that Section 50C applies only to the transfer of land or building and not to development rights. The Tribunal rejected this contention, stating that Section 50C is applicable when rights to develop the property are transferred, as it falls under the definition of "transfer" under Section 2(47) of the Income-tax Act, which includes the relinquishment of an asset.

2. Valuation Adopted by the Stamp Duty Authorities:
The assessee argued that the valuation by the stamp duty authorities was unrealistic and extremely high. The Tribunal noted that the Assessing Officer should have referred the matter to the DVO under Section 50C(2) of the Act, as the assessee had objected to the valuation. The Tribunal directed the Assessing Officer to refer the valuation matter to the DVO and recompute the capital gain based on the DVO's findings.

3. Credit for FSI of Flats Received Back by the Appellant:
The assessee argued that the FSI of the flats received should be considered part of the sale consideration. The Tribunal found merit in the argument that only the development rights for 4171.48 sq.ft. were transferred to the developer, and the retained FSI should not be considered as transferred. The Tribunal directed that the capital gain should be computed based on the area actually transferred.

4. Deduction under Section 54 for the Fair Market Value of the Flat Allotted:
The assessee claimed a deduction under Section 54 for the fair market value of the flat allotted. The Tribunal upheld the CIT(A)'s decision to allow the deduction of Rs. 8,50,000 for the cost of the flat paid by the assessee, reducing the capital gain accordingly.

5. Reference to the District Valuation Officer (DVO):
The Tribunal emphasized that the Assessing Officer should have referred the valuation to the DVO as per the provisions of Section 50C(2) since the assessee had raised objections. The Tribunal restored the issue of valuation to the file of the Assessing Officer with instructions to refer the matter to the DVO and recompute the capital gain after obtaining the DVO's valuation.

Conclusion:
The Tribunal partly allowed the assessee's appeal for statistical purposes, directing the Assessing Officer to refer the valuation matter to the DVO and recompute the capital gain based on the findings and directions provided. The Tribunal upheld the applicability of Section 50C to the transfer of development rights and allowed the deduction under Section 54 for the cost of the flat allotted to the assessee.