2015 (4) TMI 1045 - AT - Income Tax

Addition being the 1/3rd share of the appellant in the long term capital gain on sale of ancestral agricultural land - adoption of the value of the land as determined by the Valuation Officer under section 50C(2) or accepting the jantri rate prescribed for the area specially in view of the urbanization of the said area undertaken by the State Authorities - Held that - We find that section 50C(2) provides that where the assessee claimed before the AO that the value adopted or assessed by the stamp valuation authority under subsection (1) exceeds the fair market value of the property, on the date of transfer, the AO may refer the valuation of the capital asset to the valuation officer, in such a situation, the lower of value determined by the departmental valuation officer and stamp duty valuation officer shall be considered as consideration accruing to the assessee. Since it has not been disputed by the DR that the value of the property determined by the DVO was lower than the value determined by the stamp duty valuation officer, therefore, we find that there is no infirmity in the order of the CIT(A) in directing the AO to adopt the value determined by the departmental valuation officer, as sale consideration of the property for computing the capital gains in the hands of the assessee. - Decided against revenue.

Summary

Issues:
- Dispute over the valuation of property for determining capital gains under section 48 of the Income Tax Act.
- Applicability of section 50C(2) regarding valuation of property in case of a discrepancy between stamp duty valuation and fair market value.

Analysis:

Issue 1: Dispute over Valuation of Property
The case involved a dispute regarding the valuation of a property sold by the assessee for Rs. 45 lakhs, with the stamp duty valuation by the sub-Registrar at Rs. 2,32,65,900. The Assessing Officer (AO) determined the capital gain based on the stamp duty valuation, leading to an addition of Rs. 65,98,214 to the assessee's income. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] directed the AO to consider the fair market value determined by the valuation officer as the full value of sale consideration for computing capital gains. The CIT(A) found that the reference under section 50C(2) was made at the instance of the assessee, making the valuation officer's determination the appropriate consideration for capital gains calculation under section 48 of the Act.

Issue 2: Applicability of Section 50C(2)
The Revenue contended that the CIT(A) erred in directing the AO to consider the valuation determined by the departmental valuation officer (DVO) for computing capital gains instead of the stamp duty valuation. However, the Tribunal noted that section 50C(2) allows the AO to refer the valuation of the property to the valuation officer if the stamp valuation exceeds the fair market value. In such cases, the lower value between the DVO and stamp duty valuation officer is considered as the sale consideration. As the DVO's valuation was lower in this instance, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s order, emphasizing the importance of adhering to the fair market value determined by the valuation officer in cases of valuation disputes, as outlined in section 50C(2) of the Income Tax Act.