2014 (4) TMI 1086 - AT - Income Tax

Long term capital gains under section 50C - adoption of sale consideration on the basis of the stamp duty valuation under section 50C OR the sale price received by the assessee - Held that - Find no merit in the stand of the assessee and the objections raised against the Valuation Report have no meaning including the stand of DVO to have adopted commercial rates for valuing the said property as the assessment in the hands of the assessee has not been made on such Valuation Report but on a much lesser value of ₹ 1.25 crores and even if credit is given on account of all the objections raised by the assessee, the value of property adopted in the hands of the assessee is much lower than the value determined by the DVO. Hence, we uphold the order of the CIT (Appeals) in adopting the value assessed by the Stamp Valuation Authorities as the fair market value of the property on the date of transfer in computing the income of the assessee. - Decided in favour of assessee.

Summary

Issues Involved:

1. Adoption of sale consideration for the purpose of long-term capital gains under section 50C of the Income Tax Act, 1961.
2. Valuation of property by the Valuation Officer versus the Stamp Valuation Authority.
3. Consideration of various factors affecting the market value of the property.

Detailed Analysis:

1. Adoption of Sale Consideration Under Section 50C:

The primary issue in this appeal is the adoption of the sale consideration of Rs. 1,25,32,000/- based on the stamp duty valuation under section 50C of the Income Tax Act, 1961, as opposed to the sale price received by the assessee of Rs. 73,60,000/-. The assessee contends that the valuation determined by the Valuation Officer at Rs. 2,97,98,550/- is excessive and should be restricted to the stamp duty valuation of Rs. 1,25,32,000/- for the purpose of long-term capital gains.

2. Valuation by the Valuation Officer Versus Stamp Valuation Authority:

The Tribunal had earlier remitted the matter to the Assessing Officer to refer the property valuation to the Valuation Officer to ascertain the fair market value as of the transfer date. The Valuation Officer assessed the property at Rs. 2.97 crores. However, the CIT (Appeals) restricted this to Rs. 1.25 crores, the value considered by the Stamp Valuation Authority, in accordance with section 50C(3) of the Act. The assessee is aggrieved by the CIT (Appeals) not considering various factors affecting the valuation and restricting it to Rs. 1.25 crores.

3. Factors Affecting Market Value:

The assessee argued that the Valuation Officer adopted commercial rates instead of residential rates, leading to a higher valuation. The property, though residential, was in a commercial area, and various factors such as proximity to a railway track, cremation ground, and uneven plot shape were not adequately considered. The Valuation Officer had given some concessions but maintained the valuation at Rs. 2.97 crores. The CIT (Appeals) directed the Assessing Officer to adopt the stamp duty value of Rs. 1.25 crores, which was lower than the Valuation Officer's assessment.

Tribunal's Findings:

The Tribunal noted that the original assessment under section 143(3) added Rs. 51,72,000/- under section 50C based on the stamp duty valuation of Rs. 1,25,32,000/-. The Tribunal had previously remitted the issue for fresh consideration with a direction to refer the valuation to the Valuation Officer. The Valuation Officer's report valued the property at Rs. 2.97 crores, considering commercial rates, which the assessee contested. The CIT (Appeals) applied the stamp duty valuation of Rs. 1.25 crores, as per section 50C(3), which states that if the Valuation Officer's assessment exceeds the stamp duty valuation, the latter should be adopted.

The Tribunal upheld the CIT (Appeals)'s decision, noting that the objections raised by the assessee were against the Valuation Officer's report, not the stamp duty valuation. The Tribunal found no merit in the assessee's objections, as the final assessment was based on the stamp duty valuation of Rs. 1.25 crores, which was lower than the Valuation Officer's assessment. The Tribunal confirmed that the value assessed by the Stamp Valuation Authorities should be taken as the fair market value for computing the income of the assessee.

Conclusion:

The appeal filed by the assessee was dismissed, confirming the order of the CIT (Appeals) to adopt the stamp duty valuation of Rs. 1.25 crores as the fair market value for the purpose of long-term capital gains under section 50C of the Income Tax Act, 1961. The Tribunal found no merit in the assessee's objections to the Valuation Officer's report, as the final assessment was based on a lower value determined by the Stamp Valuation Authorities.