2015 (6) TMI 415 - AT - Income Tax

Addition on account of long term capital gain - whether section 50C of the Act would be invocable? - Held that - Index-II of the registered agreement reflects two values, one which is the value assessed by the stamp valuation authority for the purpose of payment of stamp duty, and the value on which the stamp duty has been actually paid, with the latter being higher. In such a situation, if the latter value is to be adopted as the deemed value for section 50C of the Act, it triggers the provisions of sub-section (2), inasmuch as the said value clearly exceeds the fair market value of the property adopted for the payment of stamp duty, inasmuch as the stamp valuation authority himself has stated the market value of the property at ₹ 4,37,20,550/- which is lower. Therefore, in such a situation, in our view, it was in the fitness of things that in order to justify invoking of section 50C of the Act, the Assessing Officer was required to compare the consideration stated in the agreement at ₹ 4,37,20,550/- with the value assessed for the payment of stamp duty, i.e. at ₹ 4,37,20,550/- as indicated in Index-II and not the amount of ₹ 4,80,00,000/-, on which stamp duty has been paid. Considered in this light, we therefore find that the addition of ₹ 42,79,000/- is not justified on the strength of invoking of section 50C of the Act. We accordingly set-aside the order of the CIT(A) and the Assessing Officer is directed to the delete the impugned addition of ₹ 42,79,000/-. Decided in favour of assessee.

Issues:
1. Addition of long term capital gain by Assessing Officer.
2. Interpretation of section 50C of the Income-tax Act, 1961.
3. Discrepancy in consideration amount for property transfer.

Issue 1: Addition of long term capital gain by Assessing Officer
The appeal challenged the addition of &8377; 42,79,000 as long term capital gain by the Assessing Officer, based on the transfer of property to an Association of Persons (AOP). The appellant, a company, entered into a joint venture agreement with another company for property development. The dispute arose regarding the consideration amount for the transfer, with the Assessing Officer adopting &8377; 4,80,00,000 as consideration, leading to the addition. The appellant argued that the actual consideration was &8377; 4,37,20,550, as per the agreement and stamp valuation. The Revenue contended that the stamp duty paid on &8377; 4,80,00,000 justified invoking section 50C of the Act.

Issue 2: Interpretation of section 50C of the Income-tax Act, 1961
The controversy centered around the application of section 50C, which allows the Assessing Officer to use the value adopted for stamp duty payment as the full consideration for capital gains tax if it exceeds the actual consideration. Section 50C is triggered when the consideration is less than the stamp duty value. The Tribunal analyzed the provisions of section 50C in detail to determine its applicability in the case of property transfer to an AOP. The Tribunal emphasized that section 50C is invoked only when the stamp duty value surpasses the actual consideration.

Issue 3: Discrepancy in consideration amount for property transfer
The Tribunal scrutinized the agreements and stamp valuation to ascertain the correct consideration for the property transfer. It was observed that the consideration stated in the agreement and assessed by the stamp valuation authority was &8377; 4,37,20,550, contradicting the &8377; 4,80,00,000 mentioned in the Index-II of the agreement. The Tribunal noted that even if stamp duty was paid on &8377; 4,80,00,000, the actual consideration remained &8377; 4,37,20,550, as per the agreement and valuation. The Tribunal concluded that the addition of &8377; 42,79,000 was unwarranted under section 50C and directed the deletion of the amount. Consequently, the appeal of the assessee was allowed.

This detailed analysis of the judgment highlights the issues of contention, the arguments presented by both parties, and the Tribunal's interpretation of the legal provisions to arrive at a conclusive decision in favor of the appellant.

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