2015 (12) TMI 980 - HC - Income Tax

Capital gain computation - Whether ITAT was right in ignoring the fact that as per provisions of section 50-C (2)(b) the matter should not have been referred by CIT(A) for valuation as the assessee had already challenged the Juntry Value assessable by the Stamp Valuation authority, before the Nayab Collector and in that case, further reference to valuation is prohibited as per the Act and value determined by Nayab Collector has to be adopted as full value of consideration ? - contention of the DR is that where the value of the property made by the stamp valuation authority is higher than the value of the property determined by the departmental valuer, then the higher value should be adopted for the purpose of working out the capital gain of the assessee Held that - Under clauses (a) and (b) of sub-section (2) of section 50-C, however, assessee has a right to ascertain before the Assessing Officer that the value adopted or assessed by the stamp valuation authority exceeds the fair market value as on the date of transfer upon which the Assessing Officer would refer the valuation of the capital asset to the Valuation Officer. Under sub-section (3) of section 50-C, where the value ascertained by the Valuation Officer exceeds the value adopted, assessed or assessable by the stamp valuation authority, the latter, i.e. the valuation of the stamp valuation authority, would be taken as the full value of the consideration for the purpose of computing capital gain. In other words, the valuation of the property adopted by the Stamp Duty authority of the State would be deemed to be the full value of the consideration for the purpose of computing capital gain. However, in case the assessee challenges such valuation before the Assessing Officer and the Assessing Officer calls for the valuation report from the Valuation Officer and the valuation adopted by the Valuation Officer exceeds the value adopted by the State Stamp Duty Authority, it would be the valuation of such stamp duty authority which would prevail for the purpose of computing capital gain. The Revenue intends to contend to the contrary which is simply not born out from the statutory provisions noticed. There is no error in the view taken by the Tribunal

Summary

Issues: Valuation of immovable property for computing capital gains

Issue Analysis:

1. Valuation Discrepancy: The primary issue in this tax appeal is the valuation of an immovable property sold by the assessee, where the Sub-Registrar of Stamp Duty valued the property at Rs. 3.4 crore, the Deputy Collector valued it at Rs. 1.33 crore, and the department valuer valued it at Rs. 71.98 lakh. The Assessing Officer adopted the value of Rs. 1.33 crore for computing capital gains.

2. CIT(A) Decision: The assessee appealed the valuation, and the CIT(A) accepted the valuation of Rs. 71.98 lakh provided by the department valuer. The Department challenged this decision before the Tribunal, arguing that the higher value determined by the stamp valuation authority should be adopted for computing capital gains.

3. Tribunal's Decision: The Tribunal rejected the Revenue's appeal, citing Section 50-C(2) of the Income-tax Act. The Tribunal referred to a previous case where it was held that the lower value between the departmental valuation officer and the stamp duty valuation officer should be considered as the sale consideration for computing capital gains. As the value determined by the departmental valuer was lower, the Tribunal upheld the CIT(A)'s decision.

4. Statutory Provisions: Section 50-C of the Income-tax Act deals with special provisions for the full value of consideration in certain cases involving land or building transfers. The section outlines the procedure for determining the full value of consideration based on the valuation by the stamp valuation authority and the role of the Valuation Officer in case of disputes.

5. Conclusion: The High Court, after considering the arguments presented and the statutory provisions, found no error in the Tribunal's decision. It clarified that the valuation adopted by the Stamp Duty authority prevails for computing capital gains unless the assessee challenges it and the Valuation Officer's valuation exceeds the stamp duty authority's valuation. The Court dismissed the Tax Appeal, affirming the Tribunal's decision.

This detailed analysis of the judgment highlights the valuation discrepancies, the decisions of the CIT(A) and the Tribunal, the relevant statutory provisions, and the ultimate conclusion reached by the High Court in dismissing the Tax Appeal.