2017 (3) TMI 882 - AT - Income Tax

Addition to the capital gains adopting the guideline value of Stamp Valuation Authority u/s.50C - Held that - The value adopted for the purposes of Wealth Tax and the guideline value reported in the website is estimated value of the locality but not the assessed value of the specific property. In case of actual transaction, the Stamp Valuation Authorities make the assessment with reference to specific property considering the locational advantages and the previous Registrations of the same locality. Therefore, we do not find any infirmity in the orders of lower authorities and hold that for the purpose of computation of capital gains u/s.50C guideline value fixed by the Stamp Valuation Authorities has to be adopted. The grounds raised by the assessee on this issue are dismissed. Whether to compute the capital gains adopting the deemed consideration per Sec.50C of the Act or the sale consideration disclosed as per sale deed, when the assessee has invested the whole of a sum in capital gains exemption bond u/s.54EC - Held that - The assessee s A.R raised this issue in his arguments but not raised any specific ground on this issue in the appeal. It is seen that, before the Ld.CIT(A) also no such ground was raised by the assessee and the Lower authorities have not considered this issue. The eligible deduction u/s 54EC has to be allowed and the balance amount of capital gains has to be brought tax. Since the assessee has invested the entire sale consideration in 54EC Bonds, this issue needs to be addressed by the AO as per the language used in section 54EC. Therefore, we remit the matter back to the file of the assessing officer to decide this issue afresh on merits.

Summary

Issues:
1. Discrepancy in the capital gains computation due to adoption of guideline value under Sec.50C of Income Tax Act.
2. Dispute regarding market value adopted for wealth tax assessment versus guideline value for capital gains computation.
3. Applicability of deemed consideration under Sec.50C versus actual sale consideration for capital gains computation when investing in exemption bonds u/s.54EC.

Issue 1: Discrepancy in Capital Gains Computation:
The appeal concerns the addition of ?6,88,494 towards capital gains based on the guideline value of Stamp Valuation Authority under Sec.50C of Income Tax Act. The Assessing Officer (AO) found the assessee sold land for ?24,15,600 but the Stamp Valuing Authority valued it at ?30,19,500. The AO adopted the guideline value as per Sec.50C, resulting in a tax liability of ?5,61,977. The CIT(A) upheld this decision, leading to the current appeal.

Issue 2: Market Value Dispute for Wealth Tax vs. Capital Gains:
The assessee argued that the market value adopted for wealth tax assessment at ?50/sq.ft. differed significantly from the guideline value of ?250/sq.ft. used for capital gains computation. The AR contended that the Stamp Valuation Authority's assessment was unjustified, presenting evidence of the guideline value being ?50/sq.ft. The Tribunal noted that the Wealth Tax assessment was ex-parte, and the guideline value was specific to the property, supporting the AO's decision to use the guideline value for capital gains computation.

Issue 3: Deemed Consideration vs. Sale Consideration for Capital Gains:
Regarding the computation of capital gains using deemed consideration under Sec.50C versus the actual sale consideration when investing in exemption bonds u/s.54EC, the Tribunal remitted the matter back to the AO for fresh consideration. The AR referenced a Tribunal decision related to a different section but did not raise specific grounds in the appeal. The Tribunal emphasized the need for the AO to address this issue in accordance with the language of Sec.54EC.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, remitting the matter back to the AO for a fresh decision on the issue of computing capital gains when investing in exemption bonds. The judgment clarifies the application of Sec.50C for capital gains computation and highlights the importance of specific property valuation for tax purposes.