2018 (11) TMI 1241 - AT - Income Tax

Capital gain - Transfer of a capital asset u/s 50C - value adopted or assessed by any authority of the State Government or Stamp Valuation Authority - determine the fair market value as per the circle rate / stamp value rate - Held that - It is not disputed by the revenue authorities that the transfer of right over the plot admeasuring 299 sq. yds amounts to transfer of a capital asset in terms of section 2(47). The assessee had acquired the plot in question by way of allotment and had acquired the right through endorsement document. This endorsement document has been further transferred to another buyer, because he was the beneficial owner of the said property in which he had the right. It is not a case that any registration has been done in the favour of the assessee for the allotment of the plot. Even the assessee has transferred his right on the plot to another buyer for again there is no registration of the said transfer and consequently there is no value adopted or assessed by any authority of the State Government or Stamp Valuation Authority. The deeming fiction for taking the full value of consideration in respect of transfer of a capital asset u/s 50C is applicable where the value is assessed by stamp valuation authority, then such a value is deemed to be the full value of the consideration receipt or accruing as a result of such transfer. The word assessable in section 50C at the time of transfer was inserted w.e.f. 1.10.2009 and therefore, in the assessment year 2007-08 the assessable value at the time of transfer cannot be taken as full value of the consideration. Either at the time of agreement or at the time of transfer there was no value assessed or assessable by the stamp valuation authority or therefore, the market value based on some ITI inquiry cannot be substituted with the actual consideration received by the assessee. Thus, the difference as worked out by the AO on the basis of un authenticated ITI report cannot be added; and accordingly, amount is directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Appeal against impugned order for assessment year 2007-08 - Short term and long term capital gains - Transfer of right in property - Market value determination - Application of section 50C.

Analysis:
The appeal was filed against the order passed by Ld. CIT(Appeals) XI, New Delhi for the assessment year 2007-08. The Tribunal had previously restored the matter to the AO for denovo assessment due to the original assessment order being passed u/s 144. The assessee showed short term capital gain on the sale of a residential plot in Omaxe, Greater Noida. The AO disputed the transfer of right in the property, claiming it was not a sale of the plot due to the endorsement of right. The AO calculated a suppressed sale consideration based on market rates, leading to a discrepancy.

Before the Ld. CIT (A), the assessee argued that the definition of transfer under section 2(47) includes the sale or relinquishment of the asset, and the right in the property constitutes an asset. The CIT (A) concluded that the transfer of right amounted to the transfer of immovable property, justifying the market value assessment by the AO. The assessee contended that the market value assessment was arbitrary and not based on stamp valuation as required by section 50C.

During the proceedings, the Counsel for the assessee argued against the valuation done by the AO and confirmed by the CIT (A), stating that the market value determined by an ITI report was not a suitable substitute for stamp valuation or the actual consideration received for the transfer of the right through endorsement. The Department, however, supported the market value determination as the transfer of immovable property necessitating fair market value assessment.

The Tribunal noted that the transfer of the right over the plot constituted a transfer of a capital asset under section 2(47). Since no registration or valuation by the Stamp Valuation Authority had been done, the deeming fiction under section 50C could not be applied. The Tribunal held that the market value based on an ITI inquiry could not replace the actual consideration received by the assessee, directing the deletion of the amount added by the AO. Consequently, the appeal of the assessee was allowed, and the disputed amount was directed to be deleted.

In conclusion, the Tribunal ruled in favor of the assessee, highlighting the importance of proper valuation methods and the inapplicability of section 50C due to the absence of stamp valuation assessment.