2008 (4) TMI 419 - AT - Income Tax

Computation of capital gain - Determination of sale value consideration - Application of section 50C - property registered @ Rs. 220.81 per sq. yd. - contention of the Department is that the value of the land is at Rs. 500 per sq. yd. - HELD THAT - In the present case the property is registered at particular rate which is adopted for registration purpose and there is no question of replacing the valuation adopted by the stamp valuation authority with the DVO for the purpose of computing the capital gain. The purpose of s. 50C is that the property which is under transfer from the assessee to another person should have been assessed at higher value for stamp valuation purpose than that received by the assessee. Since the stamp valuation authority had accepted the consideration declared by the assessee in sale deed there is no question of once again referring the matter to the DVO. Accordingly we allow the ground taken by the assessee. In the result the appeal of the assessee is allowed.

Summary

Issues:
1. Application of Section 50C of the Income Tax Act, 1961 in determining capital gain from the sale of land.

Analysis:
The appeal involved a dispute regarding the application of Section 50C of the Income Tax Act, 1961 in calculating the capital gain arising from the sale of land by the assessee. The Assessing Officer (AO) invoked Section 50C based on the valuation of the land by the Departmental Valuation Officer (DVO) at Rs. 72 lakhs, as opposed to the consideration of Rs. 16.34 lakhs declared by the assessee. The AO determined the capital gain at Rs. 62.40 lakhs after considering the indexed cost of acquisition. The assessee challenged this addition before the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the AO's order, leading to the appeal before the Appellate Tribunal.

Upon reviewing the provisions of Section 50C, it was noted that this section came into force from 1st April 2003, and its purpose was to deem the value adopted or assessed by the stamp valuation authority as the full value of consideration if it exceeds the consideration declared by the assessee in the sale deed. The Tribunal emphasized that Section 50C applies when the valuation for stamp duty purposes is higher than the declared consideration in the sale deed. In this case, since the stamp valuation authority had accepted the consideration declared by the assessee, there was no basis for substituting the valuation with the DVO's valuation for computing capital gain. Therefore, the Tribunal concluded that Section 50C was not applicable in this scenario, and the ground taken by the assessee was allowed.

In conclusion, the appeal was allowed in favor of the assessee, highlighting the correct interpretation and application of Section 50C in determining the capital gain from the sale of land.