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2011 (3) TMI 969 - AT - Income TaxCapital gains Adoption of the value of the property sold as per DVO report in place of value adopted by Stamp Valuation Authority Held that - In view of the provisions of sub-section (2) of section 50C, if fair market value as assessed by the DVO is lower than the value adopted by Stamp Duty Authorities for collecting stamp duty then the value so adopted by DVO has to be adopted by the Assessing Officer for the purpose of computation of LTCG. Appeal of the revenue is dismissed.
Issues Involved:
1. Whether the CIT(A) erred in directing the Assessing Officer (AO) to adopt the fair market value of the property sold as determined by the DVO instead of the value assessed by the Stamp Valuation Authority. Issue-wise Detailed Analysis: 1. Background and Facts: The appeal by the revenue arises from the order of CIT(A)-XII, Kolkata, concerning the assessment framed by the ITO, Ward-42(1), Kolkata, under Section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2005-06. The primary issue is whether the CIT(A) was correct in directing the AO to adopt the fair market value of the property sold as determined by the DVO instead of the value assessed by the Stamp Valuation Authority. 2. Assessee's Contentions: The assessee, a co-owner of the property, disclosed a sale consideration of Rs. 20 lakhs for her half share and computed Long Term Capital Gains (LTCG) at nil by taking the indexed cost of acquisition at Rs. 30,81,600/-. The AO noticed that the stamp valuation of the property was Rs. 1,32,22,327/-, and invoked Section 50C of the Act to compute LTCG based on this valuation. The assessee argued that the fair market value should be considered, and the property was sold for Rs. 20 lakhs due to its condition, litigation, and tenancy issues. 3. CIT(A)'s Decision: The CIT(A) referred the matter to the DVO, who valued the property at Rs. 30,87,675/-. The CIT(A) directed the AO to adopt this value for computing LTCG, as the DVO's valuation was lower than the stamp valuation. The CIT(A) found that the AO should have referred the matter to the DVO as the stamp valuation exceeded the fair market value. 4. Revenue's Argument: The revenue argued that under Section 50C(2) of the Act, it is at the AO's discretion to refer the valuation to the DVO, and it is not mandatory. The revenue contended that the stamp valuation adopted by the AO should be upheld. 5. Tribunal's Analysis and Conclusion: The Tribunal examined the provisions of Section 50C of the Act, which provides that if the consideration declared for the transfer of property is less than the value adopted for stamp duty purposes, the latter shall be deemed the full value of consideration. However, if the assessee claims that this value exceeds the fair market value, the AO may refer the valuation to the DVO. The Tribunal noted that the CIT(A) correctly referred the matter to the DVO, whose valuation was lower than the stamp valuation. Thus, the Tribunal upheld the CIT(A)'s direction to adopt the DVO's valuation for computing LTCG, finding no fault in the CIT(A)'s order. 6. Final Judgment: The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order to adopt the fair market value determined by the DVO for the purpose of computing LTCG. 7. Pronouncement: The order was pronounced in open court on the 11th day of March, 2011.
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