2016 (9) TMI 1204 - AT - Income Tax

Capital Gain on sale of plot of land - reference made to the DVO u/s. 55A - whether the value of sale shown by the assessee is on the lower side ? - Held that - It is an undisputed fact that the A.O. has made a reference u/s. 55A of the Act to the DVO to determine the correct market value as on the date of the transfer. Section 55A, permits reference to DVO by the Assessing Officer under certain circumstances. Such reference, however, is with a view to ascertaining the fair market value of capital asset for the purposes of chapter IV. In the instant case, the reference was made to DVO for ascertaining the fair market value of the capital asset as on the date of sale. We find that Section 50C provides for special provision for full value of consideration in certain cases. The said section provides a deeming fiction under which consideration received or accruing as a result of transfer of a capital asset can be replaced by the value adopted or assessed by stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer. In the said Section 50C of the Act, Sub-section (2) permits the assessee to dispute such valuation adopted by the Stamp Valuation Authority and in such a case, it is open for the Assessing Officer to refer the valuation of the capital asset to a Valuation Officer. However, in the present case, we find that the A.O. has made reference u/s. 55A for the determination of market value for the purposes of the computation of capital gain u/s. 48 of the Act. Considering the facts in totality, in the light of the decision of in the case of Gauranginiben S. Shodhan (2014 (2) TMI 78 - GUJARAT HIGH COURT ) we hold that the value adopted as per the DVO s report is uncalled for and the A.O. is directed to accept the sale consideration of ₹ 6.25 crores and compute the capital gains accordingly. - Decided against revenue.

Summary

Issues:
1. Appeal against deletion of addition in Long Term Capital Gain.
2. Validity of reference to DVO for determining market value.
3. Interpretation of Section 48 and relevance of DVO's report.
4. Comparison with Section 50C and relevance of Stamp Valuation Authority.
5. Application of previous judicial decisions on fair market value determination.

Analysis:

Issue 1:
The appeal and cross-objection were directed against the deletion of an addition in Long Term Capital Gain. The revenue contested the deletion of ?78,75,2511 made by the Assessing Officer under section 143(3) of the Act.

Issue 2:
The main contention revolved around the validity of the reference made to the DVO under section 55A of the Act for determining the correct market value. The Assessing Officer referred the matter to the DVO based on the belief that the sale value declared by the assessee was undervalued.

Issue 3:
The interpretation of Section 48 was crucial in this case. Section 48 outlines the computation of capital gains by deducting certain amounts from the full value of consideration received. The Tribunal observed that the reference to the DVO for determining fair market value was redundant for the purpose of Section 48.

Issue 4:
Section 50C, which deals with the full value of consideration in specific cases, was also discussed. It allows for the replacement of consideration with the value assessed by the Stamp Valuation Authority. However, in this case, the reference was made under section 55A for computing capital gain under section 48.

Issue 5:
The Tribunal referred to previous judicial decisions, including the case of Gauranginiben S. Shodhan and CIT v. Girish Damjibhai Patel, to support its decision. These cases emphasized that the full value of consideration under Section 48 does not necessarily align with the fair market value determined by the DVO.

In conclusion, the Tribunal dismissed the revenue's appeal, directing the Assessing Officer to accept the declared sale consideration and compute capital gains accordingly. The Cross Objection by the assessee was dismissed due to being barred by limitation. The judgment highlighted the importance of aligning valuation methods with the specific provisions of the Income Tax Act to ensure accurate computation of capital gains.