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2017 (9) TMI 516 - AT - Income TaxCapital gain computation - Sale consideration should be restricted to stamp duty valuation as against the Fair Market value determined by the DVO - assessee transferred the rights in the property - provisions of section 50C applicability to the transaction of transfer of rights in the immovable properties - Held that - During the year the assessee transferred the rights in the property to Mr.Jaykumar Dhadda, Mr.Narendra Kumar Dhadda and Mr.Dhanraj Dhadda and sons private limited at cost by transferring the amount of advance to the said persons with the condition that the balance outstanding price was to be met by the transferees. No capital gain was shown in the return of income as the transfer was effected at cost. The AO calculated the short term capital gain on these transfer taking the market price of the said rights according to DVO report by rejecting the without prejudice submission of the ld AR that the capital gain be calculated on the basis of value as per stamp valuation authority as per the provisions of 50C of the Act on the ground that in the present case only rights were transferred and not the land or building. In the appellate proceedings, the ld.CIT(A) partly allowed the appeal of the assessee by direction the AO to calculate capital gains as per the value of stamp valuation authority u/s 50C and not as per DVO valuation. In our opinion, the ld.CIT(A) has taken a correct view by directing the AO to adopt the value u/s 50C of the Act for the purpose of bringing the capital gain to tax as the transfer price for the purpose of capital gain can not be higher than the FMA u/s 50C of the Act. Accordingly, we uphold the same by dismissing the appeal of the revenue. In the result, the appeal of the revenue is dismissed.
Issues Involved:
1. Disallowance under section 14A of the Income Tax Act. 2. Applicability of Capital Gains Tax. 3. Determination of the Year of Cost of Acquisition for Capital Gains. Analysis: Issue 1: Disallowance under section 14A of the Income Tax Act The assessee appealed against the disallowance of ?3,39,342 under section 14A of the Act. The Tribunal found a similar issue in the assessment years 2008-09 and 2009-10, where the matter was remanded back to the AO for reevaluation. Citing the decision of a Co-ordinate Bench, the Tribunal upheld the assessee's appeal, restoring the issue to the AO for reconsideration, following the same approach as in previous years. The appeal was partly allowed for statistical purposes. Issue 2: Applicability of Capital Gains Tax The revenue raised concerns regarding the valuation of property transfer, disputing the direction to restrict sale consideration to stamp duty valuation rather than Fair Market Value determined by the DVO. The AO observed a transfer of rights in immovable property without corresponding additions in the balance sheet. The CIT(A) upheld the capital gains chargeability, emphasizing the transfer of rights to new owners. Regarding the sale consideration, the CIT(A) partially agreed with the appellant, directing the AO to restrict it to stamp duty valuation under section 50C of the Act. The Tribunal concurred with the CIT(A), dismissing the revenue's appeal and partly allowing the assessee's appeal. Issue 3: Determination of the Year of Cost of Acquisition for Capital Gains The AO calculated short-term capital gains on property transfers based on DVO valuation, rejecting the assessee's proposal for stamp valuation under section 50C. The CIT(A) directed the AO to adopt stamp valuation for capital gains taxation. The Tribunal upheld the CIT(A)'s decision, emphasizing that the transfer price for capital gains cannot exceed the Fair Market Value under section 50C. Consequently, the revenue's appeal was dismissed, and the assessee's appeal was partly allowed. In conclusion, the Tribunal addressed the issues of disallowance under section 14A, applicability of Capital Gains Tax, and determination of the Year of Cost of Acquisition for Capital Gains, providing detailed analyses and rulings for each, ultimately resulting in the partial allowance of the assessee's appeal and the dismissal of the revenue's appeal.
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