2017 (9) TMI 587 - HC - Income Tax

Reference to DVO - permitted u/s. 50C (Clause2) OR u/s. 55A - capital gain computation - sale was not got registered before Stamp Valuing Authority for valuation - Held that - Section 50C of the Act provides for special provision for full value of consideration in certain cases. Subsection (1) of section 50C provides for the adoption of the value taken by the Stamp Valuation Authority for the purpose of stamp duty as the full value of consideration of the transferred asset for the purpose of section 48 of the Act. Learned counsel for the Revenue however contended that in the present case the transfer of the land took place under a Banakhat which was not registered and that therefore there was no occasion for the Stamp Valuation Authority to assess the value of the land for the purpose of payment of stamp duty upon its transfer. This contention however, ignores the plain language used in subsection (1) of section 50C which provides for the adoption of the valuation of the Stamp Valuation Authority for the purpose of payment of stamp duty not only when it is adopted or assessed but where it is assessable by such authority. The expressions adopted or assessed or assessable would include even a case where the document evidencing transfer of the capital asset has not been presented for registration. The expression assessable would permit the Revenue authorities to apply what is popularly referred to as Jantri rates with respect to the land in question for the purpose of section 48 of the Act with aid of deeming fiction contained in subsection (1) of section 50C of the Act. - Decided against revenue

Summary

Issues:
- Appeal against the judgment of the Income Tax Appellate Tribunal regarding the deletion of addition in long term capital gain on the sale of land.
- Interpretation of sections 50C and 55A of the Income Tax Act.
- Validity of reference to Department Valuation Officer (DVO) for determining fair market value.
- Application of deeming fiction under section 50C for considering full value of consideration of capital assets.
- Comparison with a similar case regarding section 50C.

Analysis:
1. The appellant, the Revenue, challenged the ITAT's decision on the addition in long term capital gain. The respondent declared a sale consideration of ?6.25 crores for a plot of land without executing a final sale deed. The Assessing Officer referred the case to the DVO under section 55A to determine the fair market value. The AO computed the capital gain based on DVO's assessment, adding ?78.75 lakhs. The Commissioner (Appeals) later deleted the addition, leading to the Revenue's appeal to the Tribunal.

2. The Tribunal ruled that referencing the DVO under section 55A was not valid for ascertaining the full value of consideration under section 48. Instead, it cited section 50C, which provides a deeming fiction for certain capital assets. The Tribunal referred to a previous court decision and dismissed the Revenue's appeal, emphasizing the application of section 50C over section 55A in this context.

3. A similar issue arose in a previous case, where the court discussed section 50C's provisions. It highlighted that section 50C allows the replacement of consideration with the value assessed by the Stamp Valuation Authority. The court noted that the present case did not align with section 50C, as the sale consideration exceeded the valuation by the Authority.

4. Section 50C mandates the adoption of the Stamp Valuation Authority's value for stamp duty as the full consideration for the transferred asset. The Revenue argued that since the land transfer was under a Banakhat and unregistered, the valuation by the Authority was not applicable. However, the court clarified that section 50C's language covers cases where valuation is assessable by the Authority, even without registration. The deeming fiction in section 50C allows the use of Jantri rates for valuation.

5. The High Court dismissed the Tax Appeal, affirming the Tribunal's decision on the application of section 50C over section 55A and the validity of the DVO reference for determining the fair market value in the context of long term capital gains on land sale.