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TMI Blog2010 (3) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed by any authority of a State Government for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be computed, u/s 48. Section 50C creates a legal fiction thereby apparent consideration is substituted by valuation done by Stamp Valuation Authorities and capital gains are calculated, accordingly. Legal fiction cannot be extended any further and has to be limited to the area for which it is created. the High Court in the case of Addl. CIT v. Durgamma [ 1986 (9) TMI 58 - ANDHRA PRADESH HIGH COURT] held that it is not possible to extend the fiction beyond the field legitimately intended by the statute. AO has applied this provision of section 50C for the computation of unexplained investment u/s 69B and which is not permissible under the Act. Apart from the stamp duty valuation, there is nothing on record which suggests that the revenue has proved that the assessee has accepted over and above, what has been recorded as purchase consideration of the land in the instrument, i.e., the sale deed. Therefore, We are in full agreement with the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Sub-Registrar has assessed the value of property at Rs. 49,91,400 at the prevalent market value as per the Jantri and additional stamp duty at the rate of 10.8 per cent was collected from the assessee. The assessee has declared the purchase consideration in books of account at Rs. 18.90 lakhs only as against the value determined by the revenue authorities at Rs. 41,91,400. Accordingly, assessee has not disclosed the undisclosed investment of Rs. 31,01,400 in its books of account and treated by the Assessing Officer as unaccounted investment by under section 69B of the Act by stating as under : "Thus, section 50C determines the value of sales consideration of property in transaction where value shown in document/books is less than value determined by the land revenue authorities. Once the sales consideration is determined, it cannot be said that it is applicable only to seller. The amount paid by purchaser cannot be different then what is the sales consideration for the seller. Thus, the sales consideration determined by stamp valuation authority undoubtedly becomes the purchases price paid by the buyer. It cannot happen that sales consideration of Rs. 49,91,400 on which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved, revenue came in appeal before us. 4. We have heard the rival contentions and gone through the facts and circumstances of the case. We have also perused the case records including the assessment order as well as the order of CIT(A). Now the only issue in this appeal of the revenue is that, whether the provision of section 50C of the Act applies to purchaser or not. For this, we have to go to the relevant provision of section 50C of the Act as introduced by section 24 of the Finance Act, 2002 with effect from 1-4-2003, for and from assessment year 2003-04, namely : "Section 50C. Special provision for full value of consideration in certain cases. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereinafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed, accordingly, under section 48 of the Income-tax Act. 37.3 It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income-tax Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer shall not adopt such fair market value and shall take the full value of consideration to be the value adopted or assessed for stamp duty purposes. 37.4 This amendment wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as the full value of the consideration received or accruing as a result of the transfer. This amendment will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years." Memorandum Explaining Provisions of section 50C in the Finance Bill, 2002, as under : "The Bill proposes to insert a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. It is proposed to provide that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed, accordingly, under section 48 of the Income-tax Act. It is further proposed to provide that where the as claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of section 50C in the Finance Bill, 2002, which clearly states that where the consideration declared to be received or accruing as a result of transfer of land or building or both is less than the value adopted or assessed by any authority of a State Government for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be computed, accordingly, under section 48 of the Act. In case the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the assessment made shall be amended to re-compute the capital gains by taking the revised value as the full value of consideration. Accordingly, we are of the view that the provisions of section 50C are applicable only for the computation of capital gains in real estate transaction in respect to seller only and not for the purchaser. We find from section 50C of the Act that it creates a legal fiction thereby apparent consideration is substituted by valuation done by Stamp Valuation Authorities and capital gains are calculated, accordingly. Legal fiction cannot be extended any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital receipt and not distribution of accumulated profits. Thus, a legal fiction was invoked in the hands of the assessee-company and was not extended in the hands of the shareholders. In the present case, section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Valuation Authorities as undisclosed investment under section 69. In fact, section 69 itself is a legal fiction whereby investment into an asset is treated as income if it is not disclosed in the regular books of account. No further legal fiction from elsewhere in the statute can be borrowed to extend the field of section 69. It is for the Legislature to introduce legal fiction to overcome difficulty in taxing certain receipts or expenditure which otherwise was not possible under normal provisions of the Act. It is with this purpose that when it was found difficult to prevent tax evasion by understating apparent sale consideration as compared to the valuation made by Stamp Valuation Authorities for the purposes of levying stamp duty then it was thought necessary to introduce section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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