INCOME TAX ACT, 1961

--Capital gains--Applicability of section 50C Stamp duty valuation exceeded fair market value--In the appeal of the assessee, the ground raised is with regard to the manner of determination of capital gain on sale of land and building. The limited grievance of the assessee is that the lower authorities have erred in adopting the stamp duty value of land and building as the total sale consideration for the purpose of computing the capital gain. On this aspect, a preliminary objection raised by the appellant is that the assessing officer proceeded to adopt the value adopted by the Stamp Valuation Authority without referring the matter to the Valuation Officer, especially when the assessee had objected to the value adopted by the Stamp Valuation Authority. The assessee had claimed that in terms of section 50C(2)(a), the value adopted by the Stamp Valuation Authority under section 50C exceeded the fair market value of the property as on date of transfer. In terms thereof, the assessing officer was expected to refer the matter to the VO to ascertain the valuation and thereafter proceed in the matter as contained in section 50C(2)(a). Held: In terms of clause (a) of sub-section (2) of section 50C, it is provided that where an assessee claims before the assessing officer that the value adopted or assessed by the Stamp Valuation Authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then the assessing officer may refer valuation of the capital asset to the VO. In this case, factually it is evident that the assessee had claimed in the return of income itself that the value adopted by the Stamp Valuation Authority exceeded the fair market value as on the date of transfer as provided in section 50C(2)(a). Under these circumstances, the assessing officer ought to have referred the matter to the VO, instead of straightaway deeming the value adopted by the Stamp valuation authority as the full value of consideration.

Section 50C prescribes for adoption of full value of consideration in certain cases. It is provided that where the consideration received or accruing as a result of the transfer of a capital asset being land or building or both is less than the value adopted by an authority of the State Government for the purposes of payment of Stamp duty in respect of such transfer, then the value so adopted by the State Government authority shall be deemed to be the full value of consideration received or accruing as a result of such transfer. The said provisions of sub-section (1) of section 50C are further circumscribed by sub-section (2) of section 50C. In terms of clause (a) of sub-section (2) of section 50C, it is provided that where an assessee claims before the assessing officer that the value adopted or assessed by the Stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then the assessing officer may refer valuation of the capital asset to the VO. In this case, factually it is evident that the assessee had claimed in the return of income itself that the value adopted by the Stamp valuation authority exceeded the fair market value as on the date of transfer as provided in section 50C(2)(a). Under these circumstances, the assessing officer ought to have referred the matter to the VO, instead of straightaway deeming the value adopted by the Stamp valuation authority as the full value of consideration. The point made out by the Revenue that it is only discretionary on the part of the assessing officer to refer the matter to the VO, is quite untenable. The discretion vested in the assessing officer, in such a situation is required to be used in a judicious manner. Section 50C is a deeming provision and ostensibly involves creation of an additional tax liability on the assessee and, therefore, notwithstanding the presence of the expression 'may' in section 50C(2)(a), the assessing officer in (sic-this) case ought to have referred the matter to the VO for ascertaining the value of the capital asset in question. Therefore, in this view of the matter without going into further merits of the dispute, this Tribunal sets aside the order of the Commissioner (Appeals) and directs the assessing officer to adopt the course mentioned in section 50C(2)(a) and thereafter proceed to determine capital gain on sale of land and building. [Para 5]