INCOME TAX ACT, 1961

Section 50C

Capital gains - Reference to DVO - Surrendering tenancy rights - Investment in REC Bonds

During assessment proceedings, AO noticed that assessee sold a property and declared an LTCG after taking cost of acquisition of shop 'NIL' as the same was acquired by surrendering tenancy rights and investing the major portion of sale consideration in REC Bonds and also in a residential flat. AO noticed that stamp duty valuation of the property sold by assessee was Rs. 1,00,89,765 as on 5-2-2011, on which stamp duty was collected by Registration Department. AO made addition as per the value determined under section 50C. However, AO rejected assessee's proposal to adopt stamp value authority value of financial year 2009-10, on the ground that property was transferred in assessment year 2010-11 and capital gain was taxable in assessment year 2010-11. Held: Provision of new section 43CA introducing the provisions for taxability of transfer of immovable property held in nature of stock in trade, is also applicable on the similar lines which are applicable for immovable property held in the nature of “capital asset” under section 50C. Thus, stamp duty value as on date of initial agreement in the year 2010 can be adopted for the purpose of sale consideration. AO was directed to compute capital gain by taking stamp duty value as on date of entering agreement in the year 2010, in so far as in the year of entering into agreement assessee had received part payment by account payee cheque. AO was at liberty to verify the fact of payment received by account payee cheque.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2011-12

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