INCOME TAX ACT, 1961

Section 50C

Capital gains - Applicability of section 50C - Sale consideration of immovable property being lesser than SRO value - Title of the property was defective being a litigated property

AO found that sale consideration disclosed by assessee in her return of income towards the sale of an immovable property was lesser than the SRO value. Further, the AO rejected the submission of the assessee by stating that, there was no scope to adopt the actual sale value received by her by virtue of section 50C because the assessee did not challenge the valuation before the SRO. Accordingly, the AO invoked the provisions of section 50C and adopted the SRO value as the sale consideration for the purpose of computing capital gain in the hands of the assessee. Held: It was quite evident that there was some litigation with respect to the property sold by the assessee. Thus, when the title of the immovable property was defective then the market value of such immovable property would be considerably reduced. Since the property sold by the assessee was a litigated property, the market value of the said property could not exceed the actual sale consideration received by the assessee. Therefore, it was not appropriate to adopt the SRO value for the purpose of computation of capital gain in the hands of the assessee, rather it would be appropriate to adopt the actual market value of the property taking into consideration of the litigation involved in the property, which was nothing but the actual sale consideration received by the assessee. Accordingly, the AO was directed to compute the capital gain in the hands of the assessee based on the actual sale consideration received by the assessee.