INCOME TAX ACT, 1961

Section 50C

Capital gains - Invocation of section 50C - DLC rate of property sold was higher than sale value declared by assessee - Stamp duty levied on value higher than DLC rate

The DLC rate of the land was Rs. 44,35,410 per bigha. Accordingly the value of the land as per the DLC rate came to Rs. 3,66,36,487. The said value declared by the assessee was @ Rs. 59,56,416 per bigha which came to Rs. 4,92,00,000. The stamp duty authority levied stamp duty by assessing the value @ 150% of sale value declared in sale deed valued by stamp duty authority at Rs. 7,38,00,000. On the basis of declared sale consideration, the assessee offered the gain earned on sales of this land as long term capital gain and part of the same claimed exempted under section 54B of the Act. The assessment of the assessee was completed under section 143(3) at the total income of Rs. 86,55,578 as against the returned income of Rs. 25,05,580/ by making addition of Rs. 61,50,000 by applying the deeming provisions of Section 50C of the Act being the difference of sales consideration and value assessed by stamp duty authority for levy of stamp duty. Held: The sale value declared by assessee was more than the DLC rate which is indicative of fair market value prevailing in that area. The fair market value cannot vary according to status of buyer person. If buyer is an individual then the fair market value would be Rs. 3,66 crores and if buyer is a company or firm or institution then fair market value of the property would be 1.5 time of the normal value, this cannot be intention of section 50C which require substitution of fair market value, i.e., DLC in place of sale consideration mentioned in the sale deed, if it is found to be lower than DLC. Furthermore, stamp duty authority levied stamp duty by assessing value @ 1.5 time of value declared in the sale deed valued for stamp duty purpose at Rs. 7,38,00,000 as against 1.5 time of normal DLC. If AO did not agree with explanation of assessee with regard to consideration disclosed by him, then he should have referred matter to DVO for getting its market rate estimated as on date of the sale but he did not do so. It is undisputed fact that assessee had declared sale consideration more than DLC, accordingly there was no justification for making any addition under section 50C.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

SUBSCRIBE FOR FULL CONTENT