ACIT Vs Guptajee & Company (ITAT Delhi)
ITAT Delhi: Lal Dora Property to Be Valued as Agricultural/Residential for Section 50C – Commercial Use Does Not Alter Revenue Character; Revenue Appeal Dismissed
The Delhi Bench “F” of the ITAT dismissed the Revenue’s appeal and upheld the order of the CIT(A) in the case of Guptajee & Company for AY 2011-12, holding that section 50C valuation must be based on the nature of land as per revenue records and not on its actual user.
The assessee had sold a Lal Dora property situated at Badli, Samepur, Delhi, which was recorded as agricultural/residential land in the revenue records. The Assessing Officer invoked section 50C and substituted the sale consideration by applying a multiplicative factor of ‘3’, treating the property as commercial land on the basis that it was being used as a godown for storage of electrical goods. This resulted in an addition of ₹21.13 crore to capital gains.
The Tribunal noted that although the property was allegedly used for commercial purposes, there was no conversion of land recorded in revenue documents, nor any penalty or action by municipal/revenue authorities for misuse. It was held that mere user of land for commercial purposes cannot result in deemed conversion for the purposes of stamp valuation. As long as the land continues to be classified as agricultural/residential in official records, the multiplicative factor applicable to such category (factor ‘1’) must be adopted.
Accordingly, the Tribunal affirmed the CIT(A)’s view that application of the higher commercial factor was unsustainable and that the circle rate applicable to agricultural/residential land alone could be adopted under section 50C. In view of dismissal of the Revenue’s appeal, the assessee’s cross-objection and connected appeal were rendered infructuous and dismissed.
The order reinforces the principle that section 50C operates with reference to the character of property in revenue records, not its alleged commercial exploitation, unless such change is formally recognised by the competent authorities.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal in ITA 5168/Del/2015 is filed by the Revenue, ITA No. 4761/Del/2015 and the Cross Objection No.7/Del/2016 are filed by the Assesseeagainst the order of Learned Commissioner of Income Tax (Appeals)-XVI, New Delhi (“Ld.CIT(A)”,for short], dated09/06/2015 pertaining to Assessment Year 2011-12.
