Section 50C applies even to Unregistered Transfer of Capital Assets

Full Text of the High Court Judgment / Order is as follows:-

1. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 19.08.2016 raising following question for our consideration:

“Whether the Appellate Tribunal has erred in deleting the addition and in stating that reference to DVO in this case is permitted u/s. 50C (Clause­2) and not u/s. 55A, without realizing that the sale was not got registered before Stamp Valuing Authority for valuation and therefore, section 50C was not invoked by the Assessing Officer?”

2. Respondent assessee had filed the return of income for the assessment year 2009- ­10 declaring long term capital gain on sale of plot of land. According to the assessee, the transfer of title in land took place under a Banakhat (agreement to sale), under which, the assessee had received a sale consideration of Rs. 6.25 crores. The assessee contended that no final sale deed was executed. The Assessing Officer was of the opinion that the assessee’s declared receipt of sale consideration was on lower side. He therefore made a reference to the Department Valuation Officer under section 55A of the Income Tax Act, 1961 (‘the Act’ for short) for the purpose of determining the fair market value as on the date of the transfer. The Assessing Officer computed the assessee’s long term capital gain by adopting the value of land assessed by the DVO in response to the reference and made an addition of Rs. 78.75 lakhs (rounded off) under the said head. The assessee carried the matter in appeal. The Commissioner (Appeals) deleted the additions, upon which, the department approached the Tribunal. Tribunal was of the view that for ascertaining full value of consideration of land under section 48 of the Act, reference to the DVO under section 55A of the Act would not be maintainable. The Tribunal also referred to section 50C of the Act which provides for a deeming fiction for considering the full value of consideration of certain capital assets and held that if at all the Assessing Officer had to apply the said formula. The Tribunal relied upon and referred to the decision of this Court in case of Commissioner of Income­ tax v. Gauranginiben S. Shodhan Indl., reported in [2014] 367 ITR 238 (Guj) and dismissed the Revenue’s appeal.

3. Somewhat similar issue had come up before this Court in case of Gauranginiben (supra). The said case pertained to the assessment year 2006­- 07. The Court referring to section 50C of the Act, made following observations:

“13. We are conscious that section 50C of the Act introduced in the statute by Finance Act, 2002 with effect from 1.4.2003 now provides for special provision for full value of consideration in certain cases. The said section provides a deeming fiction under which consideration received or accruing as a result of transfer of a capital asset being land or building or both can be replaced by the value adopted or assessed or accessible by stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer. Sub­section (2) of section 50C, however, permits the assessee to dispute such valuation adopted by the State Stamp Valuation Authority and in such a case, it is open for the Assessing Officer to refer the valuation of the capital asset to a Valuation Officer. Present is not a case of this nature, as is clear from the assessment order in which the Assessing Officer has referred the reference to DVO. Even otherwise, we are informed that in the present case, sale consideration reflected in the sale deeds was higher than the valuation adopted by the Stamp Valuation Authority.”

4. Section 50C of the Act provides for special provision for full value of consideration in certain cases. Sub­section (1) of section 50C provides for the adoption of the value taken by the Stamp Valuation Authority for the purpose of stamp duty as the full value of consideration of the transferred asset for the purpose of section 48 of the Act. Learned counsel for the Revenue however contended that in the present case the transfer of the land took place under Banakhat which was not registered and that therefore there was no occasion for the Stamp Valuation Authority to assess the value of the land for the purpose of payment of stamp duty upon its transfer. This contention however, ignores the plain language used in sub­section (1) of section 50C which provides for the adoption of the valuation of the Stamp Valuation Authority for the purpose of payment of stamp duty not only when it is adopted or assessed but where it is assessable by such authority. The expressions ‘adopted’ or ‘assessed’ or ‘assessable’ would include even a case where the document evidencing transfer of the capital asset has not been presented for registration. The expression ‘assessable’ would permit the Revenue authorities to apply what is popularly referred to as Jantri rates with respect to the land in question for the purpose of section 48 of the Act with aid of deeming fiction contained in sub­section (1) of section 50C of the Act.

5. In the result, Tax Appeal is dismissed.