Case Law Details
Asst. Director of Income Tax Vs. Shri Ranjay Gulati (ITAT Delhi)– Under section 48 of the Income Tax Act, 1961 the income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto. Therefore for the purposes of computation of capital gains full value of consideration of capital asset transferred is to be taken and not the fair market value of the asset transferred.
Under section 50C of the Act for the purpose of computation of capital gains the full value of consideration has to be adopted as per circle rates. In a case where circle rates are higher than the fair market value of the property, sub section (2) of section 50C provides that the assessee can make request to the assessing officer to refer the matter to valuation officer for valuation of the property, as per market rates. Thus from the provisions of section 50C of the Act it is clear that for the purpose of computation of capital gains under section 45, the full value of consideration has to be taken as per circle rates prescribed by the State Govt. for the purpose of stamp valuation unless the AO has material in his possession to prove that the assessee had received higher amount than the circle rates. In that situation the AO will be justified to adopt amount received by the assessee as the full value of consideration. In the case of the assessee from the facts stated above, it may be seen that the circle rate for the property sold by the assessee was Rs. 13,700/- per sq.mtr. as against the sale instances adopted by the DVO for Okhla Indl. Estate, which falls in category D. The value of assessee’s share of the property as per circle rates applicable in the case of the assessee works out to Rs. 2,00,98,722/- as against sale consideration of Rs. 2,90,00,000/- admitted by the assessee. In the case of the assessee, there is nothing with the AO to suggest that the assessee had received more than what is stated in the sale deed and, therefore, full value of consideration cannot be adopted as per the DVO’s report which represent fair market value of industrial plot sold. Adoption of DVO’s report without providing opportunity of being heard is also against the principles of natural justice. Accordingly we do not find any infirmity in the order passed by the ld. CIT (A) deleting the addition based on the report of the DVO.
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Dear Sir,
My father owns a free hold property in Kanpur, where the circle rate is about Rs. 45,000/- sq yard, whereas the market rate is only about Rs. 25,000 sq yard. The size of the property is 1000sq yard. The property has been inherited by my father through a family settlement in court. If we sell the property our tax liability comes up t Rs. 70 Lacs, which is huge by any standards. Also, if we Invest the money in Bonds, we will have to invest Rs. 4.5 Crores whereas we will get only Rs. 2.5 crores from the sale proceed. We want to buy a residential property to the tune of Rs. 1.5 Crores and that too in projects which may be delivered within the next 2-3 years. IS this possible? What is the best way to save tax and get out of this mess?
Excellent review. I need your help in case law of compnay in liquidation where the developed layout was sold to buyers in instalments and got them registered after the date of liquidation as the proceedings were not known on the date of registration.The company also not declared the asset on the date of liquidation and declared after 5years about the site.What is the relief to the purchaser.any case law is available.pl quote decided cases similiar to the above.