Case Law Details
Section 50C 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 can be replaced by the value adopted or assessed by stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer. In the said section 50C of the Act, sub-section (2) permits the assessee to dispute such valuation adopted by the 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.
However, in the present case, we find that the assessing officer has made reference under section 55A for the determination of market value for the purposes of the computation of capital gain under section 48 of the Act.
Section 48, which is also contained in chapter IV of the Act pertains to method of computation of capital gain. A detailed mechanism has been provided for such computation of the income chargeable under the head “Capital Gains”. It provides, inter alia, that 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 amounts mentioned therein that is the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. Section 55 A, as we have noticed, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVO’s report would have no relevance for the purpose of determining full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of section 48 of the Act.
Full Text of the ITAT Order is as follows:-
ITA No. 2050/Ahd/2013 & C.O. No. 68/Ahd/2016 are appeal and Cross Objection by the assessee directed against the order of learned Commissioner (Appeals)-XX, Ahmedabad dated 1-5-2013 pertaining to assessment year 2009-10.
2. The sole grievance of the revenue is that the learned Commissioner (Appeals) erred in deleting the addition of Rs. 78,75,2511 made by the assessing officer vide order dated 28-12-2011 made under section 143(3) of the Act.
3. Rival contentions were heard at length. We have given a thoughtful consideration to the orders of the authorities below. In this case, the assessee has returned Long Term Capital Gain on sale of plot of land. The sale consideration was shown at Rs. 6.25 crores and the sale was made vide Banakhat dated 2-12-2008 and no final document of sale deed was executed.
4. From the sale consideration of Rs. 6.25 crores, the assessee has deducted original purchase price and the cost of improvement by appropriate indexation.
5. The assessing officer was of the opinion that considering the rising market prices, the value of sale shown by the assessee is on the lower side and accordingly made a reference under section 55A of the Act to the DVO for the purpose of the determination of correct market value as on the date of transfer as per Banakhat. The Valuation Officer vide report dated 15-12-2011 submitted the Valuation Report and estimated the sale value at Rs. 13,33,63,000.
6. The assessing officer recomputed the income from Long Term Capital Gain by taking the market value of Rs. 13,33,63,000 as valued by the DVO.
7. Aggrieved by this, the assessee carried the matter before the learned Commissioner (Appeals) and challenged the reference made to the DVO under section 55A of the Act. After considering the facts and the submissions and the provisions of section 48 of the Act, the learned Commissioner (Appeals) was convinced that the reference to the DVO was valid but was of the opinion that the assessing officer has not brought on record any other evidence to show that the assessee has received consideration over and above the declared consideration. Accordingly, the learned Commissioner (Appeals) held that the fair market value cannot be adopted as full value of consideration to determine the capital gains.
8. It is an undisputed fact that the assessing officer has made a reference under section 55A of the Act to the DVO to determine the correct market value as on the date of the transfer. Section 55A, permits reference to DVO by the assessing officer under certain circumstances. Such reference, however, is with a view to ascertaining the fair market value of capital asset for the purposes of chapter IV. In the instant case, the reference was made to DVO for ascertaining the fair market value of the capital asset as on the date of sale.
9. Provision of section 48 read as under:–
“The income chargeable under the head “Capital Gain” shall be computed by deducting from the full value of the consideration received or accruing as result of transfer of the capital asset the following amounts, namely:–
1. Expenditure incurred wholly and exclusively in connection with such transfer.
2. The cost of acquisition of the asset and the cost of any improvement thereto.”
10. A perusal of the aforementioned section shows that the main thrust of section 48 is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. section 55A, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVO’s report would have no relevance for the purpose of determining full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of section 48. Thus, in our understanding of the law, the reference to DVO for ascertaining the fair market value of the capital asset as on the date of the sale as in the present case would be wholly redundant.
11. We find that section 50C 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 can be replaced by the value adopted or assessed by stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer. In the said section 50C of the Act, sub-section (2) permits the assessee to dispute such valuation adopted by the 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.
12. However, in the present case, we find that the assessing officer has made reference under section 55A for the determination of market value for the purposes of the computation of capital gain under section 48 of the Act.
13. Our view is fortified by the decision of the Hon’ble High Court of Gujarat in the case of CIT v. Gauranginiben S. Shodhan Indl. (2014) 367 ITR 238 (Guj.) wherein the Hon’ble High Court has held as under:–
“11. Taking the question of ascertaining the fair market value on the date of sale, we notice that section 48, which is also contained in chapter IV of the Act pertains to method of computation of capital gain. A detailed mechanism has been provided for such computation of the income chargeable under the head “Capital Gains”. It provides, inter alia, that 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 amounts mentioned therein that is the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. Section 55 A, as we have noticed, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVO’s report would have no relevance for the purpose of determining full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of section 48 of the Act.
12. In that view of the matter, the reference to DVO for ascertaining the fair market value of the capital asset as on the date of the sale in the present case would be wholly redundant.
14. Somewhat similar question came up for consideration before this Court in judgment dated 28-3-2011 in the case of CIT v. Girish Damjibhai Patel [Tax Appeal No. 1016 of 2009] and allied matters, in which it was held and observed as under:–
“20. Quite apart from the Commissioner (Appeals) discarding the very Valuer’s Report, we find that the reference itself was not competent insofar as he wanted to ascertain fair market value of the land on the date of sale. In absence of any material on record before us by which assessing officer could have concluded that the consideration indicated in the sale-deed did not reflect the full consideration received by the assessee, it was not possible to assess the capital gain by estimating what would be the fair market value of the land through valuer’s report.
21. Decision of the Delhi High Court in the case of CIT v. Smt. Nilofer I. Singh (2009) 309 ITR 233 was also brought to our notice; wherein, relying on the decision of George Henderson & Co. Ltd. (supra) and Gillanders Arbuthnot & Co. (supra), the Division Bench observed that expression “full value of consideration” used in section 48 of the Act does not have reference to the market value but only to the consideration referred to in the sale deed as sale particulars of the assets which have been transferred.”
14. Considering the facts in totality, in the light of the decision of the Hon’ble Jurisdictional High Court (supra), we hold that the value adopted as per the DVO’s report is uncalled for and the assessing officer is directed to accept the sale consideration of Rs. 6.25 crores and compute the capital gains accordingly.
15. In the result, the appeal filed by the Revenue is dismissed.
C.O. No. 68/Ahd/2016 for A.Y. 2009-10.
16. The Cross Objection of the assessee is barred by limitation by 814 days. In any case, the learned counsel for the assessee stated that he is not pressing the Cross Objection. The C.O. is accordingly dismissed as not pressed.
