Summary: Section 50C of the Income Tax Act, 1961, introduced by the Finance Act, 2002, mandates that when the sale consideration of immovable property (land or building) is less than the value assessed by the State Government’s Stamp Duty Valuation Authority, the latter is deemed to be the full value for tax purposes under Section 48. If there’s a difference between the agreement date and registration date, the value on the agreement date is used if part of the payment was made via an account payee cheque. Furthermore, if the stamp value is within 110% of the actual sale price, the sale price itself is accepted. Taxpayers can challenge the stamp value before the Assessing Officer, who may refer the matter to a Valuation Officer. If the Valuation Officer’s estimate is lower than the stamp authority’s, it will be used as the full value for tax purposes. Similarly, Section 43CA, introduced in 2013, applies to non-capital assets like business stock, where the assessed value is also deemed the full consideration if lower than the sale price. Taxpayers retain the right to challenge state assessments under both sections.
A new Section 50C, inserted by the Finance Act, 2002, with effect from 1st April, 2003 is as under:
Where the consideration received or accruing as a result of the transfer by an assesse of a capital asset, being land or building or both, is less than the value adopted or assessed by an authority of a State Government ( Stamp Valuation Authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
1st proviso to section 50C (1) provides that where the date of agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the Stamp Valuation authority on the date of agreement may be taken for the purpose of computing full value of consideration for such transfer.
2nd proviso to section 50C (2), provides that the provision of 1st proviso shall apply only in case where the amount of consideration , or a part thereof, has been received by way of an account payee cheque, on or before the date of the agreement for transfer.
3rd proviso to section 50C (1) provides that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed 110% of the consideration received or accruing as a result of sale, the consideration so received or accruing as a result of the sale, for the purpose of section 48m, will be taken to be the full value of consideration.
For example, Mr. A has sold his house property for Rs. 50,00,000 and prepared registered sale deed by paying stamp duty on sale price. As per Stamp Valuation Authority the value of this property is Rs. 60,00,000.
Under above circumstances Mr. A will have to calculate his income under section 48 by considering sale value as Rs. 6,00,000 and has to pay the additional tax on capital gain.
However, Mr. A may object and claim before the Assessing Officer that the value adopted by State Valuation Authority is higher than the market value of building on the date of sale and the value so adopted by State Valuation Authority has not been disputed in appeal, assessing officer may refer the valuation of the property to the Valuation Officer.
If the value ascertained by the Valuation Officer exceeds the value adopted by State Valuation Authority , the value so adopted by the State Valuation Authority will be taken to be the full value of consideration for computing capital gains.[Section 50C (3)]. As a corollary, where the value estimated by Valuation Officer is less than that adopted by State Valuation Authority, the value estimated by the Valuation Officer will be taken s the full value of consideration.
Full value of consideration for sale of assets other than capital assets in certain cases:
A new Section 43CA, inserted by the Finance Act, 2013 with effect from 1st April, 2014. This section provides that where the consideration received or accruing as a result of transfer by an assesse of an asset (other than capital asset), being land or building or both, is less than the value adopted or assessed by an authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed will be deemed to be the full value of the consideration received or accruing as result of such transfer for the purposes of computing profits and gains from transfer of such asset [(Section 43CA (1)].
1st proviso to section 43CA (1), from assessment year 2021-22, provides that where the value adopted or assessed by the authority for the purpose of payment of stamp duty does not exceed 110%, which was 105% previously, of the consideration received or accruing as a result of transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from such transfer of asset, will be deemed to be the full value of consideration.
This section is mostly applicable to stock in trade of business. Like section 50C, assesse have all the rights to challenge the Authority of State Government.
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