Section 50C Applies to Transfer of Land to Govt-Linked Housing Society; ITAT Upholds Section 263 Revision

New India Cooperative Housing Society Ltd. Vs ITO (ITAT Mumbai)

The Income Tax Appellate Tribunal (ITAT), Mumbai dismissed the assessee’s appeal and upheld the applicability of Section 50C of the Income-tax Act, 1961 in relation to the transfer of land by a cooperative housing society. The Tribunal also upheld the jurisdiction exercised by the Principal Commissioner of Income Tax (PCIT) under Section 263 while directing the Assessing Officer (AO) to provide the assessee an opportunity to raise objections regarding the valuation adopted for the property and to refer the matter to the Departmental Valuation Officer (DVO), if required, for determining the value to be adopted for computing capital gains.

The assessee, a cooperative housing society, was one of fourteen co-owners of a parcel of land. Upon transfer of the land, the assessee received its proportionate share of the sale consideration and filed its return declaring nil income after claiming deduction under Section 80P. The assessment was reopened under Section 147, and the Assessing Officer assessed long-term capital gains based on the consideration received by the assessee. Subsequently, the PCIT invoked revisionary jurisdiction under Section 263, holding that the Assessing Officer had failed to apply the mandatory provisions of Section 50C despite the stamp duty valuation being substantially higher than the declared sale consideration. A fresh assessment was thereafter completed by applying Section 50C. The CIT(A) upheld the addition while directing the Assessing Officer to determine the correct valuation of the property and apply the appropriate rate of tax on long-term capital gains.