ITO Vs Gita Roy (ITAT Kolkata)- Whether Ld. CIT (A) erred in directing the AO to adopt the value of the property sold as per DVO report for the purpose of computing capital gains in place of value adopted by Stamp Valuation Authority and considered by AO as per provisions of Section 50C(1) of the IT Act, 1961. Held, Yes If the fair market value as assessed by the DVO is lower than the value adopted by Stamp Duty Authorities for collecting stamp duty. Then value so adopted by DVO has to be adopted by the AO for the purpose of computation of LTCG.
The property was situated in a narrow lane and fully tenanted property with encroachment and subtenants. The eviction suit was also pending since 1982. Assessee stated that notional rent at Rs. 12,000/- p.a. was also deposited by the tenants in the Court as against the property tax of Rs. 23,296/- p.a. According to the assessee, this property was loss making proposition and further no buyers were forthcoming to buy a 100 year old property, which is under litigation and tenanted.The admitted fact is that the property was sold and the stamp valuation of the property was at Rs. 1,32,22,327/-and assessee’s half share comes to Rs. 66,11,163.50. The assessee has declared the sale consideration recorded in the sale deed at Rs. 20 lacs for her half share. It is an admitted fact that the matter was referred to DVO by the CIT(A) as required by the assessee and the DVO valued the fair market value of this property at Rs. 30,87,675/- and in view of this, the CIT(A) directed the Assessing Officer to compute LTCG on the basis of fair market value estimated by the DVO. Now, we have to find out whether the action of the CIT (A) is correct in referring the matter to the DVO for valuing the fair market value of the property under reference or not. And further, whether it is mandatory for the Assessing Officer to refer the property for valuation, for adopting the fair market value for the purpose of computation of LTCG or it is discretionary on the part of the Assessing Officer.
The provision of section 50C of the Act, as introduced by the Finance Act, 2002 w.e.f. 1.4.2003, by virtue of which a special provision for determining the full value of consideration in cases of transfer of immovable property is introduced. As per this provision, in case the consideration declared to be received or accruing as a result of transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be charged accordingly u/s. 48 of the Act. This position is in view of sub-section 50C(1) of the Act. Sub-section (2) provides that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer has to take such fair market value to be the full value of consideration but if the fair market value so determined by the DVO is more than the value adopted or assessed by stamp duty Authorities for the purposes of collection of stamp duties, the Assessing Officer shall not adopt such fair market value but shall take full value of consideration to be the value adopted or assessed for the purposes of stamp duty. In the present case, the CIT(A) has referred the matter to the DVO for ascertaining the fair market value, who ascertained the fair market value at Rs. 30,87,675/- as against the value adopted by Stamp Duty Authorities at Rs. 1,33,22,222/-. In our view, in view of the provisions of sub-section (2) of section 50C, fair market value as assessed by the DVO is lower than the value adopted by Stamp Duty Authorities for collecting stamp duty and the value so adopted by DVO has to be adopted by the Assessing Officer for the purpose of computation of LTCG.