Section 50C – Fair market value determined by DVO cannot be replaced for full value of consideration

ITO Vs. Chandrakant R. Patel (ITAT Ahmedabad)

Appeal No. 3139/Ahd/2009 , Date of Decision – 08.04.2011

The assessee had shown long term capital gain on sale of land. There was a common sale deed executed along with co-owners in respect of two plots. The assessee had showed sale consideration of Rs. 41,860 per Sq. mt. The ‘Jantri’ rate as per ‘Stamp Duty Author¬ity’ was Rs. 4,500 and Rs. 7,000 per sq. mt. respectively, for the plots. The AO considering the area of the property referred valuation of the same to the DVO. The valuation report of DVO val¬ued the same at Rs. 45,000 per sq. mt. The AO on the basis of report of DVO made the addition.

On appeal the assessee contended that reference made u/s. 50C was illegal. The CIT(A) opined that reference to the DVO can be made u/s. 142A, or u/s. 55A, or u/s. 50C. The CIT(A) was of opinion that sec. 142A has a limited scope for reference to Valuation cell i.e. for estimating an investment as prescribed u/s. 69 and u/s. 69B for certain assets. Section 55A is in respect of ascertaining the fair market value for purpose of determining the cost of acquisition u/s. 55(2)(b). As per Sec. 50C, reference is possible only if sale consideration is less than the stamp duty value fixed by stamp valuation authority. Thus, the CIT(A) held that addition made by the AO was not lawfully sustainable.

Aggrieved by the order, Revenue appealed before the ITAT and ITAT held that

– The language in section 55A does not refer the ‘value of consideration’ but only uses the term ‘Fair Market value’. So the scope of the section gets con-fined to determine the fair market value of a capital asset only. Thus, considering the language of section 48 the value so deter¬mined cannot be substituted for ‘Full value of consideration’.

– Section 50C states that the AO can refer to DVO u/s. 55A only if the assessee claims that the value adopted by the stamp valuation authority exceeds their fair market value or the value so adopted by stamp valuation authority has not been disputed by any authority, Court or High Court.

– Thus, the valuation made by the DVO and the consequential addition as made by the AO was reversed and the view taken by the CIT(A) was upheld.