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In the case of Harley Street Pharmaceuticals Ltd. (supra) it has been held that provisions of Sec.50C are applicable only for computation of capital gains in real estate transaction in respect of seller only and not for the purchaser. Legal fiction cannot be extended any further and has to be limited to the area for which it is created.
Merely because the Assessing Officer invoked section 50C(2) and adopted guideline value to be the actual sale consideration and made addition in the assessee’s income automatically become a case attracting penalty under section 271(1 )(c) of the Act.
The Revenue’s case is that the provision of sec. 50C having come on the statute book with effect from 1-4-2003, and the capital asset which is the subject-matter of transfer, being land, the same would apply, and thus stands rightly invoked by the AO. The assessee’s case, and on the basis of which it found favour with the first appellate authority, is that the transfer in the first five (5) cases stood effected much prior the relevant year, i.e., on 15-01-1998
From a reading of the provisions of section 50C(2), it is clearly mandated that if an assessee challenges or objects to the Assessing Officer adopting the guideli ne value of the property for stamp duty purposes in place of the stated consideration in the sale deed for the purposes of computing LTCG, then the Assessing Officer ought to refer the property for valuation to the Valuation Officer of the Income-tax department.
Section 54EC provides for exemption from tax on long-term capital gain when the capital gain arises from the transfer of long-term capital asset and the whole or any part of the said capital gain is invested in certain bonds within the period of 6 months. Section 54EC speaks of the actual capital gain which arises out of transfer of long-term capital asset and not deeming amount. Whereas section 50C provides for deeming fiction where value of consideration is adopted as per the stamp valuation authorities or any authority of the State Government. Even if the property has been sold at a lesser price but under the deeming fiction of section 50C, the value adopted by the stamp valuation authorities is to be taken as sale consideration.
Chimanlal Manilal Patel Vs. ACIT The AO has not disputed the consideration received by the assessee. The addition has been made on the basis of deeming provisions of section 50C. The assessee has furnished all the facts of sale, documents! material before the AO. The AO has not doubted the genuineness of the documents/details furnished by the assessee. Only because the assessee agreed to the additions because of the deeming provisions it cannot be construed to be filing of inaccurate particulars on the part of the assessee. The assessee agreed to addition on the basis of valuation made by the stamp valuation authority cannot be a conclusive proof that the sale consideration as per the sale agreement is seemed to be incorrect and wrong. In view of these facts we are of the considered view that penalty cannot be levied on the basis of deeming provision.
Section 50C of the Act is a deeming provision and ostensibly involves creation of an additional tax liability on the assessee and, therefore, notwithstanding the presence of the expression ‘may’ in section 50C(2)(a), the Assessing Officer in the instant case (where assessee had claimed in his return itself that stamp duty values exceeds FMV) ought to have referred the matter to the Valuation Officer for ascertaining the value of the capital asset in question.
For application of Sec.50C that the transfer must be of a capital asset, being land or building or both. If the capital asset under transfer cannot be described as land or building or both then section 50C will cease to apply. From the facts of the case narrated above, it is seen that the assessee has transferred booking rights and received back the booking advance. Booking advance cannot be equated with the capital asset and therefore section 50C cannot be invoked.
It is sine qua non for application of Section 50 C that the transfer must be of a capital asset, being land or building or both, but then a leasehold right in such a capital asset cannot be equated with the capital asset per se. We are, therefore, unable to see any merits in revenue’s contention that even when a leasehold right in land or building or both is transferred, the provisions of Section 50C can be invoked.
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.
