In a significant ruling, the Mumbai bench of the ITAT held that Section 50C of the Income Tax Act which provides for special provisions for determining full value of consideration is applies to Depreciable assets also.
Assessee, M/s Abhideep Chemicals, has sold the property and shown sale consideration at Rs.30 lakh whereas the stamp duty value of the property Rs.1,42,83,000/- and accordingly the Assessee arrived at loss of Rs.44,87,519/- on sale of the residential property. AO accepted the return without any objection and granted benefit of Section 54 EC to the assessee.
The Commissioner of Income Tax found the action of the AO as “prejudicial to the interest of the Reveue” and set aside the order by invoking his power u/s 263 and held that Section 50 C of the Income Tax Act applicable to depreciable assets.
Upholding the order of the Commissioner, the bench clarified that the provisions of the Section 50C are applicable in the case of transfer of land and building including depreciable capital asset.
Citing a plethora of decisions, the bench said that “the provision of section 50C contains a special provision for determining full value of consideration and as per provisions of section 50C when the consideration received or accruing as a result of the transfer by an Assessee of capital asset being land or building or both, is less than the value adopted or assessed by an authority of the State Government for the payment of stamp duty in respect of such transfer, the value so adopted or assessed shall for the purpose of Section 48, be the full value of consideration received or accruing as a result of such transfer. In the instant case, the property has been transferred to Mrs. Alka B Birewar, the Managing director of the assessee company for Rs. 30 lakhs against the stamp duty valuation of the property of Rs.1,42,83,000/ -.”
Read the full text of the Order below.
