In Jastinder Singh Vedi v. DCIT, the Delhi bench of the ITAT held that the “full value of consideration” reported in the return can be replaced with “fair market value of the property” if the value adopted by the stamp authorities are higher than the value declared by the assessee.
Assessee sold his property and offered the receipt to tax as his long term capital gain. However, the AO found that the amount shown by the assessee in his return is very much lower than the fair market value and therefore, initiated assessment proceedings and referred the matter to the valuation officer. Later, assessment was completed on the basis of the value adopted by the Officer based on fair market value.
Impugning the order, Assessee maintained that the AO cannot substitute full value of consideration with the fair market value of the property in view of s. 48. The department, on the other hand, defended the AO by stating that the assessment is proper in view of section 50C of the Income Tax Act.
The issue before the Tribunal was that whether the “fair market value of the property” can be substituted in place of “full value of consideration” in section 48 of the Act.
The bench noted that as per Section 48 of the Income Tax Act, income under the head ‘capital gains’ shall be computed by deducting from the full value of consideration received or accruing as a result of transfer of the capital asset, the amount of expenditure incurred in connection with transfer and cost of acquisition of the asset including cost of any employment of the asset. What the section says is that, for the purpose of computation of capital gains “full value of the consideration” received/accrued as a result of transfer of the capital asset is required to be considered. However, in case of specific capital asset like land or building, section 50C of the Act has been introduced w.e.f. 01.04.2003. According to which, in case of land or building or both, if the consideration received or accruing as a result of the transfer of capital asset is less than the value adopted or assessed or assessable by any authority of the State Government i.e. stamp valuation authority for the purpose of payment of stamp duty then the valuation adopted or assessed or assessable shall be deemed to be full value of consideration received accruing as a result of such transfer.
“The word ‘assessable’ has been introduced w.e.f. 01.10.2009 and prior to that value adopted or assessed by stamp valuation authority was required to be deemed the full value of consideration. Further, in sub-section 2 of section 50C of the Act, if the assessee claims before the Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority, exceeds the fair market value of the property on the date of transfer and the value adopted, assessed or assessable by the stamp valuation authority has not been disputed by the assessee before any authority, court or High Court, then in such circumstances, there is a provision that the Assessing Officer may refer the valuation of the capital asset to Valuation Officer.”
While restoring the matter back to the files of the original authority for fresh consideration, the bench observed that, “the full value of consideration mentioned in section 48 of the Act may be replaced by the value assessed or adopted by the stamp value authorities or fair market value only if section 50C of the Act applies in this case and which depends on the fact whether the sale transaction was registered by the stamp valuation authorities. In other words, if the property in question has been sold through registered sale deed and the value adopted or assessed by the stamp valuation authority is higher than the value declared by the assessee in the return of income, the provisions of Section 50C of the Act are clearly applicable. If the sale transaction in question is not registered with stamp value authorities, then full value of consideration has to be accepted as declared by the assessee following the decision of the Hon’ble High Court of Punjab & Haryana in the case of Quark Media House (India) Pvt. Ltd. (supra.).”
Read the full text of the Order below.
