Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that the provisions of Section 50C of the Income Tax Act is not applicable in a case where the capital asset was not land or building but it is a right to purchase a building.
The Assessee, in the instant case is an individual has duly filed his return of income and claimed a capital loss of Rs.26,28,113 on sale of a property. In the return, it was specified that the property was purchased for a consideration of Rs.2,44,00,000 and the same was sold for a consideration of Rs.2,50,00,000 during the year.
Thereafter, during the course of assessment proceedings, the Assessing Officer (AO) referred the matter to the valuation officer and the officer re-assessed the market value of the property at Rs.3,91,53,000 as against Rs.2,50,00,000 which was declared by the assessee earlier. Accordingly, he computed the capital gain on sale of the property at Rs. 1,15,44,888.
On appeal, the CIT(A) also justified the action of the Assessing Officer in making a reference to the valuation officer.
Aggrieved by the assessee was on appeal before the tribunal by challenging the action of the AO r in replacing the “full value of sale consideration” by “fair market value of the property” for the purpose of computation of capital gain. Before the bench assessee submitted that in case of capital asset being land or building or both the full value consideration could have been substituted by the value adopted or assessed by the stamp valuation authority in accordance with the provision of section 50C of the Act. And further contended that the property was transferred on agreement to sale and it was not registered with the stamp valuation authority so no value was assessed or adopted by the stamp valuation authority.
Before taking the final decision, the Tribunal bench comprising of Judicial Member Amit Shukla and Accountant Member O.P.Kant observed that section 50C of the Income Tax Act is not applicable in the present case as the capital asset involved here was not land or building but it is a right to purchase a building only. The bench further observed that while perusing the available material facts on record it is clear that the property was transferred on agreement to sale and it was not registered with the stamp valuation authority. Hence section 50C cannot be applied in this case.
Therefore, while allowing the appeal filed by the assessee, the division bench set aside the finding of the lower authorities on the issue in dispute and also deletes the addition made by the AO.
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