By Jagdish D. Shah, Jagdish T. Punjabi, Chartered Accountants
Section 50C – AO is not justified in
substituting the value determined by DVO for the sale consideration disclosed
by the assessee in a case where the difference between the sale consideration
of the property as shown by the assessee and FMV determined by the DVO u/s.
50C(2) is less than 10 percent.
FACTS
On 07.8.2006, the assessee sold four flats
for a consideration of Rs. 1,96,60,000.
Since the sale agreements were not registered it was submitted that it
was not possible to determine the stamp duty value as per the provisions of
section 50C of the Act. The Assessing
Officer (AO) referred the valuation of these flats to DVO who declared the
value of the flats to be Rs. 2,07,51,130.
The difference between the valuation as done by the DVO and the amount
of consideration was added by the AO in assessee’s income u/s. 50C.
Aggrieved, the assessee preferred an appeal
to CIT(A) who confirmed the action of the AO.
Aggrieved, the assessee preferred an appeal
to the Tribunal where it was argued on its behalf that the provisions of
section 50C are not applicable to the facts of the case in AY 2007-08 and since
the total addition is only a small percentage (5.5%) of the total consideration
it needs to be ignored for computing long term capital gain by relying on the
ratio of the decision of Pune bench of the tribunal in the case of Rahul
Constructions vs. DCIT (Pune)(Trib) 38 DTR 19 (2010)(ITA No. 1543 / Pn/2007).
HELD
Since the transactions were entered during
the financial year 2006-07 which is prior to 1.10.2009, being the date from
which the amendment to section 50C is effective, as per CBDT Circular No.
5/2010 dated 3.6.2010, the provisions of section 50C are not applicable in so
far as sales deed so executed were not registered with the Stamp Duty Valuation
Authority. Also, since the difference
between the sale consideration of the property shown by the assessee and the
FMV determined by the DVO u/s. 50C(2) is less than 10%, AO was not justified in
substituting the value determined by the DVO for the sale consideration
disclosed by the assessee.
The Tribunal allowed the appeal filed by the
assessee.
