3 Inderlok Hotels Pvt. Ltd. v. ITO, Circle 5(2)(1)
ITAT ‘I’ Bench, Mumbai
Before A. L. Gehlot (AM) and R. S. Padvekar (JM)
ITA No. 4376/Mum./2008
A.Y. : 2005-06. Decided on : 5-2-2009 Counsel for assessee/revenue : A. H. Dalal / S. K. Singh
Income-tax Act, 1961 — S. 50C — Whether provisions of S. 50C are applicable only in respect of computation of income under the head ‘Income from Capital Gains’ and that the said Section cannot be invoked where the income is assessed as business income under the head ‘profits and gains of business or profession’ — Held, Yes.
Per R. S. Padvekar : Facts :
The assessee had constructed a building on land held by it as stock-in-trade. During the previous year relevant to the assessment year under consideration two flats in the building constructed by the asses-see were sold for a consideration of Rs.60 lakhs and Rs.40 lakhs, respectively. The Stamp Authorities had for the purposes of levy of stamp duty valued the flats at Rs.78,41,500 and Rs.72,81,456, respectively. The assessee accepted the valuation done by the Stamp Authorities. The assessee declared profit @ 8% of the sale price. The profit declared by the assessee was offered for taxation under the head ‘Income from Business’. The AO assessed profit arising on sale of these two flats under the head ‘Income from Business’, but made an addition of Rs.51,22,956. This amount represented the difference between valuation adopted for the purpose of the stamp duty and actual sale consideration shown by the assessee. The CIT(A) confirmed the action of the AO. Aggrieved, the assessee preferred an appeal to the Tribunal.
Held :
The Tribunal noted S. 50C deals with transfer of a ‘capital asset’ being land or building or both and it provides for replacing the value adopted or assessed for the purpose of stamp duty more particularly u/s.48 of the Act in place of value or sale consideration shown by the assessee if it is lower than the value adopted or assessed for the purpose of levy of stamp duty. It observed that the expression ‘capital asset’ has specific relevance with S. 45 which provides for taxing gain on transfer of ‘capital asset’ as capital gain. The Tribunal upon consideration of the language of the provisions of S. 50C of the Act and also the intention of insertion of the provisions of S. 50C as mentioned in the Explanatory Circular No. 8, dated 27-8-2002 issued by the CBDT, held that there should not be any cloud of doubt that S. 50C has application only to the extent of determining sale consideration for computation of capital gain and it cannot be applied for determining the income under other heads.
