can a valuation of property which is non existant now rather existed earlier building which the assessee through development agreement got flats and the first receipt of assessees share of flats for which cost of old land and building to the pro rata basis, be undertaken / sought by ITO, for revising capital gains tax, under section 50 C if IT Act, 1961, while the order u/s sec 143(3) is already passed demanding tax. If the above section 50C is wrong then under which one can it be done.
S. 50C does not apply to “rights” in land & building like tenancy rights
The assessee, a tenant in a flat, sold tenancy rights for Rs. 30 lakhs and offered long-term capital gains on the basis that the said sum was the consideration. The AO took the view that as the market value adopted the Sub-Registrar was Rs. 33,11,200, the said market value had to be adopted as the consideration u/s 50C. This was confirmed by the CIT (A). On appeal by the assessee, HELD allowing the appeal:
(i) S. 50C is a deeming provision and incorporates a legal fiction that if the consideration received on transfer of land or building is less than the stamp duty value, the said stamp duty value shall be deemed to be the full value of consideration for purposes of computing capital gains;
(ii) It is trite law that a legal fiction cannot extend beyond the purpose for which it is enacted. As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent is impermissible. The statute has to be interpreted on the basis of the language used. No words can be added and only the language used can be considered so to ascertain the proper meaning and intent of the legislation. (Law on interpretation discussed in detail);
(iii) S. 50C does not apply to all capital assets but only to “land or building”. A tenancy right is not “land or building” (It is “rights” in building). Consequently, s. 50C has no application and the capital gains have to be computed on the basis of the actual consideration and not the stamp duty value.
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