clarification regarding section 50C

This query is : Resolved

mahesh (Querist)
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17 May 2008 One of our client has entered into a sale agreement (without giving possession)to sell a site for Rs.10 lacs and received advance of Rs.2 lacs with a condition that the balance has to be paid at the time of registration and the registration has to be done on or before 2 months from the date of sale agreement. Rs.10 lacs is also the value fixed by the stamp valuation authority on the date of sale agreement. But the valuation authority has increased the rate to Rs.20 lacs by the time of registration and the stamp duty is paid by the buyer on rs.20 lacs. The seller has received the balance Rs.8 lacs at the time of registration.The seller has paid the long term capital gain taking the consideration as Rs.10 lacs. The case is selected for scrutiny. Now the ITO has raised a tax demand taking the sale consideration as Rs.20 lacs as per Section 50C? Is there any way out for the client to argue that the sale consideartion has to be taken as Rs.10 lacs instead of Rs.20 lacs? Are there any case laws on the above subject?

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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21 May 2008 The definition of transfer is very wide under the income tax act . Date of giving of possesion may be deemed as date of transfer if covered under definition .....now if your transfer is prior to enhancement in the stamp value ........you may raise a case.

Moreover , you may also take shelter under following :

Section 50 (2) Without prejudice to the provisions of sub-section (1), where—

(a) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer;

(b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court,

the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

Explanation.—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).