Mkt Value V/s Gvot valutaion for computation of LTCG

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Kaustubh (Querist)
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24 May 2010 Hi,

I am computing long term capital gain for a property. The Govt valuation for the property is 17.5 lacs whereas the property was sold for 9.5lacs. Actual mkt value of the property is also around 9.5lacs. The law says that the higher of Govt valuation and sale proceeds shall be taken for tax computation. But in this case the mkt value is actually much much lower than govt valuation, resulting in much higher tax liability...Are there any case laws where lower value has been accepted?

PHANI

PHANI (Expert)
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26 May 2010 Refer to the Sec.45 - Scope and year of chargeability where u/s Sec.45(1) - transfer of a capital asset, the consideration that should be taken for computing the capital gain is the amount received from the transfer of the capital asset. In this scenario, the consideration received is Rs.9.5lacs which has to be taken for computing the capital gain.

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Kaustubh

Kaustubh (Querist)
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27 May 2010 Hi Phani,
Thanks for your reply....I agree that 9.5 lacs is the consideration received, but the value of property for stamp duty valuation purpose is 17.5 lacs. So in this case, dont you think we have to take 17.5 lacs as the consideration for computing capital gain........

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PHANI

PHANI (Expert)
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28 May 2010 Kaustubh,

I accept the fact that your's is a peculiar case where Govt. Value is far more than Market Value. But govt. value is considered only for the purpose of calculation of stamp duty that needs to be paid to the govt. However, for the computation of capital gain, the consideration that is received by the assessee will be taken. Hope I have clarified your doubt.