Section 50c - property sold below stamp valuation authority
This query is : Resolved
22 February 2013
Dear Experts,
One of my client has sold property (Capital Asset)at Rs. 20 Lakhs at a lower price than the value adopted by Stamp Valuation Authority Rs. 25 Lakhs. Now as per sec 50C Rs. 25 Lakhs will be deemed to be the actual sale price. But actually due to acute need of funds client sold the property at 20 Lakhs. Also the Sale deed shows Rs. 20 Lakhs and not Rs. 25 Lakhs.
Question:
1. Why the client will pay extra capital gain tax on Rs. 500,000 though he didn't received the money?
Your assistance in this matter will be highly obliged.
One of my client has sold property (Capital Asset)at Rs. 20 Lakhs at a lower price than the value adopted by Stamp Valuation Authority Rs. 25 Lakhs. Now as per sec 50C Rs. 25 Lakhs will be deemed to be the actual sale price. But actually due to acute need of funds client sold the property at 20 Lakhs. Also the Sale deed shows Rs. 20 Lakhs and not Rs. 25 Lakhs.
Question:
1. Why the client will pay extra capital gain tax on Rs. 500,000 though he didn't received the money?
Your assistance in this matter will be highly obliged.
23 February 2013
Yes Amit. The the application of section 50C assumes notional income to the extent of gap between the consideration and stamp value. non receipt of that additional money is rather the basis of invoking 50C.
23 February 2013
Thanks, but I need a solution if you can provide, what I need to do to save tax.
23 February 2013
sub-section 2 provided that if
assessee proves that value adopted by stamp valuation authority exceeds the fair market value of the property as on the date of transfer than
value of transfer will be taken for calculation of Capital gain
but the burden to proof is on assessee
for details refer below link
https://www.caclubindia.com/articles/the-real-effect-of-section-50c-of-the-income-tax-act-1961-8665.asp#.USh3rzcqcS4
assessee proves that value adopted by stamp valuation authority exceeds the fair market value of the property as on the date of transfer than
value of transfer will be taken for calculation of Capital gain
but the burden to proof is on assessee
for details refer below link
https://www.caclubindia.com/articles/the-real-effect-of-section-50c-of-the-income-tax-act-1961-8665.asp#.USh3rzcqcS4
23 February 2013
Sunil Sahab,
just to clarify, the Ravi Kant judgment only remanded back the matter to AO and DVO for a fresh valuation. Thats it.
Though the Delhi ITAT talks about possibility of Assessee being able to demonstrate that the capital gains should be computed only at the registered value, ITAT itself has not done so. What happened after remand is not known.
Had the DVO arrived at Rs 11,42,000 through an empirical study, the same could have been adopted.
In the instant case, the sale at Rs 20,00,000 appears to be more of a distress sale which cannot be considered to be a ground for claiming a lower FMV (otherwise all sellers shall claim that they have sold the assets in distress!!)
just to clarify, the Ravi Kant judgment only remanded back the matter to AO and DVO for a fresh valuation. Thats it.
Though the Delhi ITAT talks about possibility of Assessee being able to demonstrate that the capital gains should be computed only at the registered value, ITAT itself has not done so. What happened after remand is not known.
Had the DVO arrived at Rs 11,42,000 through an empirical study, the same could have been adopted.
In the instant case, the sale at Rs 20,00,000 appears to be more of a distress sale which cannot be considered to be a ground for claiming a lower FMV (otherwise all sellers shall claim that they have sold the assets in distress!!)
23 February 2013
Dear Experts,
Today when i talked to the client he said the truth that he had sold the property at more than the registered value i.e at Rs. 30 Lakhs but has not shown the full amount in Deed as he has received the excess amount in black (Cash) i.e. Rs. 10 lakhs is the capital Gain.
Now the Question is:
1. Can he show the amount of Rs. 10 Lakhs in Books now but the Sale Deed shows that property is sold at below Stamp Valuation.
2. If we are showing Rs. 10 Lakhs in books then what are the consequences when ITO will see the Sale Deed and the Books? Will there be any tax liability in the form of penalty?
Experts I am waiting for your brains to search for the gold. Give your suggestions.
Today when i talked to the client he said the truth that he had sold the property at more than the registered value i.e at Rs. 30 Lakhs but has not shown the full amount in Deed as he has received the excess amount in black (Cash) i.e. Rs. 10 lakhs is the capital Gain.
Now the Question is:
1. Can he show the amount of Rs. 10 Lakhs in Books now but the Sale Deed shows that property is sold at below Stamp Valuation.
2. If we are showing Rs. 10 Lakhs in books then what are the consequences when ITO will see the Sale Deed and the Books? Will there be any tax liability in the form of penalty?
Experts I am waiting for your brains to search for the gold. Give your suggestions.
23 February 2013
Dear Amit,
first - you are now talking about tax evasion on part of your client.
second - yes it is open to your client to show the cash in his book. he may also make suo-moto submission that this money is part of the consideration received for the sale of land.
third - this would result in the additional tax liability
fourth - a suomoto submission can save you from a lot of penalties..
first - you are now talking about tax evasion on part of your client.
second - yes it is open to your client to show the cash in his book. he may also make suo-moto submission that this money is part of the consideration received for the sale of land.
third - this would result in the additional tax liability
fourth - a suomoto submission can save you from a lot of penalties..
25 February 2013
Sirjee, actually I have saved govt. tax, I have told the client to show the balance in cash. So actually I have avoided tax evasion, Thank you Experts.
25 February 2013
thats good amit. A good deed done!!
25 February 2013
thats good amit. A good deed done!!
25 February 2013
thats good amit. A good deed done!!
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