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CMA KNVV Sri Vidya - Sri Kanth (C.A.Final (New) ICWAI FINAL (New)) (11269 Points)

06 January 2009

MR.SHEKAR purchased a land for 1lac(8yrs back)
later in 2006 he sold out for 12lacs (market value = 20 lacs)
n he paid stamp duty on 12 lacs he calculated capital gains on 12lacs n 1lac n paid income 4m capital gains

but now he was posed to pay tax on capital gains for 20 lacs (market value) in accordance with his purchase value of 1lac

is this correct ????? is there any rule opposing it r supportin it plz give me answer 4 it n also details like rules r acts ............!!!!!!!!!!!!!!!!! ::::-----))))))

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12 Replies

Jeet Biswas (ACMA (in Service)) (5073 Points)
Replied 06 January 2009

yes....these tactics dont work now. many still do 50:50; black:white transaction & show lesser value in the deeds. this Provision serves them right. Mr. Shekhar has to comply with the Valuation Officer in this regard & pay C.G on 20lacs unless he appeals against the same....

Pls refer Sec50C of the IT Act with ref to Special Provision for Full Value of Consideration in Certain Cases.....read with the Impact of Valuation by the Valuation Officer.

CA SUDHIR HALAKHANDI (PRACTICING CHARTERED ACCOUNTANT) (13196 Points)
Replied 06 January 2009

SEE SECTION 50 C OF THE INCOME TAX ACT 1961- AND ACCORDING TO IT THE CONSIDERATION FOR THE PURPOSE OF CAPITAL GAIN HAS TO BE TAKEN EQUAL TO THE REGISTRATION VALUE. BUT IN YOUR CASE THE REGISTRATION VALUE IS THE SAME AND THE SALE IS ALSO ON THE SAME AMOUNT ON WHICH REGISTRATION IS MADE HENCE THE MARKET VALUE IS IRRELAVANT.

THERE WILL BE NO EFFECT OF MARKET VALUE IN THIS CASE.

I PRESUME HERE THAT YOUR SALE IS ON 12 LAKHS AND NOTHING ELSE.

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 06 January 2009

Sec.50C will apply where consideration declared to be received is less than value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty. In your case value can be adopted from stamp duty Ready Reckoner irrespective of the fact whether Stamp Duty is paid or not.

Hence, you are liable to pay Capital Gain Tax considering your consideration as Rs.20 lacs and not Rs.12 lacs.

CA SUDHIR HALAKHANDI (PRACTICING CHARTERED ACCOUNTANT) (13196 Points)
Replied 06 January 2009

Sorry sir , but here the property is sold for Rs.12 lakhs and the stamp duty valuation is also Rs. 12 Lakhs. Section 50 C says that if the value received is less than the stamp duty value then stam duty value is adopted and here the stamp duty is paid on 12 lakhs .

Then why Market value is important?

And under which section?

CA. Rashi Goyal (Chartered Accountant) (512 Points)
Replied 07 January 2009

According to me, the assessee has according to the provisions of section 50C, correctly filed his capital gain income.

The Assessing officer can issue the notice to the assessee to recalculate the income, only if he has obtained the valuation certificate from the valuation officer as per section 55 A of the Income tax Act.

In absence of the certificate from valuation officer, it can be opposed.

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 07 January 2009

If Rs.12 lac is as per stamp duty valuation, AO can not tax considering Rs.20 lacs as market value/consideration. The stamp duty valuation as finally accepted for stamp duty purpose is the full value of consideration for the purpose of capital gain.

CA. Rashi Goyal (Chartered Accountant) (512 Points)
Replied 07 January 2009

But AO can apply the provisions of section 55A. And refer the case to the valuation officer.

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 07 January 2009

Reference to DVO by AO for capital gain purpose is possible under three circumstances as specified in SEC 55A. Refer Sec.55A (a), 55A (b) (i) and 55A (b) (ii). Your case may fall in sec.55A (b) (ii). However, for that purpose, AO is required to form an opinion on the basis of the material on record that reference to DVO for ascertaining FMV is necessary having regard to the nature of assets and other relevant circumstances,. It is also necessary to record as to why it is necessary to adopt such a course. In the absence of the same the reference made to DVO is invalid. [Refer 2006 100 ITD 0418 (Mum-Trib) case of Sajankumar Vs. Joint CIT]