provisions of sec. 50c

Provisions of Sec. 50C

Sec. 50C Background

• History – Govt’s worry about black money in real estate transactions.

• Sec. 52(2) & K.P. Varghese’s case (SC)• Deeming provision of sec. 50C brought in by the

Finance Act, 2002.• Constitutional Validity upheld by the Bombay High

Court in 334 ITR 145 & by Madras High Court in 306 ITR 61

Provisions in brief of sec. 50C

• Sub Sec. (1) : Provides that if transfer of land or building or both is at lesser than valuation under stamp duty ready reckoner, then stamp duty value to be adopted as full value of consideration for capital gains calculations.

• Sub Secs (2) & (3) : Provides for mechanism to address grievances relating to excess valuation under stamp duty.

Sec. 50C

• Highlights of provision – Applicable to all assesseesTransfer of capital asset being land or building

or bothIf consideration in document is less than

market value for stamp duty Market Value Assessed or AssessableApplicable for both LTCG & STCG

Land or Building or Both

• Applicability to Rights in land or building Provisions of sec. 50DApplicability to Development Agreements :

Held Applicable Mumbai Tribunal in Chiranjeevlal Khanna Mumbai Tribunal in Arif Akhtar Hussain(140 TTJ

413)


Sale of TDR/Additional FSI : Held not applicable

Bombay High Court in Chedda Housing Development vs. Banijan Sheikh Farid 2007 (3) MLJ 402 in held that TDR is an immovable property.

Yet Mumbai Tribunal in ITO vs. Prem Rattan Gupta ITA No.5803/M/2009 A.Y. 2006-07 dated 28-3-2012 held that 50C not applicable to sale of TDR/FSI – Bom H.C. considered


Leasehold/Tenancy Rights :In Atul G. Puranik vs. ITO 132 ITD 499 - Plot lease of

65 years – Held Not Applicable.In DCIT vs. Tejinder Singh ITA No. 1459/Kol./2011–

House lease for 99 years – Held Not Applicable.In Shavo Norgren (P) Ltd. vs. DCIT 58 SOT 23 – MIDC

lease of 95 years : Held ApplicableIn Kishori Sharad Giatonde vs. ITO ITA No. 1561/ M/09

dated 27-11-2009 - Tenancy Rights – Held Not Applicable.


Booking RightsIn ITO vs. Yasin Moosa Godil 72 DTR 167

transferred booking rights in flat by a tripartite agreement. Held that S. 50C not applicable.

Sathekhat on Sathekhat If possession GivenIf possession not given – Poser?

Valuation on the date of Agreement (Sathekhat) or Sale Deed (Kharedikhat)

• If possession Given on Agreement : No question arises, value on agreement date.

• If possession not given on Agreement –No provision like 43CA or 56(2)(vii) in case of

agreement supported by other than cash paymentsTransfer takes place on possession/Sale Deed –

valuation on sale deed date (214 Taxman 305 – Cal).Challenge valuation u/s 50C(2) as encumberred by

agreement value

S. 50C & S. 45(3)

• Two deeming fictionsS. 45(3) Deems value entered in firm’s books

as full value of considerationS. 50C deems stamp duty valuationWhat if both differ – None is non obstante –

Rule of interpretation ITAT (Luck) in Carlton Hotel P. Ltd. vs. ACIT (122

TTJ 515) – A.Y. 2004-05 - held -

S. 50C & S. 45(3)- Contd.

o S. 50C not applicable because book entry not liable to stamp duty

o However, w.e.f. 01.10.2009 even ‘assessable’ is covered.

S. 50C & S. 50

• Applicability of S.50C to S.T. C.G. on Depreciable asset u/s 50 r.w.s. 43(6)(c) –defi. of WDV

Special Bench in ITO vs. United Marine Academy 130 ITD 113held that S. 50C is applicable to transfer of depreciable capital asset covered by S. 50

At which stage? S. 48 comes in play only where sale price exceeds WDV.

S.50C & S.50B

• Slump sale taxable u/s 50B – Lump sum price - - Include land, building or both - Price for each asset not ascertainable

• The Special Bench in Dy. CIT vs. Summit Securities Ltd. (2012) 135 ITD 99 held that it is not applicable.

S. 50C & S. 54, 54B, 54F, etc.

• Example : Net sale consideration 1 0,00,000 Indexed cost of acquisition 5,00,000Stamp Duty value 20,00,000 Capital Gains (normal)

5,00,000Capital Gains (u/s 50C) 15,00,000 Now, if cost of new asset is ` 6,00,000 then whether

entire cap gain of 15,00,000 or only 5,00,000 or 6,00,000

S. 50C & S. 54, 54B, 54F, etc.- contd

Assessee cannot be expected to do impossibleIn 49 SOT 160 (Jp) – If entire normal C.G. reinv. in

54EC – Entire C.G u/s 50C exemptIn 133 TTJ (Jp) 482– If entire actual sale

consideration reinvested in 54F - Entire C.G. u/s 50C exempt

In 356 ITR 90 (Karn) HC applied 50C for 54F calculations – since no objection u/s 50C(2) was raised agst stamp valuation.

S. 50C & S. 69, etc

• Issue of 69, etc. arises in the hands of buyer• Buyer, if Ind or HUF, now covered u/s 56(2)(vii)• Other assessees not covered by S. 56(2)(vii)• In 256 CTR 371 (Del) & 323 ITR 510 (P & H) -

for S. 69, etc. 50C held not applicable.• Thus, now double taxation in both buyer &

seller – Possible - 204 ITR 146 (Bom.)

Spared?

• In 56 SOT 12 (Mum.) - only direct transfer of land or building or both is hit. Sale of land/ building by transfer of shares of company & not subjected to stamp duty not covered by 50C.

• Tax Planning or evasion? GAAR?• What if flat/shop from housing company or

housing co-op scty is transferred, where transfer document is subjected to stamp duty?

Disputing Stamp Duty Valuation

• In practice sale can be at lesser than stamp value for genuine multiple reasons –

Distress sale – Difficulties under both remediesValuation under stamp laws are not location

specific but area specific - Disadvantageous locations like surrounded by slum or bad social elements or adjacent to say Sewage plant are not

Disputing Stamp Duty Valuation – contd.

• Remedies two but alternate – Under Stamp Law & u/s 50C(2) of I.T. Act.

Under Stamp Law : If Market Value is challenged under Stamp Duty Law, then any variation in market value in any appeal, revision or reference under Stamp Duty Law will be given effect to in Income Tax by passing order u/s 154 (sec. 155(15)) within the period of 4 yrs from end of the yr in which order of appeal, revision or reference is passed - Distress sale has difficulty.


Remedy u/s 50C(2) of I.T. Act If assessee claims that - o Stamp duty valuation exceeds FMV &o If no dispute on valuation under Stamp Act is

raisedthen A.O. ‘may’ refer valuation to the DVO

In 34 SOT 57 (Mum) it is held that ‘may’ to be read as ‘shall’ i.e. On assessee claiming FMV lower than stamp valuation A.O. must refer to DVO.


No procedure laid for claiming lesser FMVo Claim in Returno Obtain valuation report from registered valuero Apply different methods of valuation, as

circumstances demando Take care in drafting of the document – mention

factors affecting FMV in the document in recitals or in the portion dealing with adequacy of sale price.

Disputing Stamp Duty Valuation – S.50C(2) & 3)

• On reference to DVO –If DVO arrives at lesser FMV than stamp

valuation, then lesser value must be adopted by A.O, as DVO’s report is binding on him.

However, if DVO arrives at more FMV than stamp duty valuation, then valuation by DVO to be ignored by A.O. & stamp duty valuation to be adopted by A.O. as per s. 50C(3)

Disputing Stamp Duty Valuation in Appeals

• Road does not end on adverse valuation by DVO.Challenge it before CIT(A) – In 142 ITD 428 it is held

that CIT(A) can go below the valuation given by DVO. In Abbas T. Reshamwala vs. ITO, ITA No. 892/ M/2012,

dated 20-2-2013 it is held that, DVO valuation is not binding on ITAT & ITAT can arrive at different value.

In 326 ITR 229 – Time barring period for asstt extended in writ, pending DVO report – 154 is also possible.

Penalty u/s 271(1)(c) for 50C Valuation

• In 260 CTR 75 (Cal HC) –FACTS : 1. In ROI s. 50C not considered 2.FMV

not challenged u/s 50C(2) 3. Asstt. completed at stamp duty valuation 4. Asstt. not disputed

High Court deleted penalty on the ground that no evidence of assessee receiving any sum above document price.

Penalty u/s 271(1)(c) for 50C Valuation

• In Shri Chimanlal Manilal Patel vs.ACIT ITA No. 508/Ahd/2010 dated 22-6-2012

In original ROI Sec. 50C not followedIn ROI u/s 148, Sec. 50C value adoptedPenalty u/s 271(1)(c) held not leviable because

Assessee agreeing to addition on the basis of deeming provisions cannot be construed as furnishing of inaccurate particulars of income.

Provisions u/s 50C

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provisions of sec. 50c

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