Provisions of Section 50C of Income Tax Act-1961 ||Applicability of Section 50C of Income Tax Act

Provision of Section 50C of Income Tax Act

The provisions Section 50C of Income Tax Act-1961 applicable to sale of immovable Property (Building, Land etc.) are in this context.

1. Stamp Duty Value would be the Full value of consideration: Where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (Stamp Valuation Authority) for the purpose of payment of stamp duty in respect of such asset, such value adopted or assessed or assessable shall be deemed to be the full value of the consideration received or accruing as a result of such transfer [Sub-section (1)].

Amendment (This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the A.Y 2019-2020 and subsequent years.)

Where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent. of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.

Full value of consideration where the date of agreement and date of registration are not the same:

In order to ensure parity in tax treatment vis-a-vis section 43CA, it has been provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration.

Condition for taking Stamp duty value of the date of agreement:

However, the stamp duty value on the date of agreement can be adopted only in a case where the amount of consideration, or a part thereof, has been paid by way of an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, on or before the date of the agreement for the transfer of such immovable property.

2. Reference to Valuation Officer: The Assessing Officer may refer the valuation of the asset to a valuation officer as defined in section 2(r) of the Wealth-tax Act, 1957 in the following cases –

(i) Where the assesses claims before any Assessing Officer that the value adopted or assessed or assessable by the authority for payment of stamp duty exceeds the fair market value of the property as on the date of transfer and

(ii) the value so adopted or assessed or assessable by such authority has not been disputed in any appeal or revision or no reference has been made before any other authority, court or High Court.

Where any reference has been made before any other authority, Court or the High Court, the provisions of section 16A (relating to reference to Valuation Officer), section 23A (dealing with appealable orders before Commissioner (Appeals), section 24 (order of Appellate Tribunal), section 34AA (appearance by registered valuer), section 35 (rectification of mistakes) and section 37 (power to take evidence on oath) of the Wealth-tax Act, 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 [Sub-section (2)].

3. Where the value ascertained by such valuation officer exceeds the value adopted or assessed or assessable by the Stamp authority the value adopted or assessed or assessable shall be taken as the full value of the consideration received or accruing as a result of the transfer [Sub-section (3)].

Some Practical Issues :-

1. Section 50C of Income Tax Act has not applicable for determination of sale price of stock-in-trade/ Business assets.

2 Section 50C of Income Tax Act does not apply to transfer of “leasehold rights” because it is not land or building.

3 Section 50C of Income Tax Act is applicable to depreciable assets

FAIR MARKET VALUE OF THE CAPITAL ASSET ON THE DATE OF TRANSFER TO BE TAKEN AS SALE CONSIDERATION, IN CASES WHERE THE CONSIDERATION IS NOT DETERMINABLE [SECTION 50D]

Section 50D of Income Tax Act provides that, in case where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of consideration received or accruing as a result of such transfer.

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