COMMISSIONER OF INCOME TAX AJM vs. M/S INDIA MOTORS PVT LTD AJMER

Judgment 26/08/2017 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby Tribunal has partly allowed the appeal of the assessee.

considering the capital gain determined u/s 48 of the Act out of the sale of proceeds of the plot which is part of the net profit and falls within the ambit of the provisions of Section 115JA? (4) Whether on the facts and circumstances of the case the ITAT was justified in allowing the compensation paid by the assessee of Rs.2,00,000/- for cancellation of agreement treating the same as cost of improvement of asset for consideration to arrive the capital gain as determined u/s 48 of the Act? (5) Whether on the facts and circumstances of the case, the ITAT was justified in allowing the cost of expenditure incurred on reconstruction to get back the said property from liquidator/bank in 1995-96 for Rs.40,91,111/- treating the same as cost of improvement of asset for the consideration of capital gain u/s 48 of the Act?”

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was delivered and handed over to the purchaser before execution of deed. This deed was registered on 27.9.2001. The AO has relied upon the local inquires got conducted which revealed that the purchaser took possession immediately after making full payment and also started the business in the said premises. Thus the property in part performance of the contract as prescribed in Section 53A of Transfer of Property Act, 1882 stands transferred and liable for capital gain.

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section (2) of Sec.115 JA a company has to prepare profit & loss account as per provisions of Part II & Part lll of Schedule VI of the Companies Act. 1956. As such any profit & loss account prepared by a company which is not in connivance of the Companies Act 1956 cannot be considered for the purpose of provisions of Sec.115JA. The ld. A.R. while referring Part ll of schedule VI of the Companies Act,1956 submitted that as per provisions of Clause 2(a) of Part II of Schedule VI of the Companies Act.1956, profit & loss account have to be prepared to disclose the working of the company. In the resent case the company was under liquidation and was not working for more than 10 years. The liquidation proceedings were dropped by the Hon'ble High Court and to pay off the debts of the company, it had liquidated its assets. In the present case, the company was dealing in trading of motor vehicles, parts, etc. and no such business was carried out by the company in the relevant financial year and as such, there was no working of the company and whereas profit & loss account as per provisions of Companies Act,1956 can only be prepared for the trading activities. All the provisions of Part II and Part III of Schedule VI of the Companies Act, 1956 relates to operations of the Company i.e. turnover, expenses, provisions etc. Nowhere it includes receipts/expenses of capital nature. The ld. A.R. submitted further that the gain on sale of property/ capital assets are "capital profits" and as such “capital receipts" are out of the provisions of S.115JA of Income tax Act.1961. since it is not part of book profit for working of the company. Even if the same is considered in book profit and MAT tax is charged, credit for the same should be given in the subsequent year as per provisions of S.115JA of Income-tax Act 1961. 12. After considering the arguments advanced by the parties as discussed above, we find substance in the contentions of the assessce in support of the ground. Admittedly during the year the company was under liquidation and (5 of 30) [ITA-901/2008]

was not working for more than 10 years. The liquidation proceedings were dropped by Hon'ble High Court and to pay off the debts of the company, it had liquidated its assets. There is also no dispute that the company was dealing in trading of motor vehicles, parts etc. and no such business was carried out company the relevant financial year and as such, there was no by the in working of the company whereas profit and loss account as per provisions of Companies Act, 1956 can only be prepared for the trading activities. The provisions of Part-II and Part-III of Schedule VI to the Companies Act, 1956 relate to operations of the company i.e. turnover, expenses, provisions etc. No where it includes receipt/expenses of capital nature. As per provisions of sub- section (2) of section 115JA. a company to prepare has Profit & loss account as per provisions of Part-ll and Part-lll of Schedule VI of the Companies Act. 1956. As such, any profit and loss account prepared by company which is not in connivance of the Companies Act, 1956 cannot be considered for the purposes of provisions of Sec. 115JA. Under these circumstances. we concur our view with the submissions of the ld. A/R that the gain on sale of property capitall assets are capital profits and as such capital receipt and out of the provisions of section 115JA of the IT Act, 1961 since it is not part of book profit for working of the company. The adverse view taken by the lower authorities in this regard is thus set aside. The ground no. 1 is allowed in favour of the assessee.

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Officer may refer the valuation of capital asset to a valuation Officer- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value; (b) in any other case, if the Assessing Officer is of opinion- (i) that the fair market value of the asset exceeds the value of the assets claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do..…………...”. We are thus of the view that under section 55A (b)(ii) the AO is empowered to refer the matter for valuation to the DVO having regard to the nature of the asset and other relevant circumstances, if it is necessary to do so, we thus do not agree with this contention of the Id. A/R that reference for estimating fair market value of the property as on 1.1.81 cannot be made by the AO. We, however, to examine as to whether there were sufficient circumstances before the AO to refer the matter for valuation to the DVO. As per section 55A(a), the AO can refer the case to DVO for ascertaining the fair market value of the asset as on 1.4.1981, if AO is of opinion that value so claimed is less than its fair market value. In the present case as evident from annexures 13 and 14 i.e. copies of report by DVO and approved valuer respectively it is apparent that the DVO had assessed the value of asset as on 1.4.81 at Rs. 58,00,401/- against the approved valuer's report at Rs. 59,67,981/-. Thus even the difference between the two figures is bound to happen in case of two experts opinion. Thus in our view there was no reason on the part of the AO in not accepting the report furnished by the approved valuer that too in absence of any specific defect in his report. Likewise, AO has not (7 of 30) [ITA-901/2008]

assigned any reason as to why he had referred the case for valuation of property as on 31.3.2001 without appreciating that it is not the date of sale of the property nor the alleged date of conversion of capital asset under section 45 (2) of the Act. In the present case during the year the assessee had sold 1490 sq. yds of land to different purchasers and 802 sq. yd of land to someone else showing the consideration at Rs. 81,91,000/- and Rs. 47,00,000/- respectively. The AO on the basis of DVO's report adopted the fair market value of the property at Rs 3,38,84,704/- and after deducting cost of acquisition at Rs. 1,93,25,435/- worked out the capital gains at Rs. 1,45,59,269/- as per the DVO, the fair market value of 1490 sq. Yd of land during the year was Rs. 2,20,28,000/- and of 802 sq. yd of land at Rs 1,18,56,704/-. The DVO had valued the land @ Rs. 14,784/- per sq. yard. Now the moot question before us is as to whether the AO was justified in ignoring the sale consideration amount shown in the registered Sale Deed entered into between the parties to estimate the value of the property by referring the matter DVO on the basis that the Sub- (Pune) 216 relied upon by ld. A/R it has been held that reference to DVO can only be made in cases where the value of capital asset shown by the assessee is less than its fair market value minus value of land asset as on 1.4.81, shown by the assessee on the basis of approved valuer's report was more than its fair market value, hence reference under section 55A was not valid- AO is empowered to make reference under clause (b) of section 55A only in the cases where valuer's report is not given by the assessee. The Hon'ble Gujarat High Court in the case of M.V. Shah, Official Liquidator, Anand Mills ltd. vs. U.J. Matain & Anothers, 209 ITR 568 was pleased to hold that reference under clause (b)(ii) of section 55A could have been made if the ITO was of the opinion

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that having regard to the nature of assets and other relevant circumstances, it was necessary so to do. In this case the asset was a piece of land. There was nothing special about the nature of asset which would have justified the ITO to make reference to the valuation officer. No other relevant circumstances could be pointed out by the Valuation officer in his affidavit or by the ITO. No attempt was made to justify the action of ITO under any of the provisions of section 55A. The reference to DVO was not in accordance with law and had to be quashed, held the Hon'ble High Court. section 48 of the IT Act, 1961 deals with mode of computation of capital gain which reads as under:- "The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received of accruing as a result of the transfer of the capital asset...". Thus section 48 speaks about full value of consideration. Full value of consideration cannot be substituted by any hypothetical value or assumptions. The Income tax Act clearly specifies the situations, where full value of consideration is not available, to consider fair market value for computation of capital gains. As such, where full value of consideration is available, fair market value cannot be considered for the purposes of calculation of capital gains. The Hon'ble Supreme Court in the case of time Hon'ble Supreme court had quashed the Hon'ble Supreme Court was pleased to hold that unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for computation of capital gains.

(9 of 30) [ITA-901/2008] converted into stock-in-trade. Admittedly the company had not or was not doing any business of sale, purchase, dealing in land and properties and when it is not doing such type of business, mere selling of properties cannot convert the nature of property from capital asset into stock-in- trade. Selling of one's own property as a [ITA-901/2008]

him are business properties. We are thus of the view that reference to DVO for ascertaining the valuation of the property by the AO ignoring the sale consideration declared in the Sale Deed on the basis that the Sub Registrar, properties had valued the property on higher amount was not justified. The valuation adopted by the Sub-Registrar,

Registration,

is undisputedly for the purpose of payment of stamp, which is a uniform rate of the area whereas valuation of a property for its sale and purchase depends upon several factors. Besides location of the Property and Besides location of the property and the area, these factors are the need and suitability of the parties to sale and purchase the land in question. Depending on these factors, the parties negotiate with their respective aims and objects as on the part of the seller to fetch more price and on the part of the purchaser to purchase the property on lesser price. Thus under a negotiation between the parties they arrive at a agreed consideration which cannot in any manner be compared with the value adopted by the Sub-Registrar, Registration for the purpose of payment of stamp and registration

fee.

Under these circumstances, there was no occasion on the part of the AO to ignore the sale consideration shown in the sale Deed for computation of the capital gains. The amendment in section 50C of the Act with effect from 1.4.2003 also makes the position clear that before 1.4.2003 the AO was to accept the amount in sale consideration for working out the capital gains out of sale of the property unless there is positive evidence to arrive at a conclusion that higher amount than the shown sale consideration in the Sale Deed has been paid for the property. Section 50C introduced in the Act with effect from 1.4.2003 empowers the AO to substitute the value adopted by stamp Valuation Authorities

against

the actual consideration but prior to this introduction, The AO had not empowered to substitute the market value for the purpose of computation of capital gain. Under these

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facts and circumstances, we are of the view that in absence of any adverse positive evidence, the AO should have adopted the sale consideration shown in the sale deed and there was no occasion on his part in the present case to refer the matter to DVO to estimate the value of property as on 31.1.2001 under 55A (a) of the Act. Thus the action of the AO in referring the matter to the DVO for valuation of the property as on 31.3.2001 under section 55A(a) of the Act and adopted higher value of the property than that shown as sale consideration in the Sale Deed was not justified. We thus while setting aside orders of the lower authorities in this regard direct the AO to accept the capital gains as declared by the assessce against the sale of the property in question. The ground no. 2 is thus partly allowed ground no. 3 is allowed.

made to grow better. In the case of CTT vs. Miss Piroja C. Patel (supra). Hon'ble Bombay High Court was pleased to held that on eviction of the hutment dwellers from the land in question, the value of land increase and, therefore, the expenditure incurred for having the land vacated would certainly amount to cost of improvement. We, thus, are of the view that the compensation paid for getting the possession of the property and cancellation of agreement is amount spent towards the improvement of asset. We

accordingly direct the AO to include the amount of Rs. 2 lacs in the cost of property for the purpose of working out the capital gains. Ground no. 4 is thus allowed.

Chemicals

Ltd.

v. CIT MANU/MH/0190/1995 : [1996] 218 ITR 598. On eviction of the hutment dwellers from the land in question, the value of the land increases and, therefore, the expenditure incurred for having the land vacated would certainly amount to cost of improvement. Accordingly, the above question is (13 of 30) [ITA-901/2008]

answered in the affirmative, i.e., in favour of the assessee and against the Department.”

money in full and final settlement of his claims against all the respondents in the company petition including the assessee-company. As far as the sum of Rs. 5 lakhs contributed by A.M. Buhari is concerned, it was paid to him under the same compromise. We are concerned only with the balance amount of Rs. 2 laks. We are of the view that if a sum of Rs. 2 laks was not paid, the litigation would go on and the assessee-company with a view to purchase peace with A.M. Buhari to enable it to transfer the property in favor of India Tobacco Company Limited had paid the money to A.M. Bubari. We are of the view that the entire chain of events started from the contribution made by A.M. Buhari to the company and the payments made by the company to A.M. Bohari show that there is an inextricable link between the payment to A.M. Buhari and the transfer of the capital asset. We are of the view that the sum of Rs. 2 lakhs was paid to A.M. Buhari over and above his contribution of Rs. 5 lakhs so as to pave way for easy transfer of the property in favour of India Tobacco Company Ltd. In other words, we are of the view that only by the payment of Rs. 2 lakhs, the assessee was in a position to transfer the property, viz., capital asset in favour of India Tobacco Company Limited, and hence we hold that the payment was made wholly and exclusively in connection with the transfer of the capital asset. It was not a payment made partly for the transfer of the asset and partly for the settlement of A.M. Buhari's right as a shareholder as the sum of Rs. 5 lakhs was paid to him separately in settlement of the amounts contributed by him. Hence, the payment of the sum of Rs. 2 lakhs would be referable to the transfer of the assets. Though the litigation was instituted by A.M. Buhari in his capacity of a shareholder of the company, it will be too much to expect on the part of the assessee-company to keep quiet and to allow the litigation to go on thus rendering itself helpless to transfer the property and unable to realise the sale price, when an agreement was entered into on behalf of the assessee for the sale of its property in favour of India Tobacco Company Ltd., though the purchaser was willing to take the property with the risk of litigation. the expression used in section 48 of the Act, 'expenditure incurred wholly and exclusively in connection with such transfer' has wider connotation than the expression, 'for the (15 of 30) [ITA-901/2008]

transfer'. We are of the view that but for the payment of Rs. 2 lakhs, the transfer would not have taken place and the payment has necessarily to be made for the transfer of the hotel in favour of India Tobacco Company Limited. Hence, we are of the view that the sum of Rs. 2 lakhs was expended by the assessee wholly and exclusively in connection with the transfer of the capital asset and not de hors the transfer.

connection with such transfer" is wider than the expression "for the transfer". Any amount the payment of which is absolutely necessary to effect the transfer will be an expenditure covered by Clause (i) of Section 48(1). In other words, if without removing any encumbrance, sale or transfer could not be effected, the amount paid for removing that encumbrance will fall under Clause (i).

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was an expenditure incurred wholly and exclusively in connection with the transfer.” 4.8 wherein it has been held as under:-

Piroja

C

Patil

reported

in [2000]242ITR582(Bom) . In the aforesaid case, (Delhi) wherein it has been held as under:-

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to the tenant/licensee to vacate the property. These are the factual findings recorded by the tribunal and have been noticed above. We fail to understand why the said sum cannot be set of from the sale consideration as it was incurred solely and exclusively in connection with the transfer. We, therefore, need not examine and go into the question whether the amount paid was towards "cost of improvement". The said amount has to be allowed because it was incurred in view of facts found, wholly and exclusively connected and linked with transfer/sale. In similar circumstances, the Andhra High Court in Naozar Chenoy v. Commissioner of Income-tax MANU/AP/0965/1998MANU/AP/0965/1998

: [1998] 234 ITR 95 (AP) has observed as under:

As regards the expenditure incurred by the assessee towards payment of the amount to the tenants for vacating the premises, which is the subject-matter of the sale transaction, we are of wherein it has been held as under:-

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and that finding has been maintained even by the Income-tax Appellate Tribunal. The assessee has not questioned it in further appeal. As such, the only question is whether the amount of Rs. 45 lakhs paid to his sisters has been rightly accepted as expenditure in connection with the transfer of property. The sisters had a title in the property and without their co-operation there could not have been any sale. In this situation, we do not find any error in the concurrent findings reached by the Commissioner of Income-tax (Appeals) as also by the Income-tax Appellate Tribunal. In the light of the arguments advanced before us, we find that question No. 1 attempted to be raised by the Revenue before us does not arise here for determination as the substantial question of law.

that expenditure

incurred

in removing encumbrances was deductible. The amount was held to be deductible even on the fact that the amount was paid by father to son to clear encumbrances. Likewise, the Hon'ble Andhra 40,91,111/- as cost of improvement asset while working out the capital gain. The ground no. 5 is thus allowed.

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CIT

v.

Smt.

Nilofer

I.

Singh [2009]309ITR233(Delhi) has held that the provisions of Section 55A of the Act apply only where the Assessing Officer is required to ascertain the "fair market value" of a capital asset. In a case where capital gains have to be brought to tax the provisions of Sections 45 and 48 of the Act come into play. Section 45(1A) of the Act provides that any profit or gains arising from the transfer of asset effected in the previous year shall be chargeable to Income Tax under the head "Capital gains". It stipulates that capital gains shall be computed by deducting from the "full value of consideration" received or accruing as a result of the transfer of the capital asset, the amount of expenditure incurred wholly and exclusively in connection with such transfer as also the cost of acquisition of the asset and the cost of any improvement thereto. The Division Bench went on to hold that a combined reading of Section 45(1A) and Section 48 of the Act would show that it is apparent that when a sale of property takes place, the "capital gains" arising out of such a transfer has to be computed by looking at the "full value of the consideration" received or accruing as a result of such transfer. It went on to hold that the expression "full value of sale consideration" is not the same as "fair market value" as appearing in Section 55A of the Act. In coming to this conclusion the Division Bench of this Court relied upon the Supreme Court judgment in the case of CIT v. George Henderson and Co. Ltd. [1967]66ITR622(SC) as also the judgment of the Supreme Court in the case of CIT v. Gillanders Arbuthnot and Co. [1973]87ITR407(SC) wherein the expression "full value of consideration" was interpreted in the context of pari materia provisions found in the Income Tax Act, 1922. Based on these decisions the Division Bench concluded that for the purpose of computing "capital gains" there is no necessity for computing the "fair market value" and,

therefore the Assessing Officer could not have referred the matter to the Valuation Officer.

the judgment in the case of the Smt. Nilofer I. Singh [2009]309ITR233(Delhi) was not applicable. We are not in agreement with the submission made by the learned counsel for the revenue for the reasons that there is nothing on record to show that the assessee received a consideration for the sale of the saidproperty in excess of that which was shown in the agreement to sell. That being the case the decision in the case of Smt. Nilofer I. Singh (supra) would bind the revenue. The tribunal, in our view erred in accepting the stand of the revenue that actual sale consideration recorded in the agreement to sell would be substituted by the value arrived at by the DVO u/s 55(A) of the Act. The question of law as framed is answered in favour of the assessee and against the revenue.” 6.3 wherein it has been held as under:-

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the full value of consideration refers to the full market value. However, according to the assessee, the expression "full value of consideration" cannot have any reference to the fair market value.

determining the capital gains is also connected with the determination of the fair market value of the asset on the date of receipt of such amounts from the insurer. In Section 45(1A) of the said Act also, it is indicated that for the purposes of Section 48 of the said Act, that is for computation of capital gains, the value of any money or the fair market value of the asset on the date of such receipts shall be deemed to be the full value of the consideration received or accruing as a result of such transfer of capital asset. In this situation also the Assessing Officer would be required to compute the fair market value of the asset and therefore, a reference to the Valuation Officer under Section 55A of the said Act would be necessary. But, the facts of the present case are entirely different. The present case involves sales simpliciter where the full value of the considerations are the sale prices of the two properties indicated above. For the purposes of computing capital gains in such a case as the one before us, there is no necessity for computing the fair market value and, therefore, the Assessing Officer could not have referred the matter to the Valuation Officer.” 6.4 238 (Gujarat) wherein Gujarat High Court held as under:- Taking the question of ascertaining the fair market value on the date of sale, we notice that section 48, which is also contained in chapter IV of the Act pertains to method of computation of capital gain. A detailed mechanism has been provided for such computation of the income chargeable under the head "Capital Gains". It provides, inter alia, that the income chargeable under the Head "Capital Gains", shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the amounts mentioned therein that is the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the (25 of 30) [ITA-901/2008]

cost of acquisition of the asset. Section 55A, as we have noticed, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVO's report would have no (Gujarat) wherein it has been held as under:-

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"55.A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the Valuation of capital asset to a Valuation Officer:- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value; The provision specifically provides that if the Assessing Officer is of the opinion that the value disclosed by the assessee is less than the fair market value only, then he can make a reference to the DVO. Now the moot question is as to how the opinion is to be formed by the Assessing Officer. Whether this opinion is subjective or guided by some judicious actions. The formation of opinion should have rational connection with the material brought on record. It should not be based on extraneous or irrelevant reasons. In the present case, the Assessing Officer before making a reference to the Valuation Officer has not brought anything on the record indicating that the assessee has disclosed lesser sale price. There is nothing on the record which can suggest to ignore the report of the registered valuer and to adopt the report of the Valuation Officer. Both these persons are technical persons and before accepting the evidence of an expert, there should be corroboration of some other material. Taking into consideration the overall facts and circumstances of the case, we are of the opinion that the ld. Assessing Officer ought to have not made a reference to the DVO for determination of the fair market value of the property in dispute. The report of the DVO alone is not sufficient for estimating the capital gains at Rs. 12,28,907/-."

parties to sale that must be considered for determining the capital gain under section 48. Even on principle there is no reason to denude the Assessing Officer the right to draw an inference especially an irresistible inference. Take for instance a case where the property worth crores of rupees is sold for merely ` 1 lakh and there is no explanation for the same despite the parties being at arms length. The Assessing Officer is not bound to accept the statement in the sale deed unless he can prove that additional consideration was paid. The initial burden to prove the same is undoubtedly on the Department. But in such a case the onus clearly shift upon the assessee. If the assessee is unable to offer an explanation, the Department must be taken to have discharged the burden. It cannot be said that the price mentioned in the document is sacrosanct and that the same must be considered to be the price bargained between the parties to the transaction. That would indeed result in an absurdity for the parties could then by merely stating an incorrect price in the sale deed avoid the tax on capital gains altogether. The full value of consideration referred to in Sections 45 and 48 of the Act refers to the full value actually received or accruing and not what the parties merely state or declare in the sale deed as was paid or payable and received or accruing. Such a view would as we mentioned earlier enable a party to avoid the liability to tax on account of capital gains by merely stating the incorrect price to be the consideration for sale or transfer of the asset. That could not have been the intention of the legislature. The assessee submitted that there was no finding that it received any consideration other than that shown in the sale agreement. This is correct. The assessment order does not proceed on the basis that the assessee received any amount in addition to what is stated in the sale deed. It proceeds only on the basis that the assessee and the purchaser being related parties, the property was sold at a very low price. The CIT(A) also noted that the Assessing Officer had not shown that the assessee had received any consideration other than the consideration mentioned in the sale agreement. The CIT(A) further noted that the Assessing Officer had unnecessarily emphasized that the assessee and the purchaser were related parties and therefore, the vendee was in a position to exercise influence in the (29 of 30) [ITA-901/2008]

decision of the assessee and hence the assessee sold the property at the price below the market price. The Tribunal also noted this aspect in paragraph-9. The Tribunal observed that it was not the case of the Assessing Officer that the assessee received a consideration more than what was mentioned in the sale deed and that the Assessing Officer had therefore, erred in considering the fair market value. In the case of related parties, there is yet another aspect. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. Their relationship is a factor which could justify a price lower than the market price. Where parties are strangers there must be some explanation for an undervaluation. We must, therefore, proceed on the basis that it is not the case of the revenue that the assessee received any amount other than what was mentioned in the sale agreement. In this view of the matter and in view of the judgments referred to earlier especially the judgments of the SupremeCourt it must follow that there was no occasion for the Assessing Officer to determine the fair market value. The Assessing Officer was only concerned with the amounts actually received by the assessee. The amount actually received was admittedly the amount mentioned in the sale agreement. It follows then that the reference to the DVO under section 55A was without jurisdiction. Section 55A opens with the words “with a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer”. However, in view of the judgments of the Supreme Court, what falls for determination under section 48 is not the fair market value of the capital asset but the full value of the consideration received or accruing as a result of the transfer of the capital asset. Section 55A is not redundant on account of this view. It would apply to the provisions of Chapter IV which require the determination of the fair market value of capital assets. Thus the Assessing Officer proceeded on the erroneous basis that as the assessee and the purchaser are interconnected and the property was sold at an undervalue he had the jurisdiction to (30 of 30) [ITA-901/2008]

invoke the provisions of section 55A or even otherwise to determine the fair market value. The reliance upon Section 50C is of no assistance to the Revenue either. Mrs. Dugga’s submission that the Assessing Officer’s can be supported under section 50C is not well founded. Even assuming that the Assessing Officer was entitled to invoke Section 50C to have the fair market value determined, it would make no difference. In view of sub section (3) the rate adopted, assessed or assessable by the Stamp authority would prevail. It is common ground that in this case the consideration stated in the sale document is even higher than the valuation by the Stamp authority.