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Facts
The assessee sold an office premises for a consideration of ₹69,76,689 on 05.08.2005. The sale was registered in 2009 at an escalated stamp duty value of ₹1,17,18,000. The Assessing Officer adopted the stamp duty value as on the date of registration and rejected the assessee's valuation for cost of acquisition.
Held
The Tribunal held that the transaction was substantively concluded on the date of agreement as the full consideration was paid and possession was handed over. The delay in registration was not within the assessee's control. The provisions of section 50C, including its provisos, were considered. The DVO's valuation for the cost of acquisition was accepted.
Key Issues
1. Whether the stamp duty value as on the date of registration can be adopted as full value of consideration when the sale agreement and payment occurred earlier. 2. Determination of the correct cost of acquisition for computing long-term capital gains.
Sections Cited
147, 50C, 48
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Income Tax Appellate Tribunal, ‘D’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M):
This appeal has been preferred by the assessee against the order dated 19.05.2025 passed by the National Faceless Appeal Centre, Delhi, arising out of the reassessment framed under section 147 of the Income Tax Act, 1961, for the assessment year 2006–07. Through the grounds raised, the assessee has challenged both the assumption of jurisdiction under section 147 as well as the additions made on merits, Material Research Instruments particularly in relation to the adoption of stamp duty value as the full value of consideration under section 50C and the determination of cost of acquisition as on 01.04.1981 for the purposes of computing long-term capital gains.
The factual background, as borne out from the record, reveals that Late Shri Nitin Parikh was the owner of an office premises situated at 63-B, Mittal Court, Nariman Point, Mumbai. Upon his demise on 28.01.1986, the said property devolved, in accordance with his testamentary disposition, upon his wife Smt. Usha Parikh and his daughters Smt. Bela Mehta and Ms. Bina Parikh, who thus became the lawful owners of the property by operation of succession.
The said property, thus inherited, was ultimately transferred to Shri Suresh Jain by way of an agreement for sale dated 05.08.2005 for a total consideration of ₹69,76,689/-. As per the express terms of the agreement, the entire sale consideration was paid and received on the very date of execution of the agreement, and possession of the property was also handed over contemporaneously. The transaction, therefore, stood substantively concluded on that date itself, both in terms of transfer of rights as well as receipt of consideration.
The agreement further stipulated that the responsibility of registration and payment of stamp duty would rest entirely upon the purchaser. In pursuance thereof, although the transfer stood effected in August 2005, the purchaser chose to register the document at a much later point of time, Material Research Instruments namely in the year 2009, by which time the stamp duty valuation had escalated to ₹1,17,18,000/- owing to revision of ready reckoner rates. This subsequent registration was neither contemporaneous with the transfer nor within the control of the assessee.
In the return of income filed for the year under consideration, the assessee computed the long-term capital gains by adopting the actual sale consideration of ₹69,76,689/- and by taking the fair market value of the property as on 01.04.1981 at ₹18,59,200/-, based on a valuation report obtained from a registered valuer. After applying indexation and deducting transfer-related expenses, the assessee arrived at a long-term capital loss, which was duly disclosed and carried forward. The detailed computation of income along with the valuation report relied upon by the assessee is reproduced hereunder.
Sale proceeds received on 69,76,689 05.08.2005 Less: Fair Market Value as on 01.04.1981 as per Valuation report Rs. 18,59,200 92,40,224 Indexed Cost =18,59,200 x 1,45,327 497/100 Rs. 92,40,224 Transfer Charges paid to 69,767 Society 5,510 94,60,82 Brokerage Professional charges paid for Valuation Report Long Term Capital Loss C/F (24,83,139)
Material Research Instruments 6. During the reassessment proceedings, the Assessing Officer questioned both the adoption of the sale consideration as on the date of agreement and the fair market value adopted as on 01.04.1981. Proceeding on the premise that the document was registered in the year 2009, the Assessing Officer invoked the provisions of section 50C by adopting the stamp duty value prevailing as on the date of registration and further rejected the assessee’s valuation of the cost of acquisition, substituting the same with an estimated figure. The relevant observations of the Assessing Officer forming the basis of the reassessment and the consequential computation of long- term capital gains are reproduced hereunder.
Sale proceeds 1,17,18,000 received on 05.08.2005 Less: Fair Market Value as on 01.04.1981 Rs 1,82,710 = 9,08,069 Indexed Cost 1,82,710 x 497/100 Rs. 9,08,069 1,45,327 11,23,163 Transfer charges paid to Society Brokerage 69,767 Long Term Capital 1,05,94,837 Gain
In appeal, the learned Commissioner (Appeals), while affirming the applicability of section 50C with reference to the Material Research Instruments stamp duty value as on the date of registration, considered it appropriate to direct a reference to the Departmental Valuation Officer for determination of the fair market value of the property both as on 01.04.1981 and as on the date of transfer. The Departmental Valuation Officer, in his report, determined the fair market value at ₹71,06,000/- as on 05.08.2005 and at ₹12,52,000/- as on 01.04.1981. Relying upon this report, the learned Commissioner (Appeals) upheld the adoption of stamp duty value as on the date of registration and directed recomputation of capital gains by adopting the DVO’s valuation for the cost of acquisition. The relevant appellate findings are reproduced hereunder. “The grounds of appeal, statement of facts, written submission explaining the case and other relevant details submitted along with the order u/s.143(3) r.w.s. 147 of the I.T.Act, 1961 dated 24.03.2014 have been carefully perused and considered. In the instant case as claimed by the assesse, the assessee has sold an immovable property being office premises at 63-B, Mittal Court, Nariman Point, Mumbai and on the date of agreement on 05.08.2005 received full consideration of Rs.69,76,689/-which was stated to be higher than stamp duty value on the said date but the said sale of property was registered at a much later date by the purchaser when the stamp duty value escalated to a much higher level at Rs 1,17,18,000/-but while calculating long term capital gains, the amount of full consideration received on the date of agreement on 05.08.2005 was taken by the assessee. Secondly, the Fair Market Value as on 01.04.1981 was taken as Rs 18,59,200/- on the basis of Valuation Report of the Registered Valuer for calculation of Index Cost of acquisition of the property and Long Term Capital Loss to be carried forward was calculated as (-) Rs. 24,84,130/- The Ld. A.O differed on both these counts and calculated Capital Gain at Rs 1,05,94,837/- and against such variation made by the Ld AD, the assessee preferred this appeal.
Material Research Instruments Since the value adopted by the AO was on estimate basis with respect to the FMV as on 01.04.1981 while the AR of the assessee relied upon Registered Valuer's Report. during appellate proceeding the A.O was directed to refer the case of the DVO "to get the value of the property as on 01.04.1981 and also as on the date of receipt of sale le for the F.Y.2005-06 As per the Valuation Report of the Valuation Officer-1 | T.Department. Mumbai-12, the following value was determined: 1)Fair Market value of the property (FMV) as on 05.08.2005 at Rs. 71,06, 000/- 2)Fair Market value of the property (FMV) as on 01.04.1981 at Rs. 12,52, 000/- Subsequent to this, the appellant submitted another letter explaining why the valuation made by the valuation officer should not be adopted and also requested for accepting the value adopted by itself However on going through the submission made and the Report of the Valuation Officer it is seen that the Agreement for Sale inclear terms mentions that the full consideration of Rs.69,76,689/-has been paid by the purchaser and simultaneously received by the seller but It is nowhere mentioned whether even a fraction of the same has been received by an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account on the date of the Agreement. It is to be noted that inserted by the finance act. 2016, w.e.f 01.04.2017 the 1st and 2nd Proviso to section 50C state as under: "Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted ] [ Inserted by Act 21 of 1998, Section 23 (w.r.e.f. 1.4.1998). [or assessed or assessable] [Substituted by Act 33 of 2009, Section 25, for certain words (w.e.f. 1.10.2009). (by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted] [Inserted by Act 20 of 2002, Section 24 (w.e.f. 1.4.2003).] [or assessed or assessable] [Substituted by Act 33 of 2009, Section 25, for Material Research Instruments certain words (w.e.f. 1.10.2009). ([shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. [Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer; Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a [bank account or through such other electronic mode as may be prescribed] on or before the date of the agreement for transfer] The proviso, though inserted at later date clarifies the specific requirement for considering the Stamp Duty Valuation as on the date of agreement instead of the Stamp Duty Valuation as on the date of Registration which the assesee fails. This provise makes the judicial decisions relied upon by the appellant, distinguishable. Thus the FMV as on the date of registration adopted by the Ld. AO is upheld Secondly, the FMV as on 01.04.1981 determined by the Valuation Officer vide Valuation Report at Rs. 12,52,000/- is also directed to be adopted as the reason and explanation forwarded by the appellant for not adopting the same is devoid of merits. It is stated that the valuation of the nearby properties were reducing from year to year and hence the valuation adopted by the assessee should be accepted. But in this context it can be pointed out that from the year of purchase le 1979 to the year 1981, the valuation was increased from Rs.1,51,000/- to Rs. 18,59,200/-while actually as is apparent, in the next couple of decades the valuation of the said property rose at a much lesser pace to Rs. 69,76,689/- The arguments put forward by the appellant is not sufficient enough to accept the valuation made on it's behalf and reject the valuation made by the departmental Valuation Officer Material Research Instruments The Ld. AO is directed to calculate the Long Term Capital Gain based upon the above specification. In the result the appeal is partly allowed.”
We have heard the rival submissions at length and have carefully examined the material placed on record. It clearly emerges that the agreement for sale was executed on 05.08.2005, the entire sale consideration stood paid and received on or before that date, and possession of the property was simultaneously handed over to the purchaser. The transaction, therefore, stood completed in substance on the date of agreement itself, conferring enforceable rights upon the transferee. The subsequent act of registration in the year 2009 was in pursuance of a contractual obligation cast upon the purchaser and was neither within the control nor at the discretion of the assessee. The delay in registration, thus, cannot be determinative of the point of transfer for the purposes of computing capital gains.
A crucial and determinative aspect of the matter is the valuation report of the Departmental Valuation Officer, obtained during the appellate proceedings, wherein the fair market value of the property as on 05.08.2005 has been determined at ₹71,06,000/-. This valuation, rendered by the Department’s own technical expert, is substantially in consonance with the actual consideration of ₹69,76,689/- received by the assessee. Such marginal variation, falling well within acceptable valuation parameters, reinforces the conclusion that the consideration disclosed by the assessee represented the fair market value prevailing at the time of transfer. Once the Department itself accepts, through its Material Research Instruments valuation machinery, that the value as on the date of agreement broadly aligns with the declared consideration, there remains no factual basis to invoke a deeming fiction by importing a valuation applicable to a subsequent point of time.
The scheme of section 50C, when read as a whole, shows that it is a machinery provision meant to deal with cases of understatement of consideration and is not intended to be applied mechanically, ignoring the actual facts and circumstances of the transaction. The first proviso to section 50C(1) expressly recognises situations where the date of agreement fixing the amount of consideration and the date of registration are not the same and permits adoption of the stamp duty value as on the date of agreement. The second proviso further conditions such adoption upon receipt of consideration, or part thereof, through banking channels on or before the date of agreement.
In the present case, documentary evidence in the form of pay orders establishes that the entire consideration was received through recognised banking instruments prior to or on the date of execution of the agreement. Copies of such instruments evidencing receipt of consideration have been placed on record and are reproduced hereunder. Thus, the statutory conditions contemplated under both provisos to section 50C stand fully satisfied, and the assessee clearly falls within the protective ambit of the said provisos.
Material Research Instruments 12. In this backdrop, the action of the Assessing Officer in adopting the stamp duty value as on the date of registration in the year 2009, which is temporally disconnected from the transfer and reflective of subsequent market escalation, cannot be sustained. Such an approach would result in taxation of notional appreciation arising long after the transfer had already taken place, a consequence neither contemplated by section 50C nor permissible under the scheme of capital gains taxation. The full value of consideration for the purposes of section 48 is, therefore, directed to be taken at ₹69,76,689/-, being the consideration actually received by the assessee on the date of agreement.
As regards the determination of cost of acquisition, once the matter stood referred to the Departmental Valuation Officer and the fair market value as on 01.04.1981 has been determined at ₹12,52,000/-, the said value constitutes a reasonable and legally sustainable basis for computation. While the assessee had originally adopted a higher value based on an independent valuation, adoption of the DVO’s valuation, with due indexation, adequately balances the equities and obviates further controversy on this aspect.
Accordingly, the Assessing Officer is directed to recompute the long-term capital gains by adopting the sale consideration at ₹69,76,689/- and the cost of acquisition as on 01.04.1981 at ₹12,52,000/-, with indexation and consequential relief strictly in accordance with law.