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Facts
The assessee appealed an order of the CIT(A) which dismissed their appeal against the assessment order. The assessment order confirmed an addition of Rs. 84,27,058/- under Long Term Capital Gain, based on Section 50C of the Income Tax Act.
Held
The Tribunal found that the value determined by the DVO (Rs. 5,02,51,500/-) was less than the actual consideration received (Rs. 2.5 Crores). Therefore, Section 50C was not attracted. The addition made by the Assessing Officer and reduced by the CIT(A) was deleted.
Key Issues
Whether Section 50C of the Income Tax Act, 1961 is applicable when the sale consideration is higher than the stamp duty value, and whether certain expenses should be allowed as deductions in the computation of capital gains.
Sections Cited
Section 143(3), Section 147, Section 50C, Section 54
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
order : 01.01.2026 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1. 1. The present appeal preferred by the Assessee is directed against the order, dated 31/05/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 30/12/2016, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 for the Assessment Year 2011-2012.
2. The Assessee has raised following grounds of appeal :
“1. On the facts and the circumstances of the case, and in law, the honorable CIT(A) has erred and is not justified in confirming the addition of Rs. 84,27,058/- made by the learned AO under the head of Long Term Capital Gain by applying the section 50C Assessment Year 2011-2012 without appreciating the facts of the case. The appellant hereby prays that the additions of Rs. 84,27,058/- made by applying provisions of section 50C of the Income-tax Act, 1961 ('Act') may please be deleted.
On the facts and the circumstances of the case, and in law, the honorable CIT(A) has erred and is not justified in confirming the addition of Rs.84,27,058/- made by the learned AO under the head of Long Term Capital Gain by placing reliance on DVO's report and judicial precedents since the said same suffer from various fundamental infirmities: Hence, the appellant prays that such addition may be deleted.
3. Without prejudice to the grounds numbers 1 and 2 above, the honorable CIT(A) failed to appreciate that the full value of consideration accruing as a result of transfer of the property should be the aggregate consideration paid by the buyer, i.e.: (i) monetary consideration paid to the appellant and joint owners; (ii) area consideration paid to the appellant and joint owners; (iii) monetary consideration paid to tenants/ owners/occupants enjoying the property and (iv) area consideration paid to tenants/ owners /occupants enjoying the property. Such full value of consideration should be compared with the stamp duty value arrived by the DVO to determine applicability of section 50C of the Act. Further, the amount paid to the tenants/ other owners and occupants should be allowed as a deduction in the hands of the appellant in the computation of capital gains. Since the aggregate consideration paid by the buyer for the entire property far exceeds the stamp duty value, there is no question of applying provisions of section 50C of the Act. Hence, the appellant prays that such addition may be deleted.
4. On the facts and the circumstances of the case, and in law, the honorable CIT(A) has erred and is not justified in confirming the addition of Rs.84,27,058/- made by the learned AO without considering the stamp duty and registration charges payment of Rs.43,51,000/- for Deed of Conveyance and Rs.24,40,000/- paid to Amit Mehta for giving consent to the conveyance deed for release to his share from property. The appellant hereby prays that such amount paid of Rs.43,51,000/- and Rs. 24,40,000/- may be allowed as a deduction in the computation of capital gains working. 5) On the facts and the circumstances of the case, and in law, the honorable CIT(A) has erred and is not allowing deduction of value of flat acquired by the appellant under section 54 of the 2 Assessment Year 2011-2012 Act. The appellant hereby prays that the such deduction under section 54 of the Act may be granted to the appellant in the computation of capital gains income.
The relevant facts in brief are that the Assessee, an individual, filed return of income for the Assessment Year 2011-2012 declaring a total income of INR.59,459/- which was processed under section 143(1) of the Act. However, the assessment was reopened as notice under Section 148 was issued to the Assessee on 10/11/2015.
During the assessment proceedings under Section 14(3) read with Section 147 of the Act, the Assessing Officer noted that the Assessee had reported capital gains income on account of sale of share in the capital asset being land admeasuring 1001.70 sq. mtrs at Vile Parle(E), Mumbai along with buildings A, B, and C constructed thereon having 26 units/flats occupied Landowners, flat/unit owners and tenants. [hereinafter referred to as the ‘Property’]. The area occupied by the owners and tenants was as under: Parties No. of Carpet Area % of Flats/units in Sq. fts. holding in Occupied total property Landowner 1 Flat 1,290 9.67% Mukesh V. Mehta (Assessee) Harish V. Mehta (Assesee’s Brother) Late Girish V. Mehta (Assessee’s Brother) Owners[Original Developer Flats] 5 Flats 3,025 22.,69% Manoj Mohanlal Goradia (2 Flats) Hemal Muni Haribhai Patel Jayshreeben Sobodh Mehta Tenants 20 Flats 9,020 67.64% Total 26 Flats 13,335 100% 4.1. The Property was held jointly held by the Assessee along with his two 3 Assessment Year 2011-2012 brothers, and therefore, vide Deed of Conveyance registered on 11/03/2011 the Assessee along with his two brothers transferred the Property to Zee Infrastructure Private Limited [hereinafter referred to as the ‘Purchaser’] for a consideration of INR.2.5 Crores.
4.2. For the purpose of determination of stamp duty value of INR.7.03 Crores was adopted by the Stamp Duty Authorities. Since the agreed consideration was less than the stamp duty value, the Assessing Officer adopted the stamp duty value as full value of consideration invoking the provisions contained in Section 50C of the Act and re- computed capital gains income in the hands of the Assessee at INR.1,51,09,891/-(as against INR.9,891/- computed by the Assessee) in the following manner: Particulars Amount (in INR) Sale consideration as per Section 50C of the 7,03,00,000 Act (as per the value of stamp duty authority) Assessee’s share 1/3rd of INR.7,03,00,000/- 2,34,33,333 Less: Indexed cost of acquisition (as per 83,23,442 computation) Long Term Capital Gain 1,51,09,891 Less: Capital gain already shown in the 9,891 computation Long Term Capital Gain Addition 1,51,00,000 4.3. While computing the capital gains income as above, the Assessing Officer did not take into consideration stamp duty of INR. 43,51,000/- paid to stamp authority on deed of conveyance and the amount of INR.24,40,000/- paid to the son of their sister – Smt. Umaben Vaikunthlal Mehta [i.e. Mr. Amit Mehta].
4.4. As the report of the District Valuation Officer (DVO) was not received at the time of framing the Assessment, the Assessing Officer had 4 Assessment Year 2011-2012 recorded in the Assessment Order that the Assessment Order shall be rectified on receiving report from the DVO.
4.5. Thus, vide Assessment Order, dated 30/12/2016, additional capital gains income of INR.1,51,00,000/- was brought to tax in the hands of the Assessee.
Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) against the Assessment Order. Vide Order, dated 31/05/2025, the Learned CIT(A) granted partial relief to the Assessee after taking into consideration the Valuation Report of the DVO, dated 24/01/2017 as the Learned CIT(A) adopted value of INR.5,02,51,500/- as full value of consideration for Section 50C of the Act.
5.1. Accordingly, the capital gains income was computed at INR.84,27,058/- by the Assessing Officer vide Order dated 10/09/2018 passed under Section 155(15) of the Act in the following manner: Amount (in Amount (in INR) INR) FMV as per Order u/s.143(3) r.w.s. 7,03,00,000/- 147 Less: FMV as per DVO’s report 5,02,51,500/- Balance 2,00,48,500/- FMV as per DVO’s report dated 5,02,51,500/- 24/01/2017 1/3rd share comes to 1,67,50,500/- Less: Cost of acquisition As on 01/04/1981(1/3rd share) [As per Order u/s.143(3) r.w.s. 147] 83,23,442/- Long Term Capital Gain 84,27,058/- Total Income As per order u/s.143(3) r.w.s. 147 1,51,59,460/- dated 27/03/2014 5 Assessment Year 2011-2012 Less: Addition made u/s.50C 1,51,00,000/- Addition restricted to as per DVO’s 84,27,058/- 66,72,942/- report Total Income 84,86,518/- Rounded off 84,86,520/- 5.2. On the issue of stamp duty of INR.43,51,000/- paid to the stamp authority on Deed of Conveyance (dated 12/12/2010 registered on 11/03/2011) and the amount of INR.24,40,000/- paid to the son of their sister – Smt. Umaben Vaikunthlal Mehta [i.e. Mr. Amit Mehta], the Learned CIT(A) agreed with the Assessing Officer and did not grant any relief to the Assessee.
Not being satisfied with the partial relief granted by the Learned CIT(A) vide Order dated 31/05/2025, the Assessee has preferred the present appeal before this Tribunal on the grounds reproduced in paragraph 2 above.
During the course of hearing detailed arguments were advanced by both the sides by placing on material forming part of the Paper-Book filed by the Assessee. Both the sides have reiterated the stand taken by/before the authorities below. We have considered the rival submissions/contentions and have perused the material on record.
We note that it is admitted position that vide Deed of Conveyance, dated 12/12/2010 [registered on 11/03/2011], the Assessee along with his two brothers had transferred the Property and/or rights therein to the Purchaser. Therefore, the Assessee was under obligation to offer to tax as his income for the relevant previous year 1/3rd of capital gains arising from the aforesaid transaction. Ground No. 1, 2 & 3 9. The first issue that arises for consideration in the present appeal pertains to the application of the provisions contained in Section 50C 6 Assessment Year 2011-2012 of the Act and the consequent determination of the Fair Market Value/Full Value of Consideration of the Property for the purpose of computing capital gains.
9.1. During the course of the assessment proceedings, the Assessee had disputed the stamp duty value of INR.7,03,00,500/- proposed to be adopted by the Assessing Officer for the purpose of computing capital gains, and therefore, a reference was made to the DVO. Since the report of the DVO was not received by the time Assessment Order was passed, the Assessing Officer adopted the stamp duty value of INR.7,03,00,500/- for determining the amount of capital gains. The reference made to the DVO was answered by the DVO by way of Valuation Report, dated 24/01/2017 [placed at pages 110 to 120 of the paper-book] during the pendency of appeal preferred by the Assessee against the Assessment Order. The Learned CIT(A) considered the the said valuation report from DVO and has adopted the DVO valuation of INR.5,02,51,500/- for determining the capital gains income. By way of Ground No. 1, 2 & 3 raised in the present appeal the Assessee has disputed the value determined by the DVO and the applicability of provisions contained in Section 50C of the Act.
9.2. During the course of hearing before this Tribunal, the Learned Authorised Representative for the Assessee had, inter alia, contended that value of INR.5,02,51,500/- determined by the DVO comprises (a) flat occupied by Assessee (along with his 2 brothers) (b) flats occupied by 5 owners [hereinafter referred to as ‘Developer Flats’] and (c) flats occupied by the other 20 tenants [hereinafter referred to as ‘Tenanted Flats’]. The 5 owners and 20 tenants had received separate consideration for for Developer Flats and Tenanted Flats, respectively, from the Purchaser (i.e., Zee Infrastructure Pvt. Ltd). The valuation report submitted by DVO has valued the Property at INR.5,02,51,500/- which is the value of the entire property consisting of land and building of A, B, and C having 26 flats/units. 7 Assessment Year 2011-2012 9.3. The above submissions were opposed by the Learned Departmental Representative. Referring to the valuation report of the DVO, it was submitted by Learned Departmental Representative that the DVO had taken into consideration all the objections raised by the Assessee and has excluded ‘residential built-up area occupied by the existing tenants’ (1486.62 sqm)’. Therefore, the contention of the Assessee that the value determined by the DVO was of the entire property was factually incorrect.
9.4. We note that in the valuation report prepared by the District Valuation Officer (for short ‘the DVO’) the ownership history of the property under consideration has been stated as under: 3.1 Ownership History One Shri. Philip Daniel Bawtis, conveyed all his undivided share, right, title and interest in the said property in favour of one Shri. Jamnadas Kherajbhai Ladiwalla on the terms and conditions in the Indenture of Conveyance executed about 10 June 1933. The same being registered with the Sub