Computation Of Capital Gains In Real Estate Transactions
The Finance Act, 2002 had, with effect from the AY 2002, inserted a new Section 50C in the Income Tax Act, 1961, to make a special provision for determining the full value of consideration in cases of transfer of immovable property. This provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both is less than the value adopted or assessed by any authority of the State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed would be deemed to be the full value of the consideration, and the capital gains would be computed accordingly under Section 48 of the I.T. Act.
It is further provided that where the assessee
claims that the value adopted or assessed for stamp duty purposes exceeds
the fair market value of the property as on the date of transfer and he has not
disputed the value so adopted or assessed in any appeal or revision or
reference before any authority or Court, the Assessing Officer may refer the
valuation of the relevant asset to a Valuation Officer in accordance with
Section 55A of the Income Tax Act. If the fair market value determined by the
Valuation Officer is less than the value adopted for stamp duty
purposes, the Assessing Officer may take such fair market value to be the full
value of consideration.
However, if the fair market determined by
the Valuation Officer is more than the value adopted or assessed for
stamp duty purposes, the Assessing Officer would not adopt such fair market
value and would take the full value of consideration to be the value adopted or
assessed for stamp duty purposes.
It is also provided that if the value
adopted or assessed for stamp duty purposes is revised in any appeal, revision
or reference, the assessment made would be amended to re-compute the capital
gains by taking the revised value as the full value of consideration.
As per the Finance (No. 2) Act 2009 w.e.f.
the financial year 2009-2010 in the above definition for the word “assessed”
the words “assessed or assessable” have been substituted. Merely with the
change of this word there would arise more responsibility on the tax payers to
correctly compute the capital gains tax liability.
As a result of this
amendment, the transactions which are not registered with the stamp duty
valuation authority would also be covered. Thus, where the property
transactions are undertaken through power of attorney or agreement to sell,
then such transactions would also be covered within the ambit of Section 50C of
the Income Tax Act, 1961.