Section 50C -Taxability of Sale of Land or Building.

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Section 50C -Taxability of Sale of Land or Building

Where the consideration received or accruing as result of the transfer by an assessee 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 for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessable 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 that first proviso shall apply only in case where the amount of consideration, or 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, on or before the date of the agreement for transfer.

Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five percent 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 full value of the consideration.

 

What Happens If the Seller Does Not Accept the Value Adopted by SVA?

There is a possibility that value adopted by SVA may not be depicting the Fair Market Value (FMV) at all times or seller himself may not be satisfied with the value adopted by SVA based on factors known to him. Though, stamp duty is generally borne by purchaser, purchaser may not be very concerned with the value adopted by SVA given that the amount he would be shelling out by way of stamp duty would be meagre compared to cost of purchase. However, it makes a huge difference to the seller as it impacts his income tax which can be substantial based on the value. If stamp duty is not borne by seller, he may not be to question or contend the value adopted by SVA before the valuation authorities.

Therefore, as it is a matter of income tax for seller, seller is allowed under Section 50C to question the value adopted by SVA and claim the value is more than FMV, before the income tax authority unless such value is already questioned before any other authority or court. In such cases, income tax officer is required to make a reference to valuation officer and market value will be determined by such valuation officer. Valuation officer while determining market value, has to call for records, documents from taxpayer if required and give taxpayer an opportunity of being heard and pass an order in writing stating his valuation. Any value determined by valuation officer can also be questioned before higher authorities. 

What Happens If the Value of Valuation Officer is Higher Than the Value SVA?

As reference to valuation officer to determine market value is provided to benefit the taxpayer and saving them from undue hardship, reference to valuation officer does not impact taxpayer in a negative way. Even when a reference is made to valuation officer, lower of the value determined by valuation officer or adopted by SVA will be taken as sale consideration for computing capital gain.

For example, if value adopted by SVA is Rs 12,00,000 as against Rs 8,00,000 sale consideration claimed to be received by seller and value determined by valuation officer is Rs 15,00,000, sale consideration as per Section 50C will be Rs 12,00,000.

In the same example if value determined by valuation officer is Rs 10,00,000, sale consideration for the purpose of capital gains will be Rs 10,00,000.

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