Section 50C

Section 50C — the law in short

What the courts have decided on section 50C, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Vidarbha Veneere Industries Ltd v ITO High CourtHelps departmentValidity unconfirmed
  The Tribunal orders say s.50C does not touch leasehold rights. Is that still safe advice?
  No, not in Bombay. The High Court held that leasehold rights in land are a capital asset, because s.2(14) speaks of property held by an assessee and not of property owned by him, and that s.50C accordingly applies to the transfer or assignment of leasehold rights in land allotted by MIDC. The Court said it was not in agreement with the Mumbai Tribunal's decision in Atul G. Puranik, which cannot be considered good law, and that CIT v. Greenfield Hotels & Estates is of no assistance once that decision goes.
• Bhatia Propcon Pvt Ltd v DCIT (Delhi High Court) — citing section 50C when section 43CA was the right provision does not defeat the reassessment High CourtHelps departmentValidity unconfirmed
  The reopening notice says my sale below circle rate attracts section 50C, but I am a developer and the floor sold was stock in trade, so section 50C cannot apply. Does that error destroy the notice?
  No. The Delhi High Court held that sections 50C and 43CA both contain a deeming provision imputing to the asset transferred a value ascribable to it even where it is sold below the circle rate — the first for capital assets, the second for assets other than capital assets — so the Assessing Officer had sufficient reason to believe income had escaped assessment. A misapprehension as to which of the two applied was not a jurisdictional error invalidating the section 148 proceedings, and the writ petition was dismissed.
• Pramod R Agrawal v PCIT High CourtHelps taxpayer
  I left a legitimate deduction out of my return and the assessment is over. Can the Commissioner allow it under s.264?
  Yes. The Bombay High Court held that s.264 confers wide jurisdiction, that it is not confined to correcting the errors of subordinate authorities, and that it covers a claim the assessee failed to make in the return and discovered only later. The rejection was quashed and the Commissioner was directed to decide the application afresh, by a reasoned order, after a hearing.
• Limbabhai Ishwarbhai Jodhani v ACIT (Gujarat High Court) — section 50C fixes the stamp valuation authority's value; the Assessing Officer cannot assume a higher one High CourtHelps taxpayerValidity unconfirmed
  The stamp authority accepted my sale deed at the agricultural land rate and passed a final order on it. The Assessing Officer has reopened on the basis that the open land rate should have applied. Can he assume a valuation above the one the stamp authority itself adopted?
  No. The Gujarat High Court quashed the reopening. Section 50C substitutes the value adopted or assessed or assessable by the stamp valuation authority, and the Explanation defines 'assessable' as the price that authority would have adopted or assessed if the transfer had been referred to it. On the record the sale deed described the property as agricultural land, the stamp paid had been accepted by the Deputy Collector, Stamp Valuation Department in an order dated 16 October 2017, and the government resolution prescribed a lower rate for agricultural land than for open plots; the officer was therefore trying to assume a valuation beyond the value prescribed by the stamp valuation authority.
• Susai Amalanathan Antoni Vincent v Income Tax Officer High CourtHelps department
  The section 148A order does not say the information came from the Risk Management Strategy or an audit objection. Does that make the reassessment bad for want of jurisdiction?
  No. The Madras High Court held that the Risk Management Strategy is merely a phrase for an evolving departmental strategy covering all the sources from which information may be collated, and no limitation should be placed on it. The Board's circulars of 10 and 13 December 2021 list many permissible sources, and the Court held there can be no fetters on an Assessing Officer's power to gather information on which reassessment may be initiated. Here the officer had referred to information from the Director of Income Tax (Investigation and Criminal Intelligence), which sufficed for section 148A. The Rs 50 lakh condition in section 149(1)(b) was satisfied on the sale of 19 plots for Rs 1,50,25,585, and sanction under section 151 had been obtained. The petition was dismissed.
• CIT v Vummudi Amarendran High CourtHelps taxpayer
  The circle rate rose between our agreement and the sale deed, and my year is earlier than the proviso. Is there a High Court holding on the agreement-date proviso?
  Yes. The Madras High Court dismissed the department's appeal where the agreement fixing the price at Rs. 19 crores was dated 4 August 2012 and the sale deed was registered on 2 May 2013, by which time the guideline value stood at Rs. 27 crores. It held two things: an Assessing Officer cannot rest a capital gains computation on the State guideline value alone, that value being only a prima facie indication of market value; and the proviso to s.50C(1), inserted to relieve an assessee from undue hardship, is to be taken as retrospective, so it governs a transfer completed before 1 April 2017.
• Sunil Kumar Agarwal v CIT High CourtHelps taxpayer
  The AO adopted the stamp duty value and I never asked for a DVO reference. Can he do that?
  No. Where the stamp duty valuation exceeds the stated consideration, the Assessing Officer must refer the valuation to the DVO under s.50C(2), and must do so even where the assessee never asked. Recording the Sub-Registrar's value in the deed does not show that the seller accepted it, because the stamp duty burden falls on the purchaser.
• CIT v Gauranginiben S. Shodhan High CourtHelps taxpayer
  The Assessing Officer sent my property to the Departmental Valuation Officer because he thought my sale price and my 1981 cost were both wrong — was he entitled to?
  No, on these facts. The Gujarat High Court held that a section 55A reference to ascertain fair market value on the date of sale is redundant for computing capital gains, because section 48 works on the full value of consideration received, not on market value. As for the 1981 value, where the assessee has supported it with a registered valuer's estimate the reference can only be made under clause (a), and clause (a) as it then stood required the officer to think the claimed value was less than fair market value — not more. The Revenue's appeals were dismissed.
• CIT v D.G. Housing Projects Ltd High CourtHelps taxpayerValidity unconfirmed
  The Commissioner has set aside my assessment under section 263 saying the Assessing Officer did not examine an issue properly — can he do that without deciding the issue himself?
  No. The Delhi High Court held that a finding that the assessment order is erroneous is a jurisdictional precondition for section 263. Where the Assessing Officer has made an enquiry but the Commissioner thinks it inadequate, the Commissioner must himself examine or verify the matter and record a clear finding, supported by reasons, that the order is erroneous and unsustainable in law. He cannot remit the matter for the Assessing Officer to find out whether the order was erroneous. The revision order here, which said only that the point had not been properly examined, was rightly cancelled and the Revenue's appeal was dismissed.
• Gouli Mahadevappa v ITO High CourtCuts both waysSuperseded by amendment
  If the gain is computed on the stamp duty value, can I at least claim s.54F on everything I actually put into the new house?
  Yes, on this authority. Where the capital gain had been assessed on the notional consideration of Rs 36,00,000 substituted under s.50C in place of the Rs 20,00,000 actually received, the Karnataka High Court held that the Rs 24,00,000 the assessee invested in constructing a residential house was available for exemption under s.54F.
• Vaishali Urvesh Mehta v Assessment Unit (ITAT Surat) — having asked for the reference under section 50C(2), the assessee cannot reject the Valuation Officer's report ITATHelps departmentValidity unconfirmed
  I objected to the stamp duty value, the Assessing Officer referred the matter and the Valuation Officer came back with a figure well above my sale price, though below the stamp value. Can I now attack the report and fall back on my declared consideration?
  Not on a general objection. The Tribunal held that once the assessee herself disputed the stamp valuation and asked for a reference, and the Assessing Officer made it, the procedure under section 50C(2) was duly followed; section 50C(3) then provides that the value determined by the Valuation Officer 'shall' be taken as the full value of consideration, and the word 'shall' makes it mandatory for the officer to adopt it. The assessee cannot request a reference and then ask for the resulting valuation to be rejected because it came out higher than her own figure.
• Bansal Land Developers v ITO ITATHelps taxpayerValidity unconfirmed
  The stamp value rose between booking and registration and the AO added the difference under 43CA. Is that right?
  Not where sub-sections (3) and (4) of s.43CA are satisfied. The Pune Tribunal deleted the entire addition because the booking dates preceded registration, the agreement values at booking exceeded the stamp duty values then prevailing, and part of the consideration had come through banking channels, so the agreement-date value governed.
• ITO v Ketaben Janakbhai Patel ITATHelps taxpayer
  The Assessing Officer has adopted the jantri value for my land sale because a co-owner's assessment used it, even though I objected that the title was defective. Must he refer the valuation to the DVO instead?
  Yes. The Ahmedabad Tribunal held that once the assessee objects that the stamp duty value exceeds the fair market value, the Assessing Officer is duty bound to refer the valuation to the Departmental Valuation Officer under section 50C(2). He cannot adopt the jantri value simply because the officer assessing a co-owner did so. Here the assessee had raised serious objections about defective and disputed title, and the officer knew of them. The Commissioner (Appeals) was right to delete the addition made by substituting the jantri value of Rs 4,98,83,550 for the DVO's earlier valuation of Rs 3,17,86,000, and the Revenue's appeal was dismissed.
• Narain Lal Agrawal v DCIT ITATHelps taxpayerValidity unconfirmed
  We booked a flat in 2014, paid part of the price by cheque, and registered the deed in 2019 when the circle rate had risen sharply. Is the builder's allotment letter an 'agreement' for the provisos to s.56(2)(x)?
  On these facts the Jaipur bench held that it is. The allotment letter identified the property, fixed the total consideration and set out the terms of payment, was signed by both sides, and both sides then performed on it, part of the price having been paid by account payee cheque on or before the date of that agreement. That satisfied the two conditions in the provisos to s.56(2)(x)(b) - an agreement fixing the consideration on an earlier date, and part payment by a prescribed banking mode on or before that date - so the stamp duty value on the allotment date, not the registration date, was the relevant figure. The Tribunal declined to treat the label 'allotment letter' as decisive and allowed the appeal, directing deletion of the addition of Rs 58,36,000.
• Prithvi Developers v DCIT ITATHelps departmentValidity unconfirmed
  Section 43CA got a 5 per cent tolerance band in 2018 and 10 per cent in 2020. Does the band help an earlier year, as Maria Fernandes Cheryl says it does for s.50C?
  The Raipur bench said no. It held that the first proviso to s.43CA, inserted by the Finance Act 2018 with effect from 1 April 2019, applies prospectively from assessment year 2019-20, and it refused to read it as curative and retrospective. Its reasons were that before the 2018 amendment no tolerance limit was contemplated at all in s.43CA, that the explanatory notes state the amendment takes effect from 1 April 2019 and applies to assessment year 2019-20 and subsequent years, and, applying the distinction drawn by the Supreme Court in Shree Choudhary Transport Co., that this was a substantive change rather than a curative one. It followed a Mumbai coordinate bench decision in Welfare Properties P. Ltd. The addition was upheld. This entry is included precisely because it cuts against the assessee, and a practitioner should know the argument he is walking into.
• Latafat Hussain v ITO (ITAT Jaipur) — stamp value taken on the agreement date because part of the price came by account payee cheque, in AY 2010-11 ITATHelps taxpayerValidity unconfirmed
  My agreement to sell was in 2005 and the sale deed was registered in 2009, and I took a small part of the price by account payee cheque on the agreement date. Can I use the 2005 stamp value, and does the ten per cent tolerance band help me for an old year?
  On the agreement-date point, yes. The Tribunal directed the Assessing Officer to compute the gain on the stamp (DLC) value as at the date of the agreement, 3 January 2005, and not the date of registration, because Rs.35,000 of the consideration had been received by account payee cheque at the time the agreement was executed and the bank statements were on record. On the tolerance band, the order gives you less than it appears to: paragraph 10 records that on the 2005 value the difference between the agreed consideration and the DLC value was 9.34 per cent, "which is less than the prescribed 10 %" band, but that sentence follows a recital of what the assessee's representative demonstrated, and the operative direction at paragraph 10.2 rests on the agreement-date proviso alone and says nothing about the band. Do not cite this order as authority that the ten per cent band reaches back to AY 2010-11.
• ITO v Bhushan Dharamdas Karia (ITAT Mumbai) — the excess a retiring partner receives is taxed in the firm's hands, not his ITATHelps taxpayerSuperseded by amendment
  I retired from a firm and received a lump sum well above the balance in my capital account. The AO has assessed it as long-term capital gain in my hands and applied section 50C. Is that correct for a pre-2021 year?
  No. The Tribunal held that the amount received by a retiring partner on the reconstitution of a firm is taxable in the hands of the partnership firm and not in the hands of the partner. The partner was never the owner of the firm's assets; on a reconstitution there is simply a revaluation of assets and liabilities so that the retiring partner's capital account can be settled. The revenue's appeal was dismissed and the deletion of the addition in the partner's hands was upheld.
• Joseph Mudaliar v DCIT (ITAT Mumbai) — the section 50C tolerance band read into the buyer's charge under section 56(2)(vii)(b), and applied to AY 2015-16 ITATHelps taxpayerValidity unconfirmed
  I bought flats slightly below the stamp duty value and the Assessing Officer has added the difference in my hands under section 56(2)(vii)(b). There is no tolerance band in that clause. Can I still claim the section 50C margin?
  The Tribunal held that you can. It read the exception in the third proviso to section 50C(1), and the corresponding exception in section 56(2)(x)(b)(B) and the first proviso to section 43CA, into section 56(2)(vii)(b)(ii), on the reasoning that the buyer and the seller stand on the same footing and there cannot be two different fair market values for the same property. It then applied a ten per cent margin to AY 2015-16, holding the Finance Act 2018 amendments curative and beneficial and therefore retrospective, and deleted the whole addition of Rs.23,30,694.
• Maria Fernandes Cheryl v ITO ITATHelps taxpayer
  Our sale price is a few per cent below the stamp duty value, and the year is before the tolerance band was enacted. Can we still get the benefit of it?
  Yes, on this reasoning. The Mumbai bench held that the third proviso to s.50C(1) - the tolerance band, 5 per cent when inserted by the Finance Act 2018 and 10 per cent from the Finance Act 2020 - is curative. It was brought in to cure an unintended consequence of an anti-avoidance provision, namely that genuine small variations between the stated consideration and the circle rate were being treated as understatement. A curative amendment relates back, and the Tribunal held that the proviso as it now stands takes effect from 1 April 2003, the date s.50C itself came into force. On a variation of 6.55 per cent the addition was disapproved. The Tribunal also refused, pointedly, the Departmental Representative's request that the relief be recorded as a special case not to be treated as precedent.
• Naina Saluja v DCIT ITATHelps taxpayerValidity unconfirmed
  The officer sent my property to the Valuation Officer. Does that give him extra time to finish the assessment?
  No, not where the reference is under s.50C. The extension in clause (iv) of Explanation 1 to s.153 is given only where the Assessing Officer makes a reference to the Valuation Officer under s.142A(1); a reference under s.50C or s.55A does not stop the clock. The assessment, completed after the ordinary period had run out, was quashed as barred by limitation.
• Vishnubhai Mafatbhai Desai v ITO — section 49(4) is the Revenue's answer to the double-taxation objection against section 56(2)(vii)(b), and the clause applies to FY 2013-14 ITATHelps departmentValidity unconfirmed
  I am arguing that a section 56(2)(vii)(b) addition on land my client bought below circle rate produces double taxation. How is the department going to answer that?
  With section 49(4). The Ahmedabad Bench dismissed the assessee's appeal, holding that section 49(4) clearly provides that the benefit of the inflated cost of acquisition arising from the deeming provision in section 56(2)(vii)(b)(ii) will be available at the time of sale of the asset, so the capital gain will be reduced to that extent. The Bench also held that section 56(2)(vii)(b)(ii) applies from AY 2014-15 and therefore governs transactions of FY 2013-14.
• Girdhari Lal v ITO ITATHelps departmentSuperseded by amendment
  The land is recorded as agricultural in the revenue records. Is that enough to keep it outside s.2(14)?
  No. The Tribunal upheld the addition. The land lay within eight kilometres of municipal limits, no crop had been grown on it in the years before sale, and the sale deed itself described it as residential land with structures on it, so it was a capital asset under s.2(14) and s.50C applied to the consideration.
• Amartara Pvt Ltd v DCIT (ITAT Mumbai) ITATHelps taxpayerValidity unconfirmed
  I put land into an LLP as capital. The stamp value is higher than the value the firm recorded. Can the Assessing Officer apply s.50C?
  On this order, no. Section 45(3) itself supplies the deemed full value of consideration for a capital contribution, namely the amount recorded in the books of the firm. The Mumbai Tribunal held that one deeming fiction cannot be extended by importing another, so s.50C cannot be used to replace the book figure with the stamp duty value. The addition made by substituting a stamp value of Rs. 9,41,78,500 for the recorded Rs. 5.60 crores was deleted.
• ITO v Raj Kumar Parashar ITATHelps taxpayer
  The AO substituted the circle rate under s.50C. Does that higher figure also become the net consideration I have to reinvest for s.54F?
  No, on this line of authority. The Jaipur Bench held that the deeming fiction in s.50C is confined to computing capital gains under s.48 and does not carry into s.54F, so 'net consideration' in the Explanation to s.54F is the consideration actually received under the sale deed. The assessee had reinvested the whole of the actual consideration and got the whole gain exempted, even though the gain itself had been computed on the stamp duty value.
• Dharamshibhai Sonani v DCIT ITATHelps taxpayer
  I fixed the price in 2005 but registered the sale in 2007. Which date's stamp duty value applies?
  The agreement date. The Ahmedabad Tribunal held the proviso to s.50C inserted by the Finance Act, 2016 with effect from 1 April 2017, which allows the stamp duty value on the date of the agreement to be adopted, to be curative and therefore retrospective from 1 April 2003, when s.50C was introduced.
• Statutory position — section 285BA, rule 114E and Form 61A: who must file the statement of financial transactions, and the section 271FA and 271FAA penalties CBDT Circulars & InstructionsCuts both ways
  A notice says my client should have filed Form 61A and proposes a penalty of five hundred rupees a day. Who actually has to file, for what transactions, and how is the penalty computed?
  The statement of financial transactions is furnished under section 285BA(1) in Form No. 61A, and rule 114E(2) fixes both the reporting persons and the transactions in a table: for most reporters the threshold is ten lakh rupees in a financial year, for immovable property registered by a Registrar or Sub-Registrar it is thirty lakh rupees, and for a person liable to audit under section 44AB it is receipt of cash exceeding two lakh rupees for a sale of goods or services. The due date under rule 114E(5) is 31 May following the financial year. The penalty under section 271FA is five hundred rupees for every day of default, rising to one thousand rupees a day from the day after the time given in a notice under section 285BA(5) expires; section 271FAA adds fifty thousand rupees for an inaccurate statement, and, for a reporting financial institution, a further five thousand rupees for every inaccurate reportable account.
• Statutory position — the inadequate-consideration margin in section 56(2)(x)(b): none before AY 2019-20, five per cent from AY 2019-20, ten per cent from AY 2021-22 CBDT Circulars & InstructionsCuts both ways
  The stamp duty value of the flat my client bought exceeds the price by about eight per cent. Is there a tolerance band, and what was it in the year of my assessment?
  There is, but only from AY 2019-20, and its size changed. Item (B) of section 56(2)(x)(b) was substituted by the Finance Act 2018 with effect from 1 April 2019 to charge the excess only where it is more than the higher of Rs 50,000 and five per cent of the consideration, and the word 'five' was substituted by 'ten' by the Finance Act 2020 (Act No. 12 of 2020) with effect from 1 April 2021. For AY 2018-19 and earlier there was no percentage band at all under this clause: any excess over Rs 50,000 was chargeable.
• Statutory position — section 139A(5), rule 114B and Form 60: where PAN must be quoted, and the section 272B penalty of ten thousand rupees for each default CBDT Circulars & InstructionsCuts both ways
  A penalty notice under s.272B says ten thousand rupees for each of dozens of defaults. Where is PAN actually required to be quoted, what does a person without one do, and is the penalty really per default?
  Rule 114B lists eighteen transactions in which every person must quote his permanent account number, from opening a bank account and buying a car to a sale or purchase of immovable property exceeding ten lakh rupees and any sale or purchase of goods or services exceeding two lakh rupees per transaction. A person other than a company or firm who has no permanent account number makes a declaration in Form No. 60 instead. Section 272B(1) charges ten thousand rupees for failure to comply with section 139A; sub-sections (2), (2A) and (2B) each charge ten thousand rupees 'for each such default', and no order under any of them may be passed without an opportunity of being heard.
• Noida Cyber park P Ltd v ITO ITATHelps taxpayerOverruled
  I assigned my leasehold plot for less than the circle rate. Can the officer substitute the stamp duty value under s.50C?
  No, on this Tribunal's reasoning. Section 50C(1) is worded 'land or building or both' and not 'any right in land or building', and the Delhi Tribunal held the two expressions are distinct, so a transfer of leasehold rights in land or building falls outside the section and the stamp duty value cannot be substituted. Read this together with the Bombay High Court decision in Vidarbha Veneere Industries, which has since taken the opposite view.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.