Section 50C & 50CA of the Income Tax Act
Section 50C-Special Provision for Full Value of Consideration in Certain Cases
With effect from A.Y. 2003-2004; section 50C has been inserted in the Income Tax Act, 1961; dealing specifically with gross consideration in the computation of capital gains in respect of transactions in land or building or both.
1) U/S 50C, where the consideration earned or accruing due to the transfer by the assessee of a capital asset; being land or building or both, is less than the value assessed or adopted or assessable; by any authorization of a State Government (here, referred to the “stamp valuation authority”) for the payment of stamp duty in regard of such transfer; the value so assessed or adopted or assessable shall, for the purposes of section 48; be assumed to be the full value of the consideration earned or accruing as a result of such transfer.
If the agreement for sale of an apartment states the value of the apartment Rs. 20 lakhs but as per the stamp duty authorities the valuation of the apartment is Rs. 30 lakhs, then it will be considered that the flat has been sold for Rs. 30 lakhs. Thus, capital gains will also be computed on the basis of Rs. 30 lakhs.
However, in a case where the date of registration & the date of the agreement fixing the amount of consideration for the transfer of the capital asset are not the same, the value assessed or adopted or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of the consideration for such transfer.
You must remember that this provision shall apply only in a case where the sum of consideration or a part thereof; has been received by way of an account payee bank draft or account payee cheque; or by use of electronic clearing system through a bank account; on or before the date of the agreement for transfer.
2) Without prejudice to the above provisions, where;
a) The taxpayer claims before any assessing officer that the value assessed or adopted or assessable by the stamp valuation authority under the above provisions exceeds the FMV (Fair Market Value) of the property as on the date of transfer;
b) The value so assessed or adopted or assessable by the stamp valuation authority under the above provisions has not been argued in any appeal or revision or no reference has been made before any other authorization, court or the High Court;
the assessing officer may refer the valuation of a capital asset to the valuation officer & where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) & (6) of section 16A, clause (i) of sub-section (1) & sub-sections (6) & (7) of section 23A, section 24(5), section 34AA, section 35 & section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with significant adjustments, apply in relation to such reference as they apply in relation to a recommendation made by the assessing officer U/S 16A(1) of that Act.
Here, the term “Valuation Officer” shall have the meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
The expression “assessable” indicates the price which the stamp valuation authority would have; notwithstanding anything to the contrary included in any other law for the time being in force, assessed or adopted; if it were referred to such authority for the payment of stamp duty.
3) Subject to the provisions contained in sub-section (2) above; where the value determined under sub-section (2) surpasses the value assessed or adopted or assessable by the stamp valuation authority referred to in sub-section (1) above; the value so assessed or adopted or assessable by such jurisdiction shall be taken as the whole value of the consideration received or accruing from the transfer.
Section 50CA-Special Provision for Full Value of Consideration for Transfer of Share Other Than Quoted Share
Finance Act, 2017, shall insert the section 50CA after section 50C, w.e.f. 1-4-2018.
Under this section; where the consideration received or accruing as a result of the transfer by an assessee of a capital asset; being a share of a company other than a quoted share; is less than the FMV (Fair Market Value) of such share determined in such manner as may be prescribed; the value so ascertained shall, for the purposes of section 48; be assumed to be the full value of the consideration received or accruing from such transfer.
Note: Here, the term “quoted share” means the share quoted on any recognized stock exchange; with consistency from time to time; where the quotation of such share is based on current transaction made in the ordinary course of business.