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2010 (3) TMI 886 - AT - Income TaxApplication of section 50C for the computation of unexplained investment u/s 69B - Computation of capital gains in real estate transactions - Addition on unaccounted investment - investment in GIDC plot not fully disclosed in the books of account - whether the provision of section 50C of the Act applies to purchaser or not? - It is found that assessee has purchased land along with building through deed of assignment and stamp duty was paid thereon. AO has treated seller and the buyer on the same footing in making addition referring to higher value taken for stamp duty purpose - CIT(A) deleted the addition made by AO u/s 69B. HELD THAT:- We find from the Memorandum Explaining the provision of section 50C in the Finance Bill, 2002, which clearly states that where the consideration declared to be received or accruing as a result of transfer of land or building or both is less than the value adopted or assessed by any authority of a State Government for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be computed, u/s 48. Section 50C creates a legal fiction thereby apparent consideration is substituted by valuation done by Stamp Valuation Authorities and capital gains are calculated, accordingly. Legal fiction cannot be extended any further and has to be limited to the area for which it is created. the High Court in the case of Addl. CIT v. Durgamma [1986 (9) TMI 58 - ANDHRA PRADESH HIGH COURT] held that it is not possible to extend the fiction beyond the field legitimately intended by the statute. AO has applied this provision of section 50C for the computation of unexplained investment u/s 69B and which is not permissible under the Act. Apart from the stamp duty valuation, there is nothing on record which suggests that the revenue has proved that the assessee has accepted over and above, what has been recorded as purchase consideration of the land in the instrument, i.e., the sale deed. Therefore, We are in full agreement with the arguments of the assessee that section 50C is not applicable in the case of purchaser and this provision being a deeming provision will apply for determining the full value of consideration as a result of transfer of capital assets for the purposes of computation of capital gains u/s 48. further there is no evidence on record to show that the consideration over and above, what has been recorded in the sale deed, has been made by the assessee and in the absence of the same, no addition of undisclosed investment can be made by invoking the provision of section 69B. Accordingly, we confirm the order of CIT(A) deleting the addition and this issue of the revenue’s appeal is dismissed.
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