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2013 (9) TMI 636 - AT - Income TaxFair Market Value - Capital Gains - Section 55A - determination of FMV as on 1-4-1981 - average value of land adopted by the Revenue, at Rs. 27,030 per acre, on the basis of registered sale deeds – Held that:- "Fair market value" in relation to a capital asset has been defined under section 2(22B) of the Act. The fair market value in relation to capital asset, means the price that the capital asset would ordinarily fetch on its sale in the open market on the relevant date - Therefore, adoption of the average value of land by the Revenue, at Rs. 27,030 per acre, on the basis of registered sale deeds, cannot be considered as "fair market value" within the definition of fair market value in relation to a capital asset, as contained under section 2(22B) of the Act. The rationale and philosophy behind insertion of section 50C of the Act is that there is a wide gap between the sale consideration shown in the registered sale deed and the "fair market value" of the asset sold. Therefore, the Legislature deemed it fit, to introduce the deeming provisions of section 50C, which contemplate a deeming situation in respect of full value of consideration, for the purpose of levy of capital gains - Conceptually and factually, there is wide difference between the sale consideration, as recorded in the registered sale deed and the "fair market value" of the asset. The "fair market value" represents the price that a seller is willing to accept and a buyer is willing to pay in the open market. The price or sale consideration as specified in the registered sale deed of an asset in India represents the price or sale consideration negotiated or determined not in the open market but in the parallel operating market where such transactions crystallised in a clandestine manner. In view of this, the sale consideration of an asset, as recorded in the registered sale deed is generally understated and, hence, cannot be taken as the "fair market value" as on April 1, 1981 for the purpose of computation of "capital gains" - Having regard to the fairness, the fair market value of the land in question, deserves to be taken at Rs. 3.50 lakhs per acre, as on April 1, 1981, for the purpose of computation of capital gains – Appeal of assessee partly allowed.
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