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2017 (1) TMI 1290 - HC - Income TaxComputation of capital gain - Reference made u/s 55A - transaction with a related party - actual consideration (full value of consideration) versus fair market value - Held that:- The price to be considered is the consideration received or accruing as a result of the transfer and not necessarily the price that the assessee states that it received or which has accrued to it. - The amount actually received was admittedly the amount mentioned in the sale agreement. - Apex Court in the case of K.P. Varghese case [1981 (9) TMI 1 - SUPREME Court] has held that, "Capital gains was intended to tax the gains of an assessee, not what an assessee might have gained. What is not gained cannot be computed as gained." Thus the Assessing Officer proceeded on the erroneous basis that as the assessee and the purchaser are interconnected and the property was sold at an undervalue he had the jurisdiction to invoke the provisions of section 55A or even otherwise to determine the fair market value. As held by the Supreme Court it then is a distinction between undervaluation and understatement of the value. The Assessing Officer did not find the consideration to have been understated. He, therefore, was not entitled to determine the fair market value. Applicability of Section 50C - Held that:- The reliance upon Section 50C is of no assistance to the Revenue either. Mrs. Dugga’s submission that the Assessing Officer’s can be supported under section 50C is not well founded. Even assuming that the Assessing Officer was entitled to invoke Section 50C to have the fair market value determined, it would make no difference. In view of sub section (3) the rate adopted, assessed or assessable by the Stamp authority would prevail. It is common ground that in this case the consideration stated in the sale document is even higher than the valuation by the Stamp authority. The judgment of the Supreme Court in Ms. McDowell & Co. Ltd. v. Commercial Tax Officer, (1985 (4) TMI 64 - SUPREME Court) does not warrant a different view of the matter. The view that we have taken in respect of question (ii) cannot be altered in view of the judgment in McDowell’s case (supra). The ratio of the judgment of the Supreme Court referred to earlier is that for the purpose of Section 48, the full value of the consideration received by or accruing to the assessee must be taken into consideration for the purpose of computing the capital gain and that the market price of the property is not relevant for this purpose. The authorities under the Act cannot possibly take a different view of the matter. As we noted earlier it is not the case of the Revenue that the actual consideration is higher than that stated in the sale deed. The Assessing Officer was, therefore, bound to consider the actual consideration. Decided against the revenue.
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