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2008 (11) TMI 295 - AT - Income TaxComputation of capital gains on transfer of land to partnership firm - invoking the provisions of section 50C and applying DM circle rates - by taking the substance of the transaction into consideration, the market value of the land transferred to the firm as capital contribution was adopted by invoking s. 50C. HELD THAT:- We are of the considered view that s. 45(3), s. 50C and s. 55A operate in different spheres and they can be invoked when conditions laid down in those sections are satisfied. Invoking of power contained in one of these sections does not come into conflict with each other. Admittedly no registration of the transfer under Registration Act and no stamp duty has been paid. Therefore, provisions of s. 50C cannot be invoked. The case is therefore, covered only u/s. 45(3). The words used 'adopted or assessed' in s. 50C refer to two different situations. One is where for certain area, DM circle rates are announced for the purposes of determining payment of stamp duty in respect of registration of sale deed. Then the stamp valuation authority adopts such declared rates. Second situation is where DM circle rates are not declared then stamp valuation authorities carry out an assessment as to what should be the market value of the land/building for the purposes of levying stamp duty. Thus, he word 'adopted' used in the s. 50C covers the situation where DM circle rates are already announced and which are picked up for ascertaining stamp duty and the word 'assessed' is used to cover a situation where such circle rates are not announced and actual assessment of market value for levying stamp duty is carried out. As the crux of invoking s. 50C is actual registration of transfer under Registration Act, the adoption or assessment of value for the purpose of levying stamp duty would arise only thereafter. As a result, we hold that AO was not justified in invoking the provisions of s. 50C, therefore, the value at which capital asset is transferred to the firm as recorded by it in its books would only be the full value of the consideration for the purpose of computing capital gains. Cost of acquisition - transfer of 10,000 sq. ft. of land - HELD THAT:- In our considered view, the stand of Revenue is not justified because as per s. 55(2)(b)(i) an option is given to the assessee to adopt either the actual cost of acquisition of the asset to the assessee or fair market value of the asset as on 1st April, 1981 as the cost of acquisition of the asset under transfer. The assessee has rightly exercised its option and there is no reason to take a different view. As a result, this ground of assessee is also allowed.
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