CHENNAI, MAR 21, 2013: THE issue before the Bench is - Whether for the purpose of provisions of Sec 50C, the valuation of the sold plot of land can be modified if it is a distress sale. And the answer is NO.

Facts of the case

The assessee had sold a portion of the land of its factory property for a consideration of Rs.2,22,64,409/ which was as per the sale deed. At the same time, the guideline value adopted by the registering authority was Rs.3,95,91,000/-. In the computation of LCTG the assessee adopted the consideration at Rs.2,22,64,409/-. But, the AO held that the guideline value of Rs.3,95,91,000/- must be adopted. The (DVO) valued the property at Rs.3,54,73,536/- But the Valuation Report was not available before completing the assessment. The AO completed by adopting the guideline value of Rs.3,95,91,000/-. The CIT(A) determined the consideration at Rs.2.25 crores.

On Appeal before the Tribunal the DR contended that section 50C was binding on the AO. The DR further contended that the CIT(A) had grossly erred in interfering in the quantum of sale consideration without understanding the predicament of the AO and without hearing the objections of the AO. The AR contended that it was a distress sale, as the property was sold by the assessee to pay off the bank liabilities.

Having heard the parties, the Tribunal held that,

++ section 50C(1) is a deeming provision. A deeming provision is to be strictly applied without widening its scope. But it is also equally important to note that a deeming provision is inflexible. Where a deeming provision states a particular mode of operation, that mode should be adopted and it cannot be diluted or distinguished or differentiated;

++ the factors, however heartening may be, cannot be acted upon by the appellate authorities for the reason that section 50C is a deeming provision. Any relief granted to an assessee must be on the basis of reasons. The misfortunes happened to the assessee or the difficulties faced by the assessee or the matter of distress sale, etc. cannot be a ground to modify the valuation;

++ the DVO’s estimation was at Rs.3,54,73,536/-. When all these variables are changing from time to time, from authority to authority, it is not possible to reject the contentions of the assessee as a whole. The truth lies somewhere in between. We refix the consideration accountable in the hands of the assessee for the purpose of section 50C at Rs.2.5 crores.

(See 2013-TIOL-204-ITAT-MAD)