Section 50C valuation standard upheld as a valid capital gains measure and not unconstitutional under legislative competence or equality principles.

Section 50C of the Income-tax Act was upheld as constitutionally valid because it uses stamp valuation only as a measure for computing capital gains under section 48, not as a tax on the stamp value itself. The Court held that using an external valuation standard for quantification does not alter the nature of the tax or exceed legislative competence. It also found no violation of article 14, since the provision targets undervaluation in a defined class of land or building transactions and is supported by a reference mechanism to the Valuation Officer within the statutory scheme.

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Issues: Whether section 50C of the Income-tax Act, 1961 is ultra vires the Constitution of India on the grounds of lack of legislative competence and violation of article 14.

Analysis: Section 50C was treated as a special provision for computation of capital gains under section 48 and as a measure for quantifying tax, not as a tax on the stamp valuation itself. The Court held that the distinction between the subject-matter of a tax and the standard by which it is measured permits adoption of the stamp valuation authority's value for the limited purpose of computation. It further held that the provision targets undervaluation in a defined class of transactions involving land or building and therefore does not create an arbitrary or discriminatory classification. The availability of reference to the Valuation Officer was also noted as part of the statutory scheme.

Conclusion: Section 50C was upheld as constitutionally valid and the challenge to it failed.

Ratio Decidendi: A statutory provision that uses an external valuation standard only as a measure for computing tax does not change the nature of the tax or exceed legislative competence, and a classification aimed at preventing undervaluation is not unconstitutional merely because it adopts that measure.

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