Possession-based transfer and prospective section 50C amendment shape capital gains computation; disputed stamp valuation was reduced on facts.

Transfer by handing over possession in part performance was treated as occurring on the date of possession under section 2(47)(v), so the later registration of the sale deed did not change the transfer date for capital gains. The prospective amendment expanding section 50C to unregistered transactions could not be applied retrospectively, and section 50C was therefore not applied to property No. 1 on the basis adopted by the lower authorities, with gains recomputed on the agreed consideration. For property No. 2, the stamp valuation was found excessive on the facts, the absence of a DVO reference was relevant, and the addition was restricted to a fair value for capital gains computation.

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Issues: (i) Whether section 50C could be applied to property No. 1 when possession had been handed over under an agreement to sell before registration of the sale deed and the later amendment to section 50C had not yet taken effect. (ii) Whether, in respect of property No. 2, the stamp valuation adopted under section 50C required reconsideration on the facts and the addition could be restricted to a lower fair valuation.

Issue (i): Whether section 50C could be applied to property No. 1 when possession had been handed over under an agreement to sell before registration of the sale deed and the later amendment to section 50C had not yet taken effect.

Analysis: The transfer was found to have taken place on the date when possession was delivered in part performance of the contract, bringing the transaction within section 2(47)(v) of the Income-tax Act, 1961. The subsequent registration of the sale deed did not alter the date of transfer for capital gains purposes. The amendment to section 50C enlarging its scope to cover transactions not registered with the stamp authority was held to be prospective from 01.10.2009 and could not govern a transaction undertaken earlier. On the facts, the pre-amendment provision did not authorise adoption of the later stamp valuation as the full value of consideration.

Conclusion: Section 50C was not applicable to property No. 1 on the basis adopted by the lower authorities, and the capital gains were to be recomputed on the agreed consideration.

Issue (ii): Whether, in respect of property No. 2, the stamp valuation adopted under section 50C required reconsideration on the facts and the addition could be restricted to a lower fair valuation.

Analysis: The property was shown to be a long-held rented property with limiting factors affecting its marketability. The assessee disputed the stamp valuation and placed valuation material on record, but the matter was not referred to the Departmental Valuation Officer under section 50C(2). Considering the factual constraints and the absence of DVO reference, the Tribunal found that the stamp valuation was excessive and that a fair estimate would better serve the ends of justice.

Conclusion: The addition on property No. 2 was reduced and the property value was directed to be adopted at Rs. 20 lakhs for capital gains computation.

Final Conclusion: The assessee succeeded on the first issue and obtained partial relief on the second, resulting in a partly allowed appeal with recomputation of capital gains accordingly.

Ratio Decidendi: For capital gains purposes, a transfer effected by handing over possession in part performance is recognised on the date of such transfer, and a later prospective amendment enlarging the scope of section 50C cannot be applied retrospectively; where a stamp valuation is disputed and the facts justify it, a fair and reasonable valuation may be substituted for computation.

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