Section 50C cannot be applied retrospectively where transfer was substantially completed and capital gains had already accrued earlier.

Section 50C of the Income-tax Act was held inapplicable where the land transfer had been substantially completed before the provision came into force, with possession handed over, substantial consideration received, and Chapter XX-C approval already obtained; substitution of consideration on a circle-rate basis without an actual stamp valuation was therefore unjustified. Capital gains were also held not taxable in the later year because the property had been effectively transferred earlier, and the later year reflected only the final instalment and completion of formal documentation. The assessee's treatment was accepted and the departmental appeals failed.

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Issues: (i) Whether section 50C of the Income-tax Act, 1961 could be invoked where the land transfer had been substantially completed before the provision came into force and the Assessing Officer substituted the consideration on the basis of stamp duty rates without an actual valuation by the stamp authorities. (ii) Whether the capital gains could be taxed in the later assessment year when the property had already been conveyed earlier and only the final instalment and formal documentation were completed during the relevant year.

Issue (i): Whether section 50C of the Income-tax Act, 1961 could be invoked where the land transfer had been substantially completed before the provision came into force and the Assessing Officer substituted the consideration on the basis of stamp duty rates without an actual valuation by the stamp authorities.

Analysis: The transfer under the development arrangement had been entered into and substantially acted upon before section 50C came into force. Possession had been given, substantial consideration had been received, and approval under Chapter XX-C had already been obtained. The Assessing Officer's adoption of a circle rate or ready reckoner value, without an actual stamp duty valuation for the transaction in question, was treated as unsustainable. The provision could not be applied retrospectively to a transfer which had crystallized earlier.

Conclusion: Section 50C could not be applied, and the enhancement of capital gains on that basis was unjustified.

Issue (ii): Whether the capital gains could be taxed in the later assessment year when the property had already been conveyed earlier and only the final instalment and formal documentation were completed during the relevant year.

Analysis: The record showed that the property had been agreed to be sold, possession had been handed over, and more than ninety per cent of the consideration had already been received in the earlier period. The later year reflected only the final payment and completion of formal documentation. On those facts, the transfer could not be treated as having occurred in the later year merely because the last instalment was paid then. The capital gains had therefore already accrued earlier, and the assessee's treatment was accepted.

Conclusion: The capital gains were not taxable in the later year, and the Assessing Officer was not justified in bringing them to tax in that year.

Final Conclusion: The departmental appeals failed, and the relief granted to the assessee was sustained.

Ratio Decidendi: Section 50C applies only to transfers to which it is legally applicable on the relevant date, and capital gains are taxable in the year in which the transfer is effectively completed, not merely when the last instalment or formal documentation is finalised.

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