Capital gains on share sales must use actual consideration unless statute expressly allows substitution by notional value.

Capital gains on a genuine share sale must be computed on the actual sale consideration under section 48 unless the statute expressly permits substitution by deemed or fair market value. The Assessing Officer could not replace the stated sale price with break-up value or another notional figure merely on estimation, especially where no material showed receipt of different consideration. As the shares were treated as sold and no statutory basis justified a different valuation, the first appellate authority's deletion of the adjustment was upheld.

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Issues: Whether the Assessing Officer was justified in substituting the stated sale consideration of shares with a fair market value or break-up value for the purpose of computing capital gains and capital loss.

Analysis: The computation of capital gains under section 48 of the Income-tax Act, 1961 proceeds on the full value of consideration received on transfer, and substitution by a notional value is permissible only where the Act specifically so provides. The provisions permitting adoption of fair market value or deemed consideration in special situations do not authorise a general replacement of the actual sale price in ordinary sale transactions. On the facts, the shares were treated as sold, and the Assessing Officer did not bring any material to show receipt of a consideration different from the stated price. In such circumstances, the stated sale consideration could not be disturbed merely by estimating break-up value.

Conclusion: The substitution of the sale consideration by the Assessing Officer was not permissible, and the deletion made by the first appellate authority was upheld.

Ratio Decidendi: In a genuine sale of shares, capital gains must be computed on the actual sale consideration unless the statute expressly authorises substitution by a deemed or fair market value and the revenue establishes facts justifying such substitution.

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