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of <h1>Section 50C upheld as constitutional to prevent income leakage from capital asset transfers; marginal notes not legally altering statutes</h1> HC upheld the constitutional validity of Section 50C, holding the provision was enacted to prevent leakage of income from transfer of capital assets. The ... Constitutional Validity of Section 50C - Provisions have been inserted with the object of plucking the leakage of income from the capital asset - marginal note of the Section and title of the Chapter cannot take away the effect of the provisions of the Act and they cannot render those provisions legislatively incompetent if they are otherwise within the legislative incompetence. - Constitutional validity upheld Issues: (i) Whether Parliament had legislative competence to enact Section 50C of the Income-tax Act, 1961; (ii) Whether Section 50C is arbitrary or violative of Article 14 or of principles of natural justice for adopting guideline/stamp valuation as deemed consideration without adequate opportunity; (iii) Whether Section 50C is discriminatory by applying only to capital assets and not to trading assets/stock-in-trade; (iv) Whether Section 50C required to be read down or struck down.Issue (i): Whether Parliament had legislative competence to enact Section 50C of the Income-tax Act, 1961.Analysis: Entry 82, List I, Schedule VII permits taxation of income other than agricultural income and must be construed broadly to include measures to prevent evasion of income tax; precedents permit wide legislative latitude in economic and fiscal regulation; Section 50C is aimed at preventing undervaluation of immovable property to curb tax evasion and contains mechanisms linked to existing valuation and stamp-duty processes and valuation officer references.Conclusion: Section 50C is within parliamentary legislative competence and not struck down on that ground.Issue (ii): Whether Section 50C is arbitrary or violative of Article 14 or principles of natural justice for adopting guideline/stamp valuation as deemed consideration without adequate opportunity.Analysis: Procedural safeguards exist in the Indian Stamp Act, 1899 (Section 47A) and the Tamil Nadu Rules (Rules 4 and 5) providing notice, opportunity to be heard, provisional and final valuation orders, appellate remedies and a mechanism under Section 50C for referring valuation to a Valuation Officer; these provisions permit the assessee to challenge and seek revision of stamp valuation and to obtain a fair market value determination.Conclusion: Section 50C is not arbitrary or violative of Article 14 or natural justice on the ground alleged; adequate opportunity and rebuttal mechanisms are available.Issue (iii): Whether Section 50C is discriminatory by applying only to capital assets and not to trading assets/stock-in-trade.Analysis: Capital assets and trading assets/stock-in-trade are distinct categories under the Income-tax Act; classification in taxing statutes allows latitude and must only meet the tests of intelligible differentia and rational nexus to the object of preventing leakage of income from capital asset transfers; historical and statutory context shows provisions aimed at undervaluation of capital asset transfers.Conclusion: Section 50C is not discriminatory in breach of Article 14 on the basis that it applies only to capital assets.Issue (iv): Whether Section 50C requires to be read down or struck down.Analysis: Where prior precedents read down provisions for lack of rebuttal or opportunity, Section 50C contains express safeguards (referral to Valuation Officer, scope for stamp authority valuation proceedings and appellate remedies) that address those concerns; legislative intent is clear from the provision's language and is not negated by ancillary materials such as ministerial speech or circulars.Conclusion: There is no necessity to read down or strike down Section 50C; the provision is constitutionally valid as enacted.Final Conclusion: The petitions challenging Section 50C are dismissed and the impugned provision is upheld as constitutionally valid and operative with the existing statutory safeguards for valuation and appeal.Ratio Decidendi: Parliament is competent to enact Section 50C as a targeted fiscal measure to prevent undervaluation and tax evasion, and Section 50C contains adequate statutory mechanisms (stamp-act valuation procedures and valuation officer reference) to permit rebuttal of deemed valuation, so the provision is not arbitrary, discriminatory, or beyond legislative competence.
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