Section 50C valuation must reflect enforceable sale rights and may require Valuation Officer reference before capital gains are computed.

Section 50C requires the stamp duty value to be examined against the fair market value on the actual date of transfer, and where an agreement to sell creates enforceable rights and an encumbrance, the valuation cannot be concluded only by adopting the registered deed value. The matter may require reference to the Valuation Officer under section 50C(2), and the capital gains addition was therefore remanded for fresh adjudication. The claimed transfer and related computation also required factual verification and was restored for reconsideration, leaving capital gains to be re-examined by the Assessing Officer.

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Issues: (i) Whether the addition made by applying section 50C on the date of the registered sale deed was sustainable or the matter required reference to the Valuation Officer having regard to the agreement to sell and the encumbrance created thereby; (ii) Whether the disallowance made out of the cost of transfer while computing capital gains called for interference.

Issue (i): Whether the addition made by applying section 50C on the date of the registered sale deed was sustainable or the matter required reference to the Valuation Officer having regard to the agreement to sell and the encumbrance created thereby.

Analysis: Section 48 governs computation of capital gains and section 50C substitutes the stamp duty value as the full value of consideration where the declared consideration is lower. Section 50C(2) permits reference to the Valuation Officer where the assessee claims that the stamp valuation exceeds the fair market value on the date of transfer. The agreement to sell created enforceable contractual rights and an encumbrance over the property, which had to be considered while determining fair market value. In these circumstances, the valuation issue could not be concluded only by adopting the stamp duty value without further inquiry.

Conclusion: The addition was not to be sustained outright and the matter was remanded to the Assessing Officer for fresh adjudication with reference to the Valuation Officer. The issue is decided in favour of the assessee.

Issue (ii): Whether the disallowance made out of the cost of transfer while computing capital gains called for interference.

Analysis: The claim relating to expenditure incurred for transfer required factual verification. The lower appellate authority had already directed reconsideration, and the record did not justify a separate finding on merits at this stage.

Conclusion: The issue was restored for verification and consequential re-determination. The issue is decided in favour of the assessee.

Final Conclusion: The appeal succeeded only to the extent of remand and statistical relief, and the capital gains computation was left for fresh examination by the Assessing Officer.

Ratio Decidendi: Where an agreement to sell creates enforceable rights affecting the property, the fair market value under section 50C must be examined with reference to the actual date of transfer and the matter may require reference to the Valuation Officer under section 50C(2).

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