Section 50C valuation must reflect DVO findings and encumbrances from an earlier agreement to sell.

Capital gains under section 50C could not be computed on the existing stamp duty value without fresh enquiry where a DVO valuation in connected proceedings indicated a lower figure and an earlier agreement to sell had created enforceable rights amounting to an encumbrance. Because these factors could affect the fair market value and deemed full value of consideration, the Assessing Officer was required to re-determine the valuation for the transfer after considering both the DVO report and the impact of the prior sale agreement.

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Issues: Whether the valuation adopted for computing capital gains under section 50C required fresh determination in light of the DVO valuation obtained in connected proceedings and the encumbrance arising from the prior agreement to sell.

Analysis: The computation of capital gains under section 48 proceeds on the full value of consideration, while section 50C substitutes stamp duty valuation where the declared consideration is lower. Section 50C(2) permits reference to a valuation officer where the assessee disputes the stamp duty value. The prior agreement to sell created enforceable rights in favour of the transferees and constituted an encumbrance affecting the property's value. Since the DVO had valued the property at a lower figure in the related proceedings and the effect of the earlier agreement had not been examined for the assessee's transfer, the fair market value and deemed consideration could not be accepted without fresh enquiry.

Conclusion: The matter was remitted to the Assessing Officer for fresh determination of the fair market value and the deemed full value of consideration under section 50C, keeping in view both the DVO valuation and the encumbrance created by the agreement to sell.

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