Retrospective 5% tolerance under property valuation rules led to adoption of actual sale consideration and recomputation of capital gains.

The amended third proviso to section 50C(1), introducing a 5% tolerance band where stamp duty value exceeds declared consideration only marginally, was treated as a curative and beneficial provision applicable retrospectively. On the facts, the stamp duty valuation of Rs. 67,81,105 exceeded the declared sale consideration of Rs. 67,11,000 by about 1.04%, so the actual sale consideration was required to be adopted for computing long-term capital gains. The related deduction under section 54F was also to be recomputed accordingly, and the appellate tribunal found no error in that approach.

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Issues: Whether the amended third proviso to section 50C(1) of the Income-tax Act, 1961, which provides a tolerance band where the stamp duty value does not exceed the consideration by more than 5%, applies retrospectively to the assessment year under consideration, and whether the actual sale consideration should be adopted for computing long-term capital gains.

Analysis: The property valuation dispute had attained finality at Rs. 67,81,105 against the declared sale consideration of Rs. 67,11,000, resulting in a difference of only about 1.04%. The amendment introducing the tolerance band was treated as a curative and beneficial provision intended to mitigate hardship to taxpayers. On that basis, the lower appellate authority held that the actual sale consideration had to be accepted and that the capital gains and related deduction under section 54F were to be recomputed accordingly. The appellate tribunal found no infirmity in that view.

Conclusion: The amended tolerance provision was applied retrospectively, the actual sale consideration was directed to be adopted, and the revenue's challenge failed.

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