Long term capital gains on agricultural land: circle rate adopted as sale consideration; purchase cost uniformity and one-eleventh share to be computed

Long term capital gains arose on sale of agricultural land where the sale consideration was assessed at circle rate rather than actual sale price; application of the substitution of consideration rule to adopt the circle rate as sale consideration is applied, and that adoption stands. For uniformity, the purchase cost as on the base date is to be taken at Rs 50,000 per bigha as already accepted in a co-owner's final order, and the assessee's taxable capital gain is to be computed on only a one-eleventh share. Relief granted is partial, directing recomputation of capital gains accordingly.

---

---

Issues: Whether the learned NFAC was justified in upholding the Learned AO's computation of long term capital gains by substituting the actual sale consideration with circle rate under section 50C of the Income-tax Act, 1961, in the facts and circumstances of the case.

Analysis: The assessee, an agriculturist with 1/11th share in the sold agricultural land, sold the property for Rs. 42 lakhs whereas the circle rate was Rs. 60.20 lakhs. The AO applied section 50C to adopt the circle rate as substituted consideration and computed long term capital gains after allowing indexed cost based on purchase cost taken at Rs. 10,000 per bigha as on 1-4-1981. The NFAC upheld the AO's application of section 50C. The Tribunal noted that in a final order in the case of a co-owner (Peetam Singh) the purchase cost as on 1-4-1981 had been accepted at Rs. 50,000 per bigha and that order had attained finality. The Tribunal held that applying section 50C to adopt the circle rate as substituted consideration was in order, but for uniformity the purchase cost per bigha as accepted in the co-owner's final order should be adopted for recomputation of capital gains in the assessee's case. The Tribunal directed recomputation of capital gains using purchase cost of Rs. 50,000 per bigha and computing only the assessee's 1/11th share.

Conclusion: The substitution of sale consideration under section 50C is upheld, but the appeal is partly allowed by directing recomputation of long term capital gains adopting purchase cost of Rs. 50,000 per bigha and applying the assessee's 1/11th share; the grounds raised by the assessee are partly allowed in his favour.

---