Fair market value adjustment under Section 50C: corrected DVO valuation below agreed consideration, so statutory valuation presumption not applied.

Determination of fair market value for a jointly held property transfer was contested under the statute that presumes stamp/valuation as full value of consideration; the governing principle applied was valuation methodology correctness. The Divisional Valuation Officer (DVO) report omitted occupied built-up area but misallocated residential area attributable to other co-owners; recomputation correcting residential area reduced the DVO value below the contractual sale consideration, so the statutory presumption did not operate to inflate consideration for long-term capital gains. Consequentially the addition under the valuation presumption was removed; other deduction and reinvestment exemption claims were held academic.

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Issues: (i) Whether the provisions of Section 50C of the Income-tax Act, 1961 apply for computing long term capital gains in respect of the transfer of the jointly held property and whether the DVO valuation (as adopted by the CIT(A)) correctly represents the full value of consideration / fair market value for the purposes of Section 50C.

Analysis: The dispute centres on the correct determination of fair market value/full value of consideration for the property transferred on 11/03/2011 and whether the DVO valuation adopted by the CIT(A) should be applied for Section 50C. The DVO report excluded built-up area occupied by tenants but failed to account fully for residential area attributable to other owners (developer flats). Recomputing the DVO methodology by correcting the residential area for parties other than the appellant reduces the DVO value for 11/03/2011 to INR.2,42,09,333, which is below the contractual sale consideration of INR.2.5 Crores. Given that the corrected valuation is lower than the agreed consideration, Section 50C does not get attracted to inflate the consideration for capital gains computation.

Conclusion: Ground(s) (i) allowed; the addition made under Section 50C is deleted and the CIT(A)'s restricted addition is set aside. Other grounds raised regarding alleged deductions and exemption under Section 54 are dismissed as academic.

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