Clarification - section 50c

[DEV KUMAR KOTHARI]

Whether Section 50C, can correspondingly be applied in hands of buyer of property, and an addition can be amde u/s 69, 69A or 69B or 69C. some A.O. are trying ot do so. In my view it is wrong. Section 50C, is only for computing capital gains. So unless , the AO establishes in reality expenses or investment, addition cannot be made. An AO made addition in hands of buyer, I argued the case before the CIT(A), who deleted addition. About 15 months have lapsed, the revenue has not filed appeal before ITAT. From 01.10.06 however, in case of individual or HUF as buyer, the additin can be made u/s 56 for the difference. This provisin need to be challenged as invalid, in so far it imposes tax on an item which is not income in real sense. Even if there is lower price paid, it can be due to element of gift or a bargain benefit. Readers views will strengthen the case.

[Rama Krishana]

Two additions for the same amount as per the issue under section 50C [full value of consideration] and under section 69 to 69C appears to be incorrect. But on the other side if you see the theme of the provisions, under section 50C there is no additional money or value is required physically to be shown for the purpose of application of 50C, where as actual money or value is requires to exist for the purpose of application of provisions of section 69 to 69C. So it appears that apparantly his view may be correct but it would lead to double taxable for the same transaction which can not be intention of the law. Therefore, in my view, where the income proposed to be added under section 69 to 69C is more that the addition / adjustments proposed under section 50C in that case only the differential amount may be considered. But where the amount proposed under section 69 to 69C is less that amount u/s 50C, in that case no addition should be made under section 69 to 69C.

AI Summary

Section 50C valuation should not cause double taxation; only excess additions under sections 69-69C merit adjustment. Section 50C applies to computation of capital gains by deeming full value of consideration without requiring physical receipt, while additions under unexplained investment or money provisions require actual unexplained assets or funds; to avoid double taxation only the excess of unexplained income additions over the deemed valuation should be taxed, and if unexplained income additions are lower than the deemed valuation no separate addition should be made.