Bhatia Nagar Premises Co-op Soc vs. UOI (Bombay High Court)

DATE: (Date of pronouncement)
DATE: August 19, 2010 (Date of publication)

Click here to download the judgement (bhatia_50C_constitutional_validity.pdf)

S. 50C is only a measure of tax & is constitutionally valid

The assessee was the owner of land & building. It entered into a development agreement for the development & sale of the land. The consideration receivable by the assessee was Rs. 4.85 crores. For stamp duty purposes, the agreement was valued by the authorities at Rs. 15.50 crores and the duty on the same was paid by the developer. As the stamp duty valuation adversely affected the assessee for purposes of s. 50C (which provides that the value adopted by the stamp valuation authority shall be deemed to be the full value of the consideration received or accruing as a result of the transfer), the assessee filed a writ petition challenging the constitutional validity of s. 50C. HELD dismissing the Petition:

(i) There is a distinction between the subject matter of a tax and the standard by which the amount of tax is measured. The subject matter of tax is capital gains and the manner in which it should be computed is provided by s. 50C. S. 50C is only a measure of tax and not the subject matter of tax. The valuation rule of the Stamp Act is for the purpose of computation of income. It is only a standard of measure for imposing tax. (Principle laid down in A. Sanyasi Rao 219 ITR 330 (SC) followed);

(ii) S. 50C was introduced with a view to prevent evasion of tax and under-valuation of the transaction and must be read in that context. The classification made by s. 50C is in respect of an identifiable group of assessees and is not arbitrary, unreasonable or discriminatory. (K. R. Palanisamy v/s UOI 306 ITR 61 (Mad) followed)

For the law on interpretation of s. 50C see Kishori Sharad Gaitonde vs. ITO (ITAT Mumbai).