Law:

Section:

Section 48, read with section 55A, of the Income-tax Act, 1961 - Capital gains - Computation of - Assessment year 1998-99 - Whether actual sale consideration recorded in agreement to sell of assets and received by assessee can be substituted by value as adopted by District Valuation Officer under section 55A for purpose of computing capital gains chargeable to tax - Held, no Words & Phrases : 'Full value of consideration' as occurring in section 45 of the Income-tax Act, 1961 FACTS In his return of income for the relevant assessment year, the assessee had declared income by way of capital gains arising from sale of certain property. The Assessing Officer considered the sale price disclosed in the sale agreement as being low and made a reference to the District Valuation Officer (DVO) under section 55A for determining the 'fair market value' of that property on the date of sale. The DVO determined value of plot at higher figure and after making suitable adjustments determined its fair market value. The Assessing Officer computed capital gains by adopting fair market value as determined by the DVO and made additions in the assessment accordingly. On appeal, the order of the Assessing Officer was upheld by the Commissioner (Appeals) and the Tribunal. On appeal to the High Court : HELD It has been held in CIT v. Smt. Nilofer I. Singh [2009] 309 ITR 233/ 176 Taxman 252 (Delhi) that the provisions of section 55A apply only where the Assessing Officer is required to ascertain the 'fair market value' of a capital asset. The Court went on to hold that a combined reading of sections 45(1) and 48 would show that when a sale of property takes place, the 'capital gains' arising out of such a transfer have to be computed by looking at the 'full value of the consideration' received or accruing as a result of such transfer. The Court further held that the expression 'full value of sale consideration' is not the same as 'fair market value' as appearing in section 55A. Following the Supreme Court s in CIT v. George Henderson & Co. Ltd. [1967] 66 ITR 622 and CIT v. Gillanders Arbuthnot & Co. [1973] 87 ITR 407, the Court concluded that for the purpose of computing…

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