The Hindu Business Line : Stamp duty value

For the purpose of collecting stamp duty on such immovable property transfers, some State governments prescribe ‘guideline value’, which is based on certain parameters and is viewed generally as nearer to the fair market value.

If the apparent consideration in a transaction is less than the guideline value then the stamp duty is levied and collected by adopting the guideline value. If the sale value is more than the guideline value (which is a rare occurrence), the stamp duty would be collected on the said apparent consideration.

It may so happen that the actual consideration for the transfer of immovable asset is less than the prescribed guideline value and to complete the transaction, the vendor and vendee may pay stamp duty and complete the formality of registration.

This is resorted to notwithstanding that the parties are entitled to contest the stamp duty levy based on guideline value before the registering authority.

If such measure is adopted then the review of such value for stamp duty purposes would be done by physical inspection of the property.

Deeming provision

The Finance Act, 2002 inserted Section 50 C which is effective from April 1, 2003, that is, from the assessment year 2003-04. It says that the taxpayer (vendor) has to compute capital gain under Section 48 taking the full value of consideration as adopted by the stamp valuation authority for the purpose of registration.

The vendor may either contest before the stamp valuation authority as regards the value adopted for stamp duty purposes and, if not contested before the stamp valuation authority, he is eligible to contest the valuation before the assessing officer (AO) at the time of assessment.

If the taxpayer has contested the value before the stamp valuation authority then he loses the right to contest the guideline value adoption, before the AO.

Where the taxpayer does not contest before the stamp valuation authority or before the AO then the AO must adopt the value reckoned for stamp duty purpose as apparent consideration for computing capital gains.

Where the taxpayer who did not contest before the stamp valuation authority contests before the AO that the value adopted for stamp duty purpose exceeds the fair market value, the AO has to make reference to the valuation officer.

If the value assessed by the valuation officer does not exceed the value adopted for stamp valuation then the valuation made by the valuation officer is to be adopted.

If the value fixed by the valuation officer is more than the value adopted by the stamp valuation authority then the value adopted by the stamp valuation authority will be taken as deemed sale consideration.

Scope for discretion

In Jitendra Mohan Saxena vs ITO (2008 305 ITR AT 62 Lucknow) it was held that if the taxpayer does not object to the valuation made by the stamp valuation authority, then the AO could adopt such valuation for computing capital gains. However, if the taxpayer raises objection before the AO then the latter has to make reference to the valuation officer to estimate the fair market value of the immovable property.

The tribunal held that where Section 50C is invoked by the AO there is no scope for any discretion and the AO is bound to adopt the valuation made by the stamp valuation authority if it is more than the sale consideration admitted by the vendor. Also, the AO cannot adopt higher value determined by the valuation officer if it is more than the value adopted for stamp valuation purpose.

Section 50C being a deeming provision is not applicable in certain instances such as (a) contribution of immovable property as capital in a firm; (b) conversion of immovable property into stock-in-trade of a business by the taxpayer; (c) dissolution of firm — as the deed of dissolution does not require mandatory registration; and (d) slump sale and demerger — even if a document for registering the immovable property is executed.

(The author is an Erode-based chartered accountant. blfeedback@thehindu.co.in)

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