Finance Bill 2012-13 has brought another new provision to check evasion of capital gains . Under section 55 of the Income Tax Act , in a case where the capital asset became the property of the assessee before 1st April, 1981, the assessee has the option of substituting the fair market value of the asset as on 1st April, 1981 as the cost of the asset while computing capital gains.
For example , say, you have ancestral property bought in the year 1950 at Rs 500 and now you are selling that property at Rs 2 crore. Section 55 of the income tax act provides that you can get the Fair Market Value as on on 01/04/1981 as cost and the by applying the indexation on that FMV , you can compute capital gains. So , if you , get a valuation report from a registered valuer and fixed FMV at higher value, capital gains decreases considerably.
Under the I T Act , there was no provision empowering the A.O to refer the valuation of the property as on 01/04/1`981 to Valuation Officer. This led to the evasion of taxes through this route.
In order to check such mal practice , now Finance Bill 2012-13 has proposed to amend the provisions of section 55A of the Income-tax Act to enable the Assessing Officer to make a reference to the Valuation Officer where in his opinion the value declared by the assessee is at variance from the fair market value. Therefore, in case where the Assessing Officer is of the opinion that the value taken by the assessee as on 1.4.1981 is higher than the fair market value of the asset as on that date, the Assessing Officer would be enabled to make a reference to the Valuation Officer for determining the fair market value of the property.
This amendment will take effect from 1st day of July, 2012.