If Value Adopted For Stamp duty Is Less Than Market Value, What Value Should Be Considered For Capital gains?

In respect of Section 50 C if fair market value of the property is less than the Stamp value, what shall be the consideration shall be taken for valuation ? Satish Ukhale, Pune

Good question but  like the question it has short answer.

Section 50C was introduced in the I T Act from Asst Year 2003-04 (Fy 2002-03) to check the menace of under valuation of sale of property. The provision u/s 50C  empowers A.O to substitute the value of sales consideration  with the  valuation of immovable property taken for determination of  stamp duty  for the purpose of computation of capital gains ,if only he finds that the value shown by the seller is less than the value for determination of stamp duty.

The  said provision is as under

Special provision for full value of consideration in certain cases.

50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

As you can see the heading of the section is "Special provision for full value of consideration in certain cases" . The word "certain cases ‘ is important as the intention of the law makers was to apply the provision in "certain cases only’ i.e the case when under valuation is found on comparison with the value adopted for stamp duty. None other case.

Secondly , note that there is not even mention of "Market Value" in section  50C , so there is no implication for market value of the capital gains purpose. The fact that in many cases , it may just happen that market value is less than value adopted for stamp duty, I feel only judicial authority (Tribunal & above)  may give you relief provided you bring this fact clearly and forcefully.(& some luck!)

Therefore, in my opinion the moment it is found that valuation adopted for stamp duty  is less that sales consideration, section 50C is not applicable at all which means that the sale consideration is the value to be taken for capital gains purpose.