Section 50C Inapplicable On Lower Rectified DVO Value | ITAT

Case Deatils: Mukesh Vaikunthlal Mehta vs. Income-tax Officer [2026] 182 taxmann.com 174 (Mumbai - Trib.)

Judiciary and Counsel Details

• Rahul Chaudhary, Judicial Member
•  Vikram Singh Yadav, Accountant Member
• Ms. Sailee Gujrathi for the Appellant.
• Annavaran Kosuri for the Respondent.

Facts of the Case

Assessee, along with his two brothers, transferred a property comprising land and buildings with 26 units/flats to a purchaser for a consideration of Rs. 2.5 crores. The assessee held a one-third share in the property and had offered to tax the capital gains arising from the transfer. For stamp duty purposes, the value of about Rs. 7.03 crores was adopted by the stamp duty authorities.

In reassessment, the Assessing Officer (AO) invoked section 50C and adopted the stamp duty value as the full value of consideration, computing long-term capital gains in the assessee’s hands by taking one-third share thereof and making an addition of about Rs. 1.51 crores, as the District Valuation Officer (DVO) report was not received before completion of assessment.
On appeal, the CIT(A) considered DVO’s valuation and adopted it as the full value of consideration, granting partial relief. The matter reached the Mumbai Tribunal.

 ITAT Held

The Tribunal held that the DVO had excluded the area aggregating to 1486.62 Sq. Mtrs being the ‘residential built-up area occupied by the existing tenants’. Thus, the DVO had considered the area occupied by the tenants in respect of the tenanted flats and excluded it to determine the development potential and income/gains arising from the same. However, the DVO had failed to factor in the aggregate area of the property occupied by the Developer Flats’ owners. The assessee provided details of the corresponding flat, including the carpet area to be allotted to the parties other than the assessee.

On examining the same, it was found that the total residential area to be provided to parties [other than the assessee] was 1,585.76 Sq. Mtr. (equivalent to 17,069 Sq. Ft.) as opposed to 1,486.62 Sq. Mtr. adopted by the DVO.

Accordingly, the ‘Balance FSI without fungible FSI’ gets reduced from 516.78 Sq. Mtr. to 417.64 Sq. Mtr. If the computation made by the DVO is rectified, the value of the property as on 11-3-2021 comes to Rs. 2.42 crores. Since the value of Rs. 2.42 crores determined as above is less than the consideration of Rs. 2.5 crores, the provisions contained in section 50C would not get attracted.

Accordingly, the addition made by AO under section 50C, which was reduced to Rs. 84.27 lakhs by the CIT(A), was deleted.