TAX FORUM: QUESTIONS & ANSWERS
Deemed gift in a sale transaction is inferable
In the analysis of the proposals in the Finance (No.2) Bill, 2009, you have referred to extension of Sec. 50C for unregistered transfers and extension of gift from non-relatives to assets other than cash under Sec. 56(2)(vii). There is, however, reference to Sec. 50C even in the provision relating to extended gift under the proposed Sec. 56(2)(vii). Its implications may be indicated.
Sec. 50C has been understood thus far as relating to only registered sale because it is only on such registration, the guidelines value (stamp value) would be of immediate relevance. It was so found by the Tribunal in Navneet Kumar Thakkar v ITO (2008) 298 ITR (AT) 42 (Jodhpur). This loophole in law has now been plugged so that this provision will be applicable with reference to the prevailing guidelines (stamp) value as on the date of deemed transfer as in power of attorney sales or where possession is handed over in pursuance of an agreement for sale or such other arrangement. Simultaneously, gifts from non-relatives are being extended to all gifts other than cash with effect from October 1, 2009.
Where immovable property is received as gift from non-relatives, it is provided that the value to be adopted will be the one for purposes of stamp duty based on guidelines value for sale by importing Sec. 50C in Sec. 56(2)(vii). It is further provided in the same clause that in the case of transfer of immovable property for consideration, which is a sale, any difference between the stated consideration and guidelines value will be deemed to be taxable gift, if the transaction is with a non-relative. But there is a tolerance limit of Rs. 50,000 so that where the different is less than Rs. 50,000, it will be ignored. This brings back the concept of deemed gift in cases of under-stated consideration under Sec. 4(1)(a) of the Gift Tax Act, when it was in vogue. In view of the fact that stamp value is most erratic, more often more than market value and in a few cases less, it does impose a corresponding income tax burden based on such stamp value.
But then Sec. 50C provides for either of the two remedies by way of an appeal under the stamp law or by way of reference to the departmental valuation officer.
Though the valuation officer’s report is binding on the assessing officer, there is further right of appeal to Commissioner (Appeals) and the Tribunal on facts and the High Court and the Supreme Court on law.
Appeal under the stamp law will not be available on deemed transfers to which Sec. 50C is extended as there is provision for appeal against stamp value only for parties to a document presented for registration. Since gifts of immovable property will be effective only on registration, such right of appeal against stamp law will be possible.
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