Section 50C Applicable on Land Transfer to Government-Linked Housing Society — ITAT Mumbai Dismisses Assessee's Appeal and Sustains Section 263 Revision
Case Background
New India Cooperative Housing Society Ltd. Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal, Mumbai Bench, pronounced its order on 15.05.2026, dismissing the appeal preferred by a cooperative housing society and affirming both the applicability of Section 50C of the Income Tax Act, 1961 and the revisionary jurisdiction exercised by the Principal Commissioner of Income Tax under Section 263. The Tribunal additionally directed the Assessing Officer to afford the assessee a reasonable opportunity to contest the adopted valuation and, wherever necessary, to refer the matter to the Departmental Valuation Officer for an independent determination of the property value to be used in computing capital gains.
Facts of the Case
The assessee, a cooperative housing society, held a 6.1% undivided share in a parcel of land jointly owned by fourteen cooperative housing societies. The land, bearing Plot No. 4A/7 and CTS No. 194A/2, situated in JVPD Scheme at East West Road No. 3, Village – Juhu, Taluk – Andheri, had originally been conveyed in favour of these fourteen societies by the Bombay Housing Board.
The land was sold collectively to Vasundhara Cooperative Housing Society Ltd., a society formed by the Maharashtra Cadre of IPS officers, pursuant to a registered conveyance deed dated 14.05.2003. The total sale consideration received was Rs. 77,14,920/-, out of which, after deducting expenses towards development and maintenance, an amount of Rs. 74,17,895/- was distributed among the fourteen co-owner societies in proportion to their respective ownership interests.
The assessee's proportionate share, corresponding to its 6.1% ownership, amounted to Rs. 4,52,486/-.
The assessee filed its return of income for Assessment Year 2004-05 declaring nil income, after claiming a deduction of Rs. 3,55,622/- under Section 80P of the Income Tax Act, 1961.
Reassessment Proceedings Under Section 147
The assessee's case was subsequently reopened under Section 147 on the ground that the amount of Rs. 4,52,486/- had not been offered to tax. The Assessing Officer passed an assessment order under Section 143(3) read with Section 148, determining the total income at Rs. 4,52,486/- by treating the said amount as Long Term Capital Gains (LTCG).
The assessee challenged this order before the first appellate authority. The CIT(A), vide order dated 31.12.2013, partly allowed the appeal and directed the Assessing Officer to determine the fair market value as on 01.04.1981, apply indexation benefit, and recompute the capital gain or loss accordingly.
The central dispute during the reassessment proceedings was confined to ascertaining the correct cost of acquisition. The assessee's position was that based on a registered valuer's report, the FMV of the entire land as on 01.04.1981 was Rs. 28,81,500/-, of which the assessee's 6.1% proportionate share worked out to Rs. 1,75,772/-, and after applying indexation, the cost of acquisition rose to Rs. 8,13,820/-, resulting in a capital loss of Rs. 3,61,334/-. The Assessing Officer rejected this computation on account of insufficient documentary evidence.
Importantly, at no stage during the reassessment proceedings did the Assessing Officer raise any query regarding the applicability of
Section 50C, nor was this issue agitated by the assessee or adjudicated by the CIT(A) in those appellate proceedings.