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Deepak Deepu   08 February 2021

decoding of provision

what is difference between decoding of provision & deeming fiction


Learning

 1 Replies

175B083 Mahesh P S   09 February 2021

Hello,

Often, we’ve come across the word ‘deemed’ while reading a particular Act or law. Going by the dictionary meaning, a deeming provision is a section or clause of a statute, regulation or other legal instrument that states how something is to be treated or regarded. But generally, the concept of these deemed provisions always leads to a certain amount of speculation and uncertainty with regard to interpretation. There is a general sense of perplexion unless you are particularly familiar with and have a considerable hold over the use of legal jargon.

Mafatlal Gagalbhai & Co. Pvt. Ltd. vs CIT, on 19 February 1979, observed that-
"The word 'deemed' is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive descripttion that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible."

whereas, A legal fiction, in simple words, is accepting something to be true for the sake of convenience. The idea is to give the same treatment to two transactions that are different in legal substance but similar in terms of the economic effect.

Sec 50C of the Income Act states that in an event involving the sale of a capital asset (building or land or both) if the transfer document specifies a value that is less than the valuation adopted by the stamp duty authorities, the valuation adopted by the stamp duty authorities will be considered in order to arrive at the amount of capital gain arising from such transfer.

For instance, in an agreement of sale, a 2bhk flat’s value stands at Rs. 85 lakh, but according to the Stamp Duty Authorities, the valuation of the flat is Rs. 91 lakh, then it will be considered that the flat has been sold for Rs. 91 lakhs and capital gains will be computed on the basis of Rs. 91 lakh.

This provision constitutes a legal fiction to adopt the value determined by the State Stamp Valuation Authority as the sale value where the sale value is less than the value determined by the Stamp Valuation Authority.

source: clear tax

Thank you


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