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The Capacity of a communication system is defined as a highest data rate at which reliable communication is achievable. It is the key constraint to think in the drawing of a communication system since it determines the data rate. The spectral efficiency of the non adaptive modulation is sturdy, while, the adaptive modulation method improves the spectral efficiency with rising channel SNR. This paper presents a theoretical analysis between Shannon capacity and adaptive MQAM scheme in terms of power adaptation and average spectral efficiency under flat fading channel, where the received signal follows the Nakagami-m distribution. The tradeoff between data loss in deep slow fades and reliable communication is observed in case of Shannon capacity. We observe the difference in capacity between adaptive MQAM and Shannon capacity as a function of bit error rate. The variation in `m' causes the change in capacity or average spectral efficiency of the system. The analysis performed in this work is based on variable m values.