2010 (8) TMI 528 - AT - Income Tax

Exemption u/s 54F allowed despite s.50C stamp value; registration not mandatory when net consideration fully invested

ITAT Jaipur-AT allowed the assessee's claim for exemption u/s 54F on long-term capital gains. It held that 'full value of consideration' in Explanation to ... Exemption u/s 54F in respect of long term capital gains - meaning of word 'full value of consideration' - Applicability of Section 50C - expenditure incurred in connection with transfer and the cost of acquisition of the asset and the cost of any improvement thereto - Held that:- The meaning of full value of consideration in explanation 54F(I) will not be governed by meaning of word of full value of consideration as mentioned in Section 50C. The value adopted for stamp duty is to be considered as full value of consideration for the purpose of computing the capital gains u/s 48. Section 54F(1) says that capital gains is to be dealt with in accordance with the provisions of sub-sections (a) and (b) of Section 54F(1) of the Act. In the instant case, the cost of new asset is not less than the net consideration then the whole of the capital gains will not be charged even if the capital gains has been computed by adopting the value adopted by Stamp Registration Authority. It is clearly mentioned in Section 54F(4) also that net consideration which is not appropriated towards the purchase of new asset then the same is to be taxed in case such net consideration not appropriated is not deposited in the capital gain account, it is not necessary that the new asset should be got registered before filing of the return. The requirement of law is that net consideration is required to be appropriated towards the purchase of the new asset. Thus deduction u/s 54F is clearly applicable. Deeming provisions as mentioned in Section 50C will not be applicable to Section 54F so far as the meaning of full value consideration is concerned as deeming provision mentioned in Section 50C is for specific asset and for the purpose of Section 48 of I.T. Act, 1961. The assessee has claimed the deduction u/s 54F before the Id. CIT(A) and the Id. CIT(A) has entertained such claim. Therefore, the issue of claim can be considered. Hence we hold that the assessee is entitled for deduction u/s 54F of the Act. Alternatively, the claim of the assessee in restricting the capital gains is correct. Since we are holding that the assessee is entitled to get deduction for the entire capital gains u/s 54F, therefore, the alternative claim is not considered. Issues Involved:1. Computation of long-term capital gains.2. Applicability of Section 50C of the Income Tax Act.3. Eligibility for exemption under Section 54F of the Income Tax Act.4. Procedural requirements for claiming deductions.Detailed Analysis:1. Computation of Long-Term Capital Gains:The assessee challenged the computation of long-term capital gains by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO computed the long-term capital gains at Rs. 10,58,783/- against the declared long-term capital gains of Rs. 5,558/-. The AO invoked the provisions of Section 50C of the Income Tax Act, which led to the adoption of the full value of consideration at Rs. 19,24,987/- instead of the actual sale consideration of Rs. 10.81 lacs. The AO accepted the cost of purchase but did not allow any deduction for the cost of improvement as the assessee did not claim deduction under Section 54F.2. Applicability of Section 50C of the Income Tax Act:Section 50C(1) states that if the consideration received from the transfer of a capital asset is less than the value adopted by the stamp valuation authority, the value adopted for stamp duty purposes shall be deemed as the full value of the consideration for computing capital gains under Section 48. The Tribunal noted that Section 50C provides a deeming provision for considering the full value of consideration as the value adopted for stamp duty. This artificial meaning of full value of consideration is specifically for the purpose of Section 48.3. Eligibility for Exemption under Section 54F of the Income Tax Act:The assessee contended that the capital gains should be exempt under Section 54F as the investment in the new residential house exceeded the sale consideration. The Tribunal examined Section 54F(1), which provides that capital gains arising from the transfer of a long-term capital asset shall not be charged to tax if the net consideration is invested in a new residential house within the specified period. The Tribunal held that the meaning of 'full value of consideration' in Section 54F(1) refers to the actual sale consideration specified in the sale deed, not the value adopted under Section 50C. Thus, the assessee's investment in the new residential house, which exceeded the sale consideration, entitled them to the benefit under Section 54F.4. Procedural Requirements for Claiming Deductions:The CIT(A) had denied the deduction under Section 54F on the grounds that the assessee did not claim it at the time of filing the return or during the assessment proceedings. The Tribunal referred to the decision in Goetze (India) Ltd Vs. CIT, which held that the AO has no power to entertain a claim made otherwise than by a revised return. However, the Tribunal noted that the appellate authorities have the power to entertain such claims. Since the assessee claimed the deduction before the CIT(A) and it was entertained, the Tribunal held that the deduction under Section 54F should be allowed.Conclusion:The Tribunal concluded that the assessee is entitled to the deduction under Section 54F as the investment in the new residential house exceeded the full value of consideration adopted for stamp duty purposes. The appeal of the assessee was allowed, and the alternative claim regarding restricting the capital gains to Rs. 1,39,377/- was not considered as the primary claim was upheld.