Registered transfer of immovable property triggered capital gains and section 50C, with only partial section 54F relief allowed.

A registered sale deed transferring title and possession constituted a completed transfer of immovable property, so capital gains arose in the relevant year and the deeming fiction of section 50C applied; later cancellation or re-transfer did not undo the transfer. The assessee's challenge to the stamp valuation under section 50C(2) failed because no reliable claim or valuation material was produced to show that the stamp value exceeded fair market value. Section 54F relief was allowed only partially: the reacquisition of the plot was treated as qualifying investment, but the claimed construction expenditure was disallowed for lack of evidence, so deduction was confined to the proved amount.

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Issues: (i) Whether the transfer of the plot took place on execution of the registered sale deed so as to attract capital gains tax and the deeming fiction of section 50C; (ii) whether the assessee was entitled to deduction under section 54F, and to what extent; (iii) whether the objection to the stamp valuation under section 50C(2) could be accepted.

Issue (i): Whether the transfer of the plot took place on execution of the registered sale deed so as to attract capital gains tax and the deeming fiction of section 50C.

Analysis: The sale deed dated 16.04.2007 evidenced transfer of title and possession for consideration. The subsequent cancellation and re-transfer documents did not dislodge the fact that a completed transfer had taken place in law. The contention that no transfer occurred in the relevant assessment year was also rejected because the statutory requirements of section 53A of the Transfer of Property Act were not satisfied on the material produced. The property was therefore a capital asset transferred during the year, and section 50C applied for adopting the stamp valuation.

Conclusion: The issue was decided against the assessee and the capital gains were held taxable in the relevant year on the basis of section 50C.

Issue (ii): Whether the assessee was entitled to deduction under section 54F, and to what extent.

Analysis: The later purchase of the same plot for Rs. 3,00,000/- was treated as investment in a new asset for the limited purpose of section 54F relief, but the claim based on alleged construction was rejected for want of evidence and because construction activity was stated to be prohibited in the area. The Tribunal accepted that the assessee should receive credit for the amount spent on reacquiring the plot, while denying relief for the claimed construction expenditure.

Conclusion: The assessee was held entitled to partial relief under section 54F to the extent of Rs. 3,00,000/- only.

Issue (iii): Whether the objection to the stamp valuation under section 50C(2) could be accepted.

Analysis: The assessee did not make a reliable claim before the Assessing Officer that the stamp value exceeded fair market value, nor was any valuation material produced to support a different market value. In these circumstances, the statutory mechanism for reference to the Valuation Officer was not shown to have been properly invoked, and the adopted stamp value was not displaced.

Conclusion: The objection under section 50C(2) was rejected.

Final Conclusion: The appeal succeeded only in part by granting limited relief under section 54F, while the findings on transfer, capital gains taxability, and the stamp valuation stood sustained.

Ratio Decidendi: A registered transfer of immovable property, supported by title and possession, attracts capital gains tax notwithstanding a later cancellation or re-transfer, and section 54F relief can be allowed only to the extent of proven qualifying investment.

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