Tribunal grants assessee relief, directs AO to use actual sale consideration for capital gains, allows Section 54EC exemption.

The Tribunal allowed the appeal in favor of the assessee, directing the Assessing Officer to consider the actual sale consideration of Rs. 58,50,000 for capital gains computation and granting exemption under Section 54EC for the investment in NHAI bonds. The decision was pronounced on 08/10/2021.

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Issues Involved:

1. Adoption of stamp duty value as per Section 50C of the Income Tax Act, 1961.
2. Rejection of the claim of exemption under Section 54EC of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Adoption of Stamp Duty Value as per Section 50C:

The first issue addressed was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in upholding the action of the Assessing Officer (AO) in adopting the stamp duty value as the full value of consideration under Section 50C of the Income Tax Act, 1961. The assessee had sold a residential house property for Rs. 58,50,000, while the stamp valuation authority valued the property at Rs. 61,16,000. The AO invoked Section 50C and adopted the higher value of Rs. 61,16,000 for capital gains computation. The assessee contended that the difference of Rs. 2,66,000 (4.55% of the sale consideration) was minimal and should not invoke Section 50C. The CIT(A) upheld the AO's decision, leading to an addition of Rs. 2,66,000.

The Tribunal found that the difference between the stamp duty value and the actual consideration was less than 5%. It noted an amendment to Section 50C effective from 01/04/2019, introducing a tolerance band of 10%, which was held to be retrospective in nature. The Tribunal cited the case of Maria Fernandes Cheryl vs. ITO, where it was determined that such curative amendments should be applied retrospectively to avoid unintended consequences. Therefore, the Tribunal directed the AO to consider only Rs. 58,50,000 as the sale consideration, providing relief to the assessee.

2. Rejection of the Claim of Exemption under Section 54EC:

The second issue was whether the CIT(A) was justified in rejecting the assessee's claim for exemption under Section 54EC of the Act. The assessee had invested Rs. 50,00,000 in National Highways Authority of India (NHAI) capital gain bonds, claiming exemption under Section 54EC. However, both the AO and CIT(A) held that the investment was made beyond the six-month period from the date of sale, thus disqualifying the exemption.

The Tribunal found that the assessee had issued a cheque for Rs. 50,00,000 on 24/10/2013, which was handed over to the sub-broker and then to Karvy Stock Broking Ltd., the authorized agent of NHAI, on the same day. However, Karvy Stock Broking Ltd. delayed handing over the cheque to NHAI until 06/11/2013, and it was encashed on 07/11/2013. The Tribunal held that the delay caused by Karvy Stock Broking Ltd. was beyond the control of the assessee, who had acted within the six-month period. The Tribunal also referred to the affidavit from the sub-broker affirming the timely submission of the cheque and application, which was not contested by the revenue. Citing the Supreme Court decision in Mehta Parikh & Co. vs. CIT, the Tribunal concluded that the assessee was entitled to the exemption under Section 54EC.

Conclusion:

The appeal was allowed in favor of the assessee, with the Tribunal directing the AO to adopt the actual sale consideration of Rs. 58,50,000 for capital gains computation and granting the exemption under Section 54EC for the investment in NHAI bonds. The order was pronounced on 08/10/2021.

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