2025 (8) TMI 1311 - AT - Income Tax

Third proviso to s.50C objection dismissed; 10% stamp valuation tolerance retrospective; s.54EC deduction granted after reinvestment and s.139(1) filing

Sh. Anil Kumar Sharma Versus Income Tax Officer, Ward-1 (1), Meerut

Sh. Anil Kumar Sharma Versus Income Tax Officer, Ward-1 (1), Meerut - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the assessee's challenge to denial of deduction under section 54F of the Act is pressed and/or to be adjudicated. 2. Whether the third proviso to section 50C (introducing a tolerance margin of 10% between stamp duty value and actual consideration) has retrospective effect so as to exclude from deeming under section 50C any difference within that margin for transactions prior to its effective date. 3. Whether deduction under section 54EC of the Act can be allowed to the extent of actual investment made in specified bonds (Rs. 50,00,000) notwithstanding that the return and original computation claimed a lesser amount (Rs. 38,93,880), in the absence of any statutory bar to amend the claim. ISSUE-WISE DETAILED ANALYSIS - ISSUE 1: Claim under section 54F Legal framework: Section 54F provides exemption for capital gains on transfer of long-term capital asset subject to prescribed conditions, normally claimed in return and adjudicated in assessment proceedings under section 143(3). Precedent treatment: Not applicable in the present text as no authorities discussed by the Court on this point. Interpretation and reasoning: The assessee's counsel expressly did not press the ground relating to section 54F. The Tribunal therefore declined to adjudicate the merit of that ground and treated it as not pressed. Ratio vs. Obiter: Procedural - the Tribunal's refusal to decide an unpressed ground is a procedural ruling (ratio as to non-consideration), not a substantive pronouncement on section 54F law. Conclusion: Ground relating to section 54F is relinquished by the assessee and rejected as not pressed; no substantive decision on entitlement under section 54F was rendered. ISSUE-WISE DETAILED ANALYSIS - ISSUE 2: Retrospective effect of 3rd proviso to section 50C (tolerance margin 10%) Legal framework: Section 50C deems the stamp duty value (stamp valuation) to be the full value of consideration for transfer of immovable property unless the actual consideration is more; provisos carve out exceptions and tolerance margins. Finance Act, 2020 amended the proviso to provide a 10% tolerance margin effective from 01.04.2021. Precedent treatment (followed/distinguished/overruled): The Tribunal relied on earlier judicial pronouncement (Maria Fernandes Cheryl v. ITO (2021) 123 taxmann.com 252 (Mum)) which held that the third proviso - being a provision that affords relief to taxpayers - is to be given retrospective effect to the date of introduction of section 50C. Interpretation and reasoning: The Tribunal accepted the assessee's submission that the differential between the DVO-determined FMV and the actual sale consideration was within the 10% tolerance margin introduced by the third proviso. The Revenue's contention that the 10% margin is prospective only was rejected on the basis of the cited precedent which treats the proviso as relief-giving and hence retrospective. Given that the key numerical facts (sale consideration, DVO-FMV, stamp duty value) were not in dispute and the difference fell within the tolerance margin, the addition under section 50C was found unsustainable. Ratio vs. Obiter: Ratio - the Tribunal's decision to delete the section 50C addition rests on the precedent-driven legal conclusion that the 10% tolerance margin applies retrospectively and that where the variation is within that margin the deemed valuation under section 50C cannot be applied to increase taxable gains. Conclusion: The addition under section 50C representing the sum less than the 10% margin was deleted; the Tribunal followed authoritative precedent holding the proviso retrospective and allowed the assessee's challenge to the section 50C adjustment. ISSUE-WISE DETAILED ANALYSIS - ISSUE 3: Allowability of section 54EC deduction to extent of actual investment beyond original ITR claim Legal framework: Section 54EC permits exemption from long-term capital gains where specified capital gains are reinvested in notified bonds within the prescribed period and subject to conditions. Returns under section 139(1) and subsequent assessments compute taxable income and reliefs claimed. Precedent treatment (followed/distinguished/overruled): The judgment does not cite specific authorities on amendment of claims for relief post-return. The Tribunal's approach treats entitlement to exemption as governed by substance (actual reinvestment and compliance) and absence of statutory prohibition against allowing relief beyond the amount shown in the original computation. Interpretation and reasoning: The Revenue argued that deduction should be restricted to the amount claimed in the ITR (Rs. 38,93,880). The Tribunal examined facts showing undisputed actual reinvestment of capital gains into section 54EC bonds to the extent claimed now (Rs. 50,00,000), and that the return was filed under section 139(1). Finding no statutory provision barring a taxpayer from seeking relief in assessment proceedings beyond the figure originally computed in the return, and relying on the undisputed factual compliance with section 54EC conditions, the Tribunal allowed the higher deduction. The decision emphasizes entitlement based on actual reinvestment and absence of a statutory bar to allow a duly substantiated claim made during appeal/assessment even if higher than original computation. Ratio vs. Obiter: Ratio - where an assessee has actually reinvested in section 54EC bonds and there is no statutory bar, the Tribunal may allow the exemption to the extent of actual investment notwithstanding a lower figure stated in the original computation, provided the claim is raised in the proceedings and substantiated. Conclusion: Deduction under section 54EC was allowed to the full extent of actual investment (Rs. 50,00,000) rather than being confined to the lower amount declared in the original return; the Tribunal found merit in the assessee's entitlement and allowed the excess deduction. OVERALL DECISIONAL CONCLUSION The appeal was partly allowed: the section 50C addition was deleted (proviso treated as retrospective and the differential within 10% margin not taxable under section 50C), the section 54EC exemption was allowed to the full extent of actual reinvestment (Rs. 50,00,000) despite a lower figure in original computation, and the claim under section 54F was not pressed and thus not decided.