Section 50C deeming fiction is confined to capital gains; full section 54F exemption depends on actual reinvestment.

Section 50C applies only to substitute consideration for capital gains computation on the basis of the final stamp valuation, so the lower value finally determined by the Collector of Stamps had to be used and the assessment recomputed accordingly. The deeming fiction in section 50C could not be carried into section 54F, because exemption under that provision depends on the actual net consideration received and reinvested in a residential house. Since the entire actual sale consideration was reinvested, the assessee was entitled to full exemption under section 54F and consequential relief.

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Issues: (i) Whether, for computation of capital gains under section 50C, the sale consideration had to be taken as the stamp valuation finally determined by the Collector of Stamps instead of the higher value initially adopted by the stamp authority. (ii) Whether the deeming fiction under section 50C could be imported into section 54F so as to deny full exemption when the entire actual sale consideration was reinvested in the eligible residential house.

Issue (i): Whether, for computation of capital gains under section 50C, the sale consideration had to be taken as the stamp valuation finally determined by the Collector of Stamps instead of the higher value initially adopted by the stamp authority.

Analysis: Section 50C creates a deeming fiction only for substituting the consideration for the purpose of section 48 where the declared consideration is lower than the value adopted or assessable by the stamp valuation authority. The valuation in the present case had ultimately attained finality at the lower figure fixed by the Collector of Stamps pursuant to the judicial order, and that assessable value had to govern the computation. The fiction under section 50C was therefore required to operate on the final stamp value and not on the earlier provisional valuation.

Conclusion: The lower final stamp valuation had to be adopted for computing capital gains under section 50C, and the assessee was entitled to consequential relief.

Issue (ii): Whether the deeming fiction under section 50C could be imported into section 54F so as to deny full exemption when the entire actual sale consideration was reinvested in the eligible residential house.

Analysis: Section 54F grants exemption with reference to the net consideration actually received and reinvested in the new residential house. The legal fiction created by section 50C is confined to computation of capital gains and cannot be extended beyond its limited purpose. A deeming value cannot be treated as the actual net consideration for the separate exemption provision, because that would require the assessee to do something impossible, namely reinvest more than what was actually received. The exemption had therefore to be examined on the basis of the real consideration and actual reinvestment.

Conclusion: The assessee was entitled to full exemption under section 54F on the basis of the actual net consideration reinvested.

Final Conclusion: The additions sustained in assessment were deleted, the capital gains computation was required to be redone on the basis of the finally determined stamp value, and the assessee was held entitled to complete relief under the exemption provision.

Ratio Decidendi: A deeming fiction under section 50C is limited to capital gains computation and cannot be extended to restrict exemption under section 54F, which must be applied on the basis of the actual net consideration received and reinvested.

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