TaxTMI 
TaxTMI 
2010 (8) TMI 528
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..... 4. Alternatively, in the facts and circumstances of the fc case and in law the Id. CIT(A) has erred in confirming the action of the AO in not allowing the exemption u/s 54K in respect of long term capital gains. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the exemption u/s 54F in respect of long term capital gains." 3.1 During the assessment year under consideration, the assessee has sold a plot and declared the long term capital gains of Rs. 5,558/-. The plot was sold at sale consideration of Rs. 10.81 lacs. The AO invoked the provisions of Section 50C of the Act and accordingly the full value of the consideration was taken at Rs. 19,24,987/-. The AO accepted the cost of purchase of the asset. In respect of cost of improvement the AO has not allowed any deduction since the assessee has not claimed deduction u/s 54F and therefore, the AO did not give deduction u/s 54F of the Act. 4. Before the Id. CIT(A), the assessee contended that the assessee may be allowed relief u/s 54F by considering the full value of the consideration as shown by the assessee in the sale deed as C....
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....Further, in any case the deduction u/s 54F is available only when within a period of 3 year after the date of sale the assessee has constructed a residential house. However, in the present case, it is not a construction of residential house by the assessee but it was a case of purchase of flat constructed by M/s. Salasar Balaji Housing (P) Ltd. Under these circumstances, in my considered view, the appellant is not entitled for any deduction in the present facts of the case u/s 54F of I.T. Act and accordingly the relevant ground of appeal is hereby rejected." 5. During the course of proceedings before us, the ld.AR has submitted that assessee sold an asset for Rs. 10.81 lacs. The assessee paid a part sum of Rs. 12,74,000/- for purchase of flat at Sector -2, Vidhyadhar Nagar, Jaipur. A sum of Rs. 4,00,000/- was paid before due date of fling of return for the assessment year 2006-07. The plot was got registered on 11-01-2007 for Rs. 21,14,896/-. A sum of Rs. 4,40,896/- was invested before the due date of filing of return till the registration of flat. The investment of actual sale consideration entitles the assessee for benefit u/s 54F. The investment in new residential house excee....
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....ue so adopted is to be taken as full value of the consideration for the purposes of Section 48 of the Act. Section 50C provides a deeming provision for considering the full - value of consideration as the value adopted for stamp duty. In modern statutes, the expression deem is used a great deal and for many purposes. It is at times used to introduce artificial conception which are intended to go beyond legal principles or to go an artificial construction of a word for phrase. Thus the artificial meaning of full value of the consideration have been given in Section 50C of the Income tax Act for the purpose of Section 48 of the Income tax Act. One is entitled to ascertain the purpose for creating a statutory fiction. After ascertaining the purpose, full effect must be given to the statutory fiction and it should be carried to its logical conclusion and to that end, it would be proper and even necessary to assume all those facts on which alone fiction can operate. The legislature in its wisdom has referred to Section 48 of Income tax Act in Section 50C for adopting the same value as fair market value. Hence, the deeming fiction as provided in Section 50C in respect of the word 'fu....
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.... to how the deduction u/s 54F is to be given, it will be useful to reproduce Section 54F(1) "54F(1) [subject to the provisions of sub-section 4, where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long term capital asset, not being a residential house (hereafter in this Section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall, be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost ....
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....riated 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. 7.4 We have also considered the decision of Hon'ble Mumbai High Court in the case of C1T Vs. Ace Builders (P) Ltd, supra. Section 50 of the Income tax Act provides that capital gains on sale of depreciable asset is to be deemed as short term capital gains . The Hon'ble Mumbai High Court has held that fiction limited to Section 50 will apply to computation of capital gains and not to exemption provisions. For allowing deduction u/s 54E, one will have no distinction between depreciable asset and non-depreciable asset. Hence, it is clear that deeming fiction mentioned in one Section will not automatically apply to all the provisions. In case deeming fiction has been created in specific provision of the Act then Hon'ble Gauhati High Court in the case of CIT v. Assam Petroleum (P) Ltd 262 ITR 587 also held that Section 54E is not controlled by Section 50. Hence deemi....