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2023 (6) TMI 517
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.... house. 3. That on the facts and in the circumstances of the case, the ld. CIT (A) grossly erred in sustaining the addition made by the ld AO in respect of long term capital gain without giving proper benefit of indexation and deduction u/s 54F of the Act. 4. That on the facts and in the circumstances of the case, the ld. CIT (A) grossly erred in adopting fair market value of property from F.Y. 2004-05 without considering the explanation (iii) to provision of section 48 of the Act. 5. That on the facts and in the circumstances of the case, the ld. CIT (A) grossly erred in restricting the cost of construction to Rs. 1 lac instead of Rs. 2,57,500/- particularly when the cost of construction declared by the assessee is highly reasonable looking to the construction work carried out. 6. That on the facts and in the circumstances of the case, the ld. CIT (A) erred in not allowing benefit of deduction u/s 54F of the Act particularly when the investment made by the assessee in construction of house duly recorded and supported from the documentary evidences. 7. That on the facts and in the circumstances of the case, the ld. CIT (A) erred in susta....
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....d that during the year under consideration the assessee has sold shops and received actual sales consideration of Rs. 12,00,000/-which was less than the value accepted by the DLC of Rs. 20,78,310/-. The assessee has claimed long term capital gain nil after exemption u/s 54F of the Act. The computation of capital gain is as under: - Sale of Plots (Actual Consideration) 1200000/- Less: - Brokerage 40000/- 1160000/- Less: - Exemption u/s 54F 2389100/- Long term capital gain NIL /- 2] The assessee has computed long term capital gain nil as the entire actual consideration was invested in construction of residential house. The exemption claimed by the assessee accordance with the provisions of section 54F of the Act. The details of investment made by the assessee are as under: Year Particulars Investment Total Investment 31/03/2012 Purchase of plot 2,40,000 2,40,000 31/03/2013 Investment in Const. of New house 5,00,000 7,40,000 31/03/2014 Investment in Const. of New house 6,49,100 13,89,100 31/03/2015 Investment in Const. of New house 19,00,000 23,89,100 3]It is submitted th....
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....house within the stipulated period as also observed above while deciding the first issue. The assessee has proved such investment during the assessment proceedings and, thus, the assessee has complied with the requirement of substantive provisions and, thus, is entitled to the claim of exemption u/s 54F of the Act. In view of this, we direct the Assessing Officer to grant exemption to the assessee as permissible under the provisions of section 54 of the Act." 6] Before ascertaining as to how the deduction under s. 54F is to be allowable to the assessee, it will be useful to reproduce s. 54F(1): "54F. (1) Subject to the provisions of sub-s. (4), where, in the case of an assessee being an individual or an HUF, 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 ....
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....tant case, the cost of new asset is not less than the net consideration thus the whole of the capital gains will not be charged even if the capital gains has been computed by adopting the value adopted by stamp registration authority. It is clearly mentioned in s. 54F(4) also that net consideration which is not appropriated towards the purchase of new asset then the same is to be taxed in case such net consideration not appropriated 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 under s. 54F is clearly applicable. 8] It is submitted that the natural meaning of full value of consideration refers to consideration specified in the sale deed. The Hon'ble Delhi High Court in the case CIT vs. Smt. Nilofer I. Singh (2009) 221 CTR (Del) 277: (2008) 14 DTR (Del) 108 (2009) 309 ITR 233 (Del) had held that full value of consideration refers to the consideration specified in the sale deed. For deciding the meaning of words 'full value of consideration'....
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.... profits or gains so computed. While computing the profits or gains as per s. 48, the deeming provision embedded in s. 50C has to be given effect to. The charge is created on the enhanced profits or gains arrived at from the fiction of s. 50C. This aspect was justified by the Hon'ble Finance Minister in his Budget Speech that s. 50C will curb the menace of unaccounted income in the property transactions by presuming the sale consideration to be the value of the guideline value for registration in case it is stated lower than that value of registration. 10] When the assessee has invested entire actual sales consideration received by him in the purchase and construction of new house accordance with the provision of section 54F(1) thereafter the provision of section 50C has not been applicable in light of following judicial decisions. a] The Hon'ble ITAT Jaipur Bench in the case of Gyan Chand Batra V/S ITO reported in 133 TTJ 482 held as under: "Capital gains-Exemption under s. 54F- Full value of consideration vis a-vis value adopted for stamp duty-Legislature in its wisdom has referred to s. 48 in s. 50C for adopting the stamp duty value as fair mar....
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....12] 49 SOT 160/[2011] 16 taxmann.com 357 (JP). In this case, the assessee sold a property for Rs. 40 lakhs. Sale value as per the DVO at Rs. 74,58,880/- . Assessee invested the said sum of Rs. 40 lakhs in Bonds. Finally, AO taxed difference of Rs.34,58,880/-. Since, the assessee contended where the entire sum of Rs. 40 lakhs is invested, the provisions of section 50C cannot be invoked. On these facts, the Tribunal held that in principle, deeming provisions of section 50C on 'full value consideration' will not be applicable to section 54F as these provisions are asset specific and it only meant for section 48 of the Act. Further, Tribunal held that where the entire sale consideration is invested in Bonds as per section 54EC of the Act, the assessee is entitled to deduction u/s 54F and provisions of section are not applicable. Literal meaning of the provisions of clause (a) of section 54F(1) of the Act was advocated. In the process, the Explanation to section 54F(1) of the Act, where 'net consideration' was defined, was relied. Tribunal decision of Bangalore bench in the case of Gouli Mahadevappa (supra) (para 8) and Jaipur bench decision in the case of Gyan Chand Bat....
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....e Hon'ble Court held that "When capital gain is assessed on notional basis, whatever amount invested in new residential house within prescribed period u/s. 54F, entire amount invested, should get benefit of deduction irrespective of fact that funds from other sources are utilized for new residential house" In light of above the addition made by the ld. AO may kindly be deleted. ALTERNATIVE SUBMISSION 1] That while passing the assessment order the AO has worked out long term capital gain amounting to Rs. 20,28,370/- the working made by the ld. AO is as under: - Sale Consideration 20,78,310/- Less:- Brokerage 40,000/- Net Consideration 20,38,310/- Less: - Indexed Cost *F.Yr 2004-05 (5,600/-)*852/480. 9,940/- Capital Gain 20,28,370/- Less: - Deduction u/s 54/54F Nil Long Term Capital Gain 20,28,370/- 2] That in appeal before CIT (A) the ld. CIT (A) has directed to the AO worked out the capital gain as per direction issued in the order. The working of capital gainafter the decision of ld. CIT (A) is as under: - Sale Consideration 20,78,310/- Less:- Brokerage 40,000/- Net Consid....
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.... repeated for the sake of brevity. However, the computation of LTCG as per AO and as per CIT(A) may kindly be referred to at pages no. 9 & 10 of the earlier written submission for better appreciation. 2. The crux of the finding ld. CIT are as under: i) However, with respect to the cost of construction of the shop, the appellant has not furnished any documentary evidence either with respect to the period of construction or cost of construction. Therefore, the AO is directed to compute the capital gain by allowing the cost of construction of the shop at Rs. I lac with the benefit of indexation from the Financial Year 2004-05. ii) The investment made in subsequent years shall not be considered for the purpose of computing proportionate deduction admissible u/s 54F, as the appellant had not deposited sales consideration in the capital gain investment scheme u/s 54F(4) before the date of filing of return of income. Thus, the disputes, after the availability of the order of the ld. CIT(A),boil down to the issues narrated above, on which our submission follows hereinafter. 3. At the outset, the fats are not disputed that the assessee made total....
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....ance with the intention of the legislature as expressed by the Hon'ble Finance Minister in his budget speech reproduced at pg 5-6 & 12 of CIT(A) order. 4.3 Supporting Case Laws: In fact, the issue involved is directly covered by the various decisions, some of which are already referred in written submission pg.5-9. In addition, further reliance is placed on the following : 4.3.1 Nandlal Sharma v/s ITO (2015) 172TTJ 412 (Jp) (DPB 1-5) held that: Time-Limit of making investment: "Income-tax Act, 1961, s.54; In favour of: AssesseeCapital gains - Exemption under s.54 - Time-limit for investment - Sec.54 refers to s.139 for the time-limit to acquire eligible new asset, which includes return under s.139(4) also i.e., time-limit of one year from the end of assessment year - Therefore, assessee having utilized the sale consideration of his old house for the purchase of a new residential house before the due date of filing of return under s.139(4), the same is eligible for exemption under s.54 - CIT vs. Md. Jagriti Agarwal (2011) 245 CTR (P&H) 629: (2011) 64 DTR (P&H) 333: (2011) 339 ITR 610 (P&H), CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361: (2006) 286 ITR 2....
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....or before 31.03.2015, the assessee has already invested Rs. 23,89,100/- as against actual sale consideration which certainly exceeded the actual/real sale consideration of Rs. 11,60,000/- (as also the stamp duty valuation u/s 50C at Rs. 20,78,310/-). Moreover, the assessee right from the beginning intended to construct a new residential house and within the stipulated period of 3 years, the assessee can't be denied the benefit of deduction u/s 54F. 5.2 Supporting Case Laws:On this aspect direct decision are in the cases of Ajay Goyal vs ITO (2006) 99 TTJ 164 (JodTrib),wherein it was held that: "...There seems to be no dispute with regard to the fact that the sale proceeds of plot in question were utilised by the assessee within three years as required, but what is in dispute is the time of completion of the house in question......... When the assessee had invested this sale proceed within the stipulated time, and admittedly much more investment was needed in the construction of the house, it would be unjustified to hold that the assessee has not carried out the intention of the legislature. So, the assessee is entitled to the relief as claimed for.-Jagan Nath Singh Lodh....
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....tly covered by the various decisions, some of which are already referred in written submission pg. 5-9. In addition, further reliance is placed on the following: In Income Tax Office vs. Rajkumar Parashar (2018) 195 TTJ (Jp) 212(DPB 10-17) it was held as: "Where 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 s. 45. What is therefore, relevant is the investment of the net consideration in respect of the original asset which has been transferred and where the net consideration is fully invested in the new asset, the whole of the capital gains shall not be charged under s. 45. The net consideration for the purposes of s. 54F has been defined as the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. Thus, the consideration which is actually received or accrued as a result of transfer has to be invested in the new asset. In the instant case, the consideration which accrued to the assessee as per the sale deed is Rs. 24,60,....
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.... the AO for submitting remand report was not submitted despite repeated reminders (Page 5). 2. The CIT(A) did not allow the claimed Cost of Acquisition (COA) and Indexed Cost of Acquisition (ICOA) but estimated the cost at Rs. 1 lakh from the Financial Year 2004-2005 and onwards, as against Rs.2,57,500/- claimed. However, such an estimation was absolutely without any basis and made on whims & fancies. On the contrary, the appellant furnished the relevant details and reliable basis for making the estimation. In any case, initially it was a case of vacant plot and thereon shops were constructed, which fact is not denied. 3. The CIT(A) didn't deny the fact (and otherwise this is in accordance with the human probability) that the assessee couldn't be expected to place supporting evidences to support the claim of the cost of acquisition and/or the improved cost of acquisition carried out several years before (i.e. around 30 years back in this case). In absence, a fair estimation is required to be made based on the reliable material only, (as contemplated u/s 144 and/or u/s 145 of the Act). The ld. CIT(A) completely failed to bring any material but made an estimation @ ....
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.... in order to deal with the controversy in question, it is necessary to first of all deal with the provisions of section 54F of the Act which is reproduced below :- "54F. (1) Subject to the provisions of sub-s. (4), where, in the case of an assessee being an individual or an HUF, 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 s.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....
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.... same is to be taxed in case such net consideration not appropriated 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 under s. 54F is clearly applicable. The Hon'ble ITAT, Chandigarh Bench in the case of Seema Sabharwal, ITA No. 272/Chd/2017 dated 05/02/2018 in which the Hon'ble Tribunal after considering decision of various High Courts including decision of Hon'ble Karnataka High Court on the identical facts has allowed the deduction u/s 54Fof the Act. The relevant finding recorded by the Hon'ble Tribunal reads as under: - "11. Though the Hon'ble High Court in relation to the issue of claim of exemption u/s 54F of the Act has held that what matters is the intention of the assessee to purchase/ construct new house. The Hon'ble Karnataka High Court has held that if the intention is not to retain cash but to invest in construction or any purchase in property and if such investment is made within the period stipulated therein, th....
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....pital gains so computed under s. 45 r/w s. 48 and s. 50C. Therefore, the provisions of s. 50C(1) are not applicable to s. 54F for the purpose of determining the meaning of full value of consideration.-Gyanchand Batra vs. ITO (2010) 45 DTR (Jp)(Trib) 41 : (2010) 133 TTJ (Jp) 482, Prakash Karnawat vs. ITO (2012) 49 SOT 160 (Jp) and Nand Lal Sharma vs. ITO (2015) 122 DTR (Jp)(Trib) 404 : (2015) 172 TTJ (Jp) 412 followed; Gouli Mahadevappa vs. ITO & Anr. (2013) 259 CTR (Kar) 579: (2013) 88 DTR (Kar) 59 : (2013) 356 ITR 90 (Kar) distinguished." Thus in our view also the natural meaning of full value of consideration refers to consideration specified in the Sale Deed. In this regard, Hon'ble Delhi High Court in the case CIT vs. Smt. Nilofer I. Singh (2009) 221 CTR (Del) 277: (2008) 14 DTR (Del) 108 (2009) 309 ITR 233 (Del) had held that full value of consideration refers to the consideration specified in the sale deed. For deciding the meaning of words 'full value of consideration', The Hon'ble Delhi High Court has referred to the decision of Hon'ble Apex Court at page 237 as under: "This controversy has already been settled by the Supreme Court in the case of....
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....rived at from the fiction of s. 50C. This aspect was justified by the Hon'ble Finance Minister in his Budget Speech that s. 50C will curb the menace of unaccounted income in the property transactions by presuming the sale consideration to be the value of the guideline value for registration in case it is stated lower than that value of registration. Thus when the assessee has invested entire actual sales consideration received by him in the purchase and construction of new house accordance with the provision of section 54F(1) thereafter the provision of section 50C has not been applicable in light of following judicial decisions. a] The Hon'ble ITAT Jaipur Bench in the case of Gyan Chand Batra V/S ITO reported in 133 TTJ 482 held as under: "Capital gains-Exemption under s. 54F- Full value of consideration vis a-vis value adopted for stamp duty- Legislature in its wisdom has referred to s. 48 in s. 50C for adopting the stamp duty value as fair market value - Hence, the deeming fiction as provided in s. 50C in respect of the words 'full value of consideration' is to be applied only to s. 48-Words 'full value of consideration' as mentioned ....