TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 517
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....ances 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 sustaining partial disallowance of deduction u/s 54F particularly when the appellant h....
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....ation 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 that the provision of section 50C has not applicable in the case of the assessee as entire actual sale consideration received by the assessee was invested in the construc....
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....e 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 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 ass....
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....tioned 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', The Hon'ble Delhi High Court has referred to the decision of Hon'ble Apex Court at p. 237 as under: "This controversy has already been settled by the Supreme Court in the case of CIT vs. George Henderson & Co. Ltd. (1967) 66 ITR 622 (SC), the v....
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....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 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 in other provisions of the Act are not governed by the meaning of these words....
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....f 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 Batra(supra) were followed. This case is also distinguishable on the facts that considering the full value consideration as per the deemed provisions of section 50C, the net consideration is much higher than the invested amount, whereas in the present case, the net consideration by all methods i.e. with or without....
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....ion 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 Consideration 20,38,310/- Less: Indexed Cost *F. Yr 1981 (6,156/-) *852/100 52,449/- Less Cost of Improvement (100000.00 *852/480) 1,77,500/- 2,29,949/- Capital Gain 18,08,361/- Less: Deduction u/s 54/54F (18,08,361 x 721000/116000) 11,23,989/- Long Term Capital Gain 6,84,372/- 3] The ld. CIT (A) ought to have allowed deduction u/s 54F amounting to Rs. 6,49....
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....efore, 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 investment of Rs. 23,89,100/- towards the purchase of the plot and the construction thereon, of a new residential house starting from A.Y.2012-13 to A.Y. 2015-16 (as per the following table at page 2 of ITA WS): Previous year ended on Nature of investment Amount of Investment (Rs) Total Investment (Rs) PB Remark 31/03/2012 Purchase of plot 2,40,000 2,40,000 75 31/03/2013 Investment in const. of new house 5,00,000 7,40,000 93 31/03/20....
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....ns - 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 274 (Gau), Fathuma Bai v/s ITO (2009) 32 DTR (Kar) 243 and CIT v/s Smt. Vrinder P. Issac (2011) 64 DTR (Kar) 376 relied on. (para 3.7) Conclusion: Assessee having utilized the sale consideration of his old house for purchase of new residential house before the due date of filing of return under s. 139(4), the same is eligible for exemption under s.54. 4.3.2 In CIT vs Rajesh Kumar Jalan (2006) 296 ITR 274 (Gau), wherein it was held that: "Capital gains-Exemption under s. 54-Time-limit for making deposit under the scheme-Only s. 139 is mentioned in s. 54(2)-....
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....eems 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 Lodha vs. ITO (2004) 85 TTJ (Jd) 173 relied on." 5.2.2 In Jagan NathSingh Lodha vs. ITO (2004) 85 TTJ 173 (JodhTrib), wherein it was held that: "Intention of assessee from the very beginning being to purchase residential house and he having done so within two years of sale of plot, he was entitled to exemption under s. 54F in respect of the amount invested even though he failed to deposit the amount in Capital Gain Account Scheme during the interregnum." 5.2.3 In SMT. Nirmala Yadav Vs. Income Tax Officer (2017) 183 TTJ (Jd) 769 it was held as: Assessee having sold a property and invested more than the net conside....
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....ital 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. 24,60,000 and the whole of the said consideration has been invested in the Capital Gains Accounts Scheme for purchase of the new house property which is again not disputed by the Revenue. The consideration as determined under s. 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee. Rather, it is a value which has been deemed as full value of consideration for the limited purposes of determining the income chargeable as capital gains under s. 48. Therefore, the provisions of s. 54F(1)(a) are complied with by the assessee and he is eligible for deduction of the whole of the capital g....
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....e 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 @ Rs. 1 lakh by rule of thumb. Lastly, at the outset we strongly rely the written submission filed before the Hon'ble ITAT. Thus, the LTCG upheld by the CIT(A) at Rs.6,84,372/- deserves a complete a deletion." 5. On the other hand, the ld. D/R supported the orders of the revenue authorities. He placed reliance in the case of Arpit Khairari vs. ITO, (2020) 116 taxmann.com 720 (Jaipur Trib.) and the judgment of Hon'ble Punjab & Haryana High Court in the case of Jagwinder Singh vs. CIT (2014) 50 taxmann.com 145 (P&H). 6. We have heard rival contentions, perused the material available on record and gone through the orders of the revenue authorities. As per the facts of the present cas....
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....ain 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 gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under s. 45: Provided that nothing contained in this sub-section shall apply where-- (a) the assessee-- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer ....
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....le 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, than section 54F(4) is not at all attracted. We may clarify here that provisions of section 54(2) are almost identically worded as in invested the amount for the purchase/ construction of the 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." The Coordinate Bench of the Tribunal, Jaipur in the case of Income Tax Office vs. Rajkumar Parashar (2018) 195 TTJ (Jp) 212(DPB 10-17) it was held as: ....
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....9 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 CIT vs. George Henderson & Co. Ltd. (1967) 66 ITR 622 (SC), the very expression 'full value of consideration' was under consideration of the Supreme Court in the context of the provisions of the Indian IT Act, 1922. The provisions of s. 12B of the 1922 Act pertain to capital gains. Sub-s. (1) was in parimateria to s. 45(1) of the present Act and sub-s. (2) of s. 12B of the 1922 Act was in parimateria to the provisions of s. 48 of the present Act. The Supreme Court was of the view that the expression 'full value of consideration' in the main part of s. 12B(2) of the Act cannot be construed as having a reference to the market value of the asset transferred but the expression only meant, the full value of a consideration received by the transferor in exchange of the capital asset transferred by him. The Su....
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....ration 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 in other provisions of the Act are not governed by the meaning of these words as mentioned in s. 50C-Hence,for ascertaining the full value of consideration as mentioned in different provisions except s.48, consideration specified in sale deed has to be considered-Thus, meaning of full value of consideration as referred to in Explanation to s. 54F(1) is not governed by the meaning of the words full value of consideration' as mentioned in s. 50C-In the instant case, the cost of new asset is not less than the net consideration-Thus, whole of the capital gain is not chargeable to tax even if the capital gain is computed by taking the value adopted by the stamp registration authority-Hence, theassessee is entitled for exemption under s. 54F" b] PRAKASH KARNAWAT vs. INCOME TAX OFFICER [ITAT JAIPUR] REPORTED IN 49 SOT 0160 "....