TaxTMI 
TaxTMI 
2026 (7) TMI 612
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.... the entire capital gains as exempt under section 54F, on the plea that the investment made in residential house was more than the net consideration received by him from transfer of shop & land. Later, the ITR of assessee was selected for scrutiny and the AO examined the claim of assessee regarding LTCG & deduction claimed under Section 54F; and thereafter, the AO in respect of sale value of the transferred lands in question, invoked section 50C and adopted deemed guideline value of the four (4) lands as the full value of consideration i.e. Rs 4,63,87,220/-. And the AO finding that since the assessee had invested for the new residential house only Rs. 2,15,67,970/-, which is less than the deemed guideline value of the four (4) lands, gave show cause to proportionately disallow the exemption under section 54F of the Act. 3. The assessee objected to the aforesaid proposal firstly on the ground that the lands sold were agricultural property, and hence they were not 'capital asset' and hence capital-gain is not attracted on its transfer. Secondly, the proposal to adopt guideline value was erroneous, since fair market value of the lands were less than the guideline value and pleaded ....
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....No. 3134 of 2016) 20,60,100 14,17,000 Sale of Nanjai Land at Thirukovilur, Survey No. 168/1 and 168/2 (Document No. 3135 of 2016) 1,47,54,240 74,01,000 Sale of Nanjai Land at Thirukovilur, Survey No. 345/1B, 345/2B and 348/1B (Document No. 3136 of 2016) 2,53,22,880 1,27,02,500 Total 4,63,87,220 2,73,47,000 5. The Appellant is noted to have raised various ground before this Tribunal including the ground that the lands sold by the Appellant's father/assessee were agricultural lands and thus, they are not capital assets and hence doesn't attract capital gain from transfer of such property; (ii) and that the deeming fiction under section 50C has to be applied only for the purpose of computing capital gains under section 48 and not for the purpose of computing deduction under section 54F and hence, claimed that since the entire consideration as shown in sale-deed of Rs. 2,03,00,000/- has been fully invested in the new residential house, the Appellant is entitled to full deduction under section 54F. Further, according to the Ld.AR, anyway, the AO was bound to adopt the value determined by the DVO for the purpose of section 50C, and pointed out that if ....
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....as determined under section 50C in the denominator instead of the actual sale consideration received by the assessee/appellant's father. A comparison chart showing the computation of capital gains as admitted in the return of income, as computed by the AO and as computed based on the values provided by the DVO is enclosed as Annexure. 8. A perusal of the chart, according to Ld AR, show that the Appellant's father has received only Rs. 2,03,00,000/- as net consideration in respect of the sale of one shop and four (4) lands, whereas the AO has adopted the value as per section 50C not only for the purpose of computing capital gains, but also for the purpose of calculating exemption under section 54F. Drawing our attention to row 3B of the chart, he showed us that the AO has adopted the guideline value as the denominator while calculating the exemption under section 54F, which is erroneous. 9. The thrust of the assessee's assertion is that deeming provision of section 50C is only for adopting the guideline value as fair market value (FMV) if sale consideration shown in sale-deed is less than the guideline value, for the purpose of computing capital gain under section 48 and not f....
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.... (irrespective of whether the guideline value or the value determined by DVO is adopted under section 50C). Thus, the calculation of exemption under section 50C ought to be as per row 3D of the chart supra. 10. For the aforesaid proposition, the Ld.AR relies on the following orders of this Tribunal: - A. Mrs. Baskarababu Usha v. Income-tax Officer [2022] 135 taxmann.com 307 (Chennai - Trib.) B. Shri. R. Srinivasan (HUF) Versus The Income Tax Officer, Ward I (1), Trichy - 2016 (8) TMI 1092 - ITAT CHENNAI C. Shri Shivkumar Lakshman v. The Income Tax Officer, International Taxation - I in ITA No. 402/Mds/2015 D. Gyan Chand Batra v. Income-tax Officer [2010] 8 taxmann.com 22 (Jaipur) 11. He drew our attention to para 11 of the order of this Tribunal in the case of Mrs. Baskarababu Usha v. Income-tax Officer [2022] 135 taxmann.com 307 (Chennai - Trib.) wherein it has been held that deeming fiction under section 50C cannot be applied while calculating exemption under section 54F. It would be gainful to read the observation, which is noted as under: - "11. As regards adoption of deemed consideration for the purpose of exemption u/s 54F of....
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....r investing the entire sale consideration of Rs. 2,03,00,000/- for purchase of land & construction of new residential house/asset (hereinafter referred to as 'New Asset'). During the course of assessment proceedings, the AO called for details of the sale of original assets and noted from perusal of the registered sale deed that the sale consideration recorded therein was Rs. 2,03,00,000/- (i.e.50% of the share) and noticing that guideline value as determined by stamp-duty authority for the properties sold were more, proposed to adopt the value of the property as per provisions of Section 50C of the Act, i.e. market value as determined by stamp-duty authority/guideline value of the properties for computing the capital gain from the transactions. Pursuant to the same, assessee filed his objections by raising two (2) issues i) that the four (4) immovable properties sold by him were agricultural lands and thus they are not 'capital-assets' and therefore, question of capital gain doesn't arise from such transfer. And ii) assessee contested the adoption of market value as determined by stamp valuation authority, since the market value of the immovable properties were less than what was d....
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....inal assets in construction of new-asset. Reason for such a conclusion is that in this case, the sale-consideration disclosed in the sale-deeds is Rs. 2,03,00,000/- (i.e.50% of the share), and assessee in this case has invested in constructing new asset Rs. 2,15,67,970/-, which fact is not disputed. Hence assessee is noted to have fulfilled the condition for being entitled for exemption u/s 54F of the Act and consequently, no capital-gain is chargeable to tax, even if the capital gain is computed by adopting the value as per section 50C of the Act. 17. The Authorities in this case, for restricting/disallowing the claim of exemption u/s 54F is noted to have adopted the 'full value of consideration' as defined under the provisions of section 50C of the Act. The question for consideration is for the purpose of exemption u/s. 54 of the Act, the 'full value of consideration' as defined under the provisions of section 50C of the Act is applicable or actual consideration received as a result of transfer of original asset. It should be borne in mind that the provisions of section 50C of the Act, comes into play when the sale consideration is less than value adopted by any authority of t....
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....ed, the deeming fiction as provided u/s. 50C of the Act in respect of the words 'full value of consideration' is to be applied only to section 48 of the Act and therefore meaning of full value of consideration as referred to in explanation to section 54F(1) of the Act is not governed by the meaning of the words full value of consideration as mentioned in section 50C of the Act as held by the coordinate bench of ITAT Jaipur in the case of Gyan Chand Batra v. ITO [2010] 8 taxmann.com 22. It would be gainful to refer to the relevant portion of the order, which is extracted below: From sub-s. (1) of s. 50C, it is clear that in case the consideration received is less than the value adopted by stamp valuation authority then the value so adopted is to be taken as full value of the consideration for the purposes of 5. 48. Sec. 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 conceptions which are intended to go beyond legal principles or to give an artificial construction of a ....
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.... 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. Deeming provisions as mentioned in s. 50C will not be applicable to s. 54F so far as the meaning of full value of consideration is concerned as deeming provision mentioned in s. 50C is for specific asset and for the purpose of s. 48. Hence the assessee is entitled for deduction under s. 54F.-CIT v. Ace Builders (P.) Ltd. (2005) 195 CTR (Bom) 1. (2006) 281 ITR 210 (Bom) and CIT v. Assam Petroleum Industries (P.) Ltd. (2003) 185 CTR (Gau) 71: (2003) 262 ITR 587 (Gau)applied. (Paras 7.3 to 7.5)" 19. Considering the facts and circumstances of the case and also applying the ratio of the case laws discussed above, we are of the view that the assessee is eligible for exemption u/s. 54 of the Act, if the net sale consideration is invested in construction or purchase of new residential house. In the present case, the assessee has invested the entire sal....