ITO Vs Raj Kumar Parashar (ITAT Jaipur)
Firstly, it is not in dispute that the AO has rightly taken the full value of consideration as determined by the stamp duty authorities as per explicit provisions of section 50C of the Act and has determined the long term capital gains of Rs 94,60,800 after providing indexed cost of acquisition.
The limited controversy revolves around determination of extent of deduction under section 54F to the assessee. As per Revenue, the AO has rightly allowed the benefit of deduction u/s 54F to the assessee to the extent of actual investment of Rs 24,60,000 in the new house property. Per contra, the contention of the assessee is that where the whole of the actual sale consideration of Rs 24,60,000 has been invested in the new house property, the whole of the capital gains, even though worked out in terms of section 50C of the Act, would be eligible for deduction under section 54F of the Act and the assessee is not liable to pay any capital gains tax.
On perusal of the provisions of Section 54F, it is clear that the 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 section 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 section 45 of the Act. The net consideration for the purposes of section 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. In other words, 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, undisputedly, the consideration which has 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 been disputed by the Revenue. The consideration as determined under section 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 section 48 of the Act. Therefore, in the instant case, the provisions of section 54F(1)(a) are complied with by the assessee and the assessee shall be eligible for deduction in respect of the whole of the capital gains so computed under section 45 read with section 48 and section 50C of the Act. The decisions of the Coordinate Benches as referred supra support the case of the assessee. The subject issue was not for consideration before the Hon’ble Karnataka High Court and hence, the same doesn’t support the case of the revenue. We are therefore of the considered view that the provision of section 50C(1) of the Act are not applicable to section 54F for the purpose of determining the meaning of full value of consideration.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal filed by the Revenue against the order of ld. CIT(A), Ajmer dated 19.10.2015 wherein the Revenue has taken the following grounds of appeal:
“1. Deleting the addition of Rs. 70,00,800/- without appreciating the fact of the case that the AO has rightly taken the full value of consideration as per explicit provisions of section 50C of the Act and rightly allowed the benefit of deduction u/s 54F to the assessee to the extent he actual made investment in the new house.
2. Holding that the provision of section 50C(1) of the Act are not applicable to section 54F for the purpose of determining the meaning of full value of consideration.”
2. The facts of the case are that during the year under consideration, the assessee has sold a property situated at Khasra No. 8175, Thok Maliyan, Ajmer for a consideration of Rs. 24,60,000/-. Subsequently, the Sub-Registrar-1, Ajmer has adopted the value of the property at Rs. 96,03,000/-. Since the assessee has not disclosed the sale value adopted by the Sub-Registrar, the case was reopened by issuance of a notice u/s 148 dated 29.05.2013. During the course of assessment proceedings, the assessee submitted that it has invested the entire amount of the sale consideration amounting to Rs. 24,60,000/- in the capital gain account scheme for the purposes of purchasing a new house property, hence capital gains would be exempted u/s 54F and provisions of section 50C would not be applicable. However, the submissions of the assessee were not acceptable to the Assessing Officer. According to the Assessing officer, “the income which has been adopted by the stamp authorities is deemed to have been received. Section 50C has been specifically introduced with a view to prevent evasion of tax and under valuation of the transaction and it is in that context, section 45, section 48 and section 50 must be read. Therefore, the assessee was supposed to declare the correct sale consideration and according to the correct sale consideration, investment for deduction u/s 54F is to be made. The AO accordingly computed income under the head “capital gains” as under:
