Lalit Kumar Kalwar Sarwar Vs ITO (ITAT Jaipur)
After analyzing the provisions of section 54F(1) of the Act, we find that in Explanation to section 54F(1), it is that net consideration means the full value of 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. The meaning of full value of consideration in Explanation to s. 54F(1) will not be governed by meaning of words ‘full value of consideration’ as mentioned in s. 50C. The value adopted for stamp duty is to be considered as full value of consideration for the purpose of computing the capital gains under s. 48. Sec. 54F(1) says that capital gains is to be dealt with in accordance with the provisions of sub-ss. (a) and (b) of s. 54F(1)of the Act. In the instant 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.
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’,
provision of section 50C of the Act creates a limited fiction to the effect that the full value of consideration shall be substituted for the purpose of s. 48 of the Act by the amount taken by the Registrar for registration purpose. Thus, the fiction under s. 50C of the Act is extended only to the aspect of computation of capital gains and the same does not extend to the charging section or the exemptions to the charging section. The legislature consciously intended to apply the fiction under s. 50C of the Act only to the expression used in s. 48 of the Act and not in any other place. The exemption ss. 54, 54B, 54D, 54EA, 54EB, 54F, 54G and 54H, are self-contained sections which also include the method of computation of the exemption. The manner in which the profits or gains arising out of the transfer of the capital asset are to be computed as mentioned in s. 48 which goes without saying that the charge is on the 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.
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.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal by the assessee is directed against the order of ld. CIT(A), Ajmer dated 04.01.2018 for the assessment year 2013-14. The assessee has raised the following grounds of appeal :-
1. That on the facts and in the circumstances of the case, the ld. CIT (A) grossly erred in not considering the explanation to provision of section 54F(1) of the Act as the assessee has made investment of full value of consideration in construction of house.
2. That on the facts and in the circumstances of the case, the ld. CIT (A) grossly erred in holding the provision of section 50C is applicable particularly when the same are not applicable as the full value of consideration was invested by the assessee in construction of 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 sustaining partial disallowance of deduction u/s 54F particularly when the appellant has made investment of whole of the net consideration received in construction of new property.
8. That on the facts and in the circumstances of the case, the ld. CIT (A) erred in charging interest u/s 234A, 234B and 234C.
9. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing.
2. The brief facts of the case are that the assessee was engaged in the trading of Tyres under the name and style M/s. Jai Ambey Tyres. The assessee filed his return of income declaring income of Rs. 3,97,590/- on 30.09.2013. The case of the assessee was selected for scrutiny through CASS. Accordingly notice under section 143(2) was issued on 02.09.2014 which was duly served on the assessee. Further notice under section 143(2) and notice under section 142(1) along with questionnaire were issued on 03.12.2014 seeking specific details which were served upon the assessee. Thereafter, notice under section 142(1) along with detailed questionnaire issued on 10.07.2015 fixing the case for hearing on 20.07.2015. In compliance, assessee’s A/R attended and produced books of accounts, bank statement etc. which were examined on test check basis. During the year under consideration the assessee had sold a parental property for Rs. 20,78,310/- and shown long term capital gain at Nil after claiming exemption under section 54F of the IT Act. At the time of assessment, the assessee filed written reply claiming therein cost of construction of shop sold in FY 2012-13 at Rs. 2,57,500/- on estimation basis but failed to produce any documentary evidences to corroborate his claim. The assessee also failed to furnish documentary evidences in respect of year of construction, cost of acquisition etc. The AO completed the assessment by computing the total income at Rs. 24,26,600/- by taking the long term capital gain at Rs. 20,28,370/- after allowing deduction under Chapter VIA of I.T. Act, 1961. Aggrieved by the order of assessment, the assessee preferred appeal before ld. CIT (A). The ld. CIT (A) allowing some relief, allowed the appeal of the assessee in part.
3. Now the assessee is in appeal before the Tribunal.
4. Before me, the ld. Counsel for the assessee has submitted his written submissions as under :-
“It is submitted 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: –
