Section 50C Deeming Fiction Can’t Override 54B Exemption: ITAT Jaipur

Meera Vs ITO (ITAT Jaipur)

50C Deeming Fiction Can’t Override 54B Exemption- Full Reinvestment Shields from Tax: ITAT Jaipur- Stamp Duty Value Irrelevant for 54B Exemption-

Background

• Case: Related to sale of agricultural land jointly held with co-owners.
• AO’s findings:
• Land sold on 17.03.2010 for ₹43,50,000 (assessee’s share 1/8th).
• Sub-Registrar valued land at higher DLC value (₹1,01,78,240).
• Assessee’s share as per sec. 50C worked out to ₹25,44,560.
• After indexation, LTCG computed at ₹18,53,310.
• Deduction u/s 54B denied.
• Assessed income at ₹18,53,310.

CIT(A) Order (17.10.2024)

• Instead of deciding merits, set aside assessment to AO for fresh adjudication, treating it as ex-parte order u/s 144.

Assessee’s Arguments

• AO had already received submissions & documents in proceedings.
• Deduction u/s 54B wrongly denied.
• Case covered by ITAT decision in co-owner’s case (Narangi Devi).
• CIT(A) erred in remanding instead of deciding merits.

ITAT Findings

• AO acknowledged assessee had filed submissions on multiple occasions.
• Assessment not truly ex-parte u/s 144; CIT(A) wrongly assumed so.
• CIT(A), having co-terminus powers with AO, should have decided on merits.
• On merits:

– Assessee sold land along with co-owners & invested in new agricultural land (purchase deed showed investment of ₹12,87,500).

– Net consideration received by assessee was only ₹10,87,500.

– Since new investment exceeded net consideration, full exemption u/s 54B available.

– Deeming provisions of sec. 50C apply for capital gains computation, but not for exemption under sec. 54B/54F (supported by Jaipur ITAT precedents: Gyan Chand Batra, Raj Kumar Parashar, Prakash Karnawal).