Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER D.S. SUNDER SINGH, Accountant Member:
This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-10,Hyderabad vide I.T.A..No.0121/CIT(A)-10/2017-18/CIT(A),HYD-10/10180/2017-18 dated 15.06.2018 for the Assessment Year (A.Y.)2009-10.
2 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
All the grounds of appeal are related deduction u/s 54F of the Income Tax Act, 1961 (hereinafter called as ‘Act’) and taxability of capital gains on sale of capital asset.
In this case, the assessee did not file the return of income for the A.Y. 2009-10 and the Assessing Officer (AO) came to know that the assessee had sold the plot admeasuring 600 sq.yards bearing survey No.312/P, Kapuluppada, vide Sale Deed No.3954/2008 dated 10.11.2008 for a consideration of Rs.30,00,000/- against the market value of the property of Rs.42,00,000/- as per stamp valuation authorities in short SRO). Since the assessee having capital gains and did not file the return of income, the AO had issued the notice u/s 148 on 16.03.2016 and in response to the notice, the assessee filed return of income declaring ‘Nil’ income on 23.04.2016. Before the AO, the assessee submitted that the she has sold the property for a consideration of Rs.30 lakhs and the entire net consideration was invested for acquiring the new residential house, and entitled for deduction u/s 54F thus there is no case for application of section 50C of the Act. Further the assessee relied on clause (a) of sub section 1 of section 54F and the Explanation for the purpose of net consideration. The AO not being convinced with the explanation of the assessee adopted the market
3 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
value as assessed by the Stamps and Registration Authorities as per section 50C of the Act and determined the capital gains and allowed the deduction u/s 54F for an amount of Rs.30,36,735/-. The resultant difference of an amount of Rs.8,80,175/- was to be taxed under long term capital gains.
On appeal before the CIT(A), the Ld.CIT(A) confirmed the order of the AO and dismissed the appeal of the assessee.
Aggrieved by the order of the CIT(A), the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld.AR argued that the assessee had sold the property and received the actual consideration of Rs.30,00,000/- and the entire amount was invested for acquiring the new house. The Ld.AR argued that if the entire net consideration is applied for acquiring a new house, there is no case for invoking the provisions of section 50C and the assessee would be entitled for deduction of actual consideration.
On the other hand, the Ld.DR supported the orders of the lower authorities.
4 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
We have heard both the parties and perused the material placed on record. In this case, the assessee has sold the property for a consideration of Rs.30,00,000/- and invested more than the amount of net consideration received by the assessee for the purpose of acquiring new residential house, thereby applied the entire net consideration in acquiring the new house. The AO computed the capital gains u/s 50C and allowed the deduction as claimed by the assessee and taxed the balance amount. The moot question in this case is whether the capital gains required to be computed by applying section 50C or not? when the assessee has invested the entire net consideration in acquiring the new house. As per section 54F of the Act, the conditions required to be satisfied for allowing the deduction u/s 54F is firstly, the asset transferred must be long term capital asset not being a residential house. Secondly, the assessee should acquire the new house within one year before the transfer or within 2 years from the date of transfer or the assessee required to construct one residential house before one year or within 3 years from the date of transfer. In the above event, the quantum of allowable deduction is, if the cost of the new asset is not less than the net consideration in respect of the original house, the whole of such capital gains should not be charged u/s 54 of the Act. Similarly, the net consideration defined in Explanation is as under :
5 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
"net consideration", in relation to the transfer of a capital asset, means 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. From the above, the net consideration is the full value of consideration received or accrued as a result of transfer but not the deemed consideration as defined in section 50C of the Act. Section 54F(1)(a) clearly makes the assessee entitled for the net consideration, if the whole of such amount is paid for acquiring the new house. In the instant case, there is no dispute that the assessee has paid the whole of net consideration for acquiring the new house. On identical facts this Tribunal in the case of DCIT, Circle-2(1), Vijayawada Vs. Dr.Chalasani Mallikarjuna Rao vide I.T.A No.206/Viz/2013 dated 21.10.2016 held that section 50C has no application in case the entire net sale consideration has been applied for acquiring the new house. For the sake of clarity and convenience, we extract relevant part of the order of this Tribunal in para No.12 which reads as under :
The question is whether the assessee needs to invest the net sale consideration as a result of transfer or the full value of consideration as defined u/s 50C of the Act. The full value of consideration as defined u/s 50C of the Act is a deeming consideration which is applicable for the purpose of computation of capital gain under the provisions of section 48 of the Act. The net sale consideration as a result of transfer of capital asset is a consideration received or accrued as a result of transfer. There is difference between net sale consideration and full value consideration. In our considered view, if the assessee invests net sale consideration for the purpose of purchase/construction of new residential house property, then
6 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
he is eligible for exemption u/s 54 of the Act, even though the full value of consideration is more than the net sale consideration as a result of transfer. 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 Vs. ITO (2010) 6 ITR 147. The relevant portion of the order 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 word for phrase, Thus the artificial meaning of full value of the consideration has been given in s. 50C for the purpose of s, 48. One is entitled to ascertain the purpose for creating a statutory fiction. After ascertaining the purpose, full effect must be to the statutory fiction and it should be carried to its logical conclusion and to that end, it be proper and even necessary to assume all those facts on which alone fiction can operate legislature in its wisdom has referred to £ 48 in S. 50C for adopting the same value market value. Hence, the deeming fiction as provided in £ 50C in respect of the word value of consideration' is to be applied only for s. 48. The words 'full value of consideration mentioned in other provisions of the Act are not governed by the meaning of full value consideration as contained in s. SOC. The natural meaning of full value of consideration refers to consideration specified in the sale deed. Hence, for the meaning of full value of consideration mentioned in different provisions of the Act except in s. 48, one will have to consider the value of consideration as specified in sale deed. —CIT vs. Smt. Niofer I. Singh (2009) 22 (Del) 277: (2008) 14 DTR (Del) 108: (2009) 309 ITR 233 (Del) relied on. (Para 7.1) In Explanation to s. 54F(1), it is mentioned that net consideration means the full value a 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 o 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-c/s. (a) and (b) of s. 54F(1). In the
7 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
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 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 dearly 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 vs. Ace Builders (P) Ltd. (2005) 195 CTR (Born) 1. (2006) 281 ITR 210 (Born) and CIT vs. Assam Petroleum Industries (P) Ltd. (2003) 185 CTR (Gau) 71 (2003) 262 ITR 587 (Gau) applied.
The assessee also relied on the decision of ITAT Jaipur Bench in I.T.A.No.11/JP/2016 dated 28.09.2017 in the case of ITO, Ward-2(1), Ajmer Vs. Raj Kumar Parashar, Ajmer, wherein, the coordinate Bench has taken a similar view on identical facts. We extract relevant part of the order of the coordinate bench of Jaipur as under.
“8. We have heard the rival contentions and pursued the material available on record. 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. 9. 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.
8 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
To appreciate the issue under consideration, we refer to the provisions of section 54F which reads as under "54F (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, 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, one residential house in India (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 asset, the whole of such capital gain shall not be charged under section 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 section 45:
Explanation. —For the purposes of this section— "net consideration" in relation to the transfer of a capital asset, means 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. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit,' and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset"
On perusal of the above provisions, it is clear that the where the cost
9 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
ofthe 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.”
Since the facts are identical, respectfully following the view taken by this Tribunal and the decision of coordinate bench of Jaipur, we are unable to sustain the orders of the lower authorities, accordingly we set aside the order of the CIT(A) and delete the addition made by the AO. The appeal of the assessee on this ground is allowed.
10 I.T.A. No.443/Viz/2018 Smt.Kalva Uma Devi, Visakhapatnam
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 12th December, 2018.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर ससह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER धिशाखापटणम /Visakhapatnam ददिांक /Dated : 12.12.2018 L.Rama, SPS आदेश की प्रधिधलधप अग्रेधर्ि/Copy of the order forwarded to:- 1. ननर्ााररती / The Assessee – Smt.Kalva Uma Devi, 15-2-17, Srinilayam Maharanipeta, Visakhapatnam 2. राजस्व / The Revenue– Income Tax Officer, Ward-1(4), Visakhapatnam 3. The Pr.Commissioner of Income Tax-1,Visakhapatnam 4. The Commissioner of Income Tax-(Appeals)-10, Hyderabad 5. धिभागीय प्रधिधिधि, आयकर अपीलीय अधिकरण, धिशाखापटणम /DR, ITAT, Visakhapatnam 6. गाडा फ़ाईल / Guard file
आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, VISAKHAPATNAM