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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI P.M. JAGTAP, VICE-
आदेश / O R D E R
This appeal filed by the assessee is directed against the order of learned Commissioner of Income-Tax (Appeals-1), Vadodara [“CIT(A)” in short] dated 26.03.2019 and the solitary issue involved therein relates to the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of disallowance of assessee’s claim for exemption under Section 54F of the Income-tax Act, 1961 (“the Act” in short) to the extent of Rs.4,88,645/-.
The assessee, in the present case, is an individual who filed his return of income for the year under consideration on 02.07.2010 declaring a total income of Rs.8,45,749/-. In the assessment originally completed under Section 143(3) of the Act vide an order dated 11.12.2013, the total income of the assessee was determined by the Assessing Officer at Rs.9,45,750/-. The said assessment was subsequently reopened and a notice under Section 148 of the Act issued by the Assessing Officer to the assessee on 14.08.2015. In
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response to the said notice, a reply was filed by the assessee stating that the return filed by him originally on 02.07.2010 may be treated as return filed in response to notice under Section 148 of the Act. During the course of assessment proceedings, a mistake in computing exemption under Section 54F of the Act, as claimed by the assessee at Rs.79,18,030/- as against Rs.74,29,385/-, was pointed out by the Assessing Officer and the assessee was called upon by him to explain as to why the excess claim made by him for exemption under Section 54F & 54EC of the Act should not be disallowed. In reply, the following submission was made by the assessee in writing:-
"In reply to your query raised during the course of assessment proceedings For the above assessment year, your assessee submits as under: That your assessee is an individual deriving salary from Jagdish Foods Pvt. Ltd, income from House property, income from capital gains & income from other sources. As regards income from capital gains, it is submitted during year under assessment, your assessee sold one plot situated at saptarshi Soc, Old Padra Road, Baroda for Rs.10720000/-. The said plot was purchased by your assessee on 15/04/2000 for Rs. 1600000. The Index cost of investment of said land comes to Rs.2801970/- [Rs.1600000/- X 711/406]. Thus there is a net capital gain of Rs.7918030/-. Your assessee has made investment in 54EC of Rs.2000000/-. Your assessee has also made investment in new Residential house (Flat No. 101 & 102) of Rs. 8000000/- and claimed deduction u/s 54F of the Act of Rs. 7918030/-. Thus there is income from capital gains of Rs. Nil. As regards exemption claimed U/s 54F of I.T. Act, it is submitted that the exemption u/s 54F of the Act is to be calculated on the basis of net consideration to long term capital gains. In this connection, your assessee invites your honour attention to the Explanation to clause B to proviso to Sub -sec. 1 of section 54F of the Act. The said Explanation read as under: "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
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of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. Ongoing through the above explanation, it is seen that the net consideration means the full value of consideration less any expenditure incurred for such transfer. Your assessee further invites your honour's attention to Section 45 where in its opening portion it has been defined the word "Capital Gains" as any profit arising from the transfer of capital asset. Your assessee further invites your honour's attention to Section- 2(29B) of the Act. The said Section read as under. "Long term capital gains means capital gains arising from the transfer of a long-term capital asset If we read both these above definition together, then it would mean that Long term capital gains means Capital gains on sale price of the said asset less indexed cost of acquisition. In your assessee's case the sale value of the said land is Rs.1,07,20,000/-. The indexed cost of acquisition is Rs.2801970/-. Thus, net long term capital gains is Rs. 79,18,030/- only. It may please be noted that investment in Bond u/s. 54EC of the Act is not apart of either cost of purchase or cost of improvement. The investment In Bond is an exemption. And accordingly the same can not be deducted from amount of Long term sale capital gains. The calculation made by the audit party is unwarranted.
It is further submitted that as per Sec. 54F of the I.T. Act, the deduction is based on investment of long term capital gains. And not the amount of balance capital gains after deduction of exemption. In your assessee's case, the capital gains is Rs. 7918030/-[sale value Rs. 10720000/-less indexed cost of Acquisition Rs.2801970/-] as against the capital gains adopted of Rs. 5918030/- by the audit party. The exemption U/S. 54F of the Act is to be claimed as under:
Capital gain x Inyestrnent in new house Net consideration = 7918030/- x 8000000 10720000/- = Rs. 5908978/- “
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The Assessing Officer did not find the submission made by the assessee to be tenable and holding that the assessee was entitled for deduction under Section 54F and 54EC of the Act only to the extent of Rs.74,29,385/- as against Rs.79,18,030/-, he disallowed the excess claim of Rs.4,88,645/- made by the assessee on the basis of the following working made in the assessment completed vide an order dated 26.07.2016 passed under Section 143(3) r.w.s. 147 of the Act:-
Details Rs. LTCG after 54 EC 59,18,030 Net sale consideration remained to be 87,20,000 invested 54F deduction allowable 59,18,030x80,00,000/87,20,000 Total deduction allowed 54EC+54F 20,00,000+54,29,385=74,29,385 Claimed by assessee 79,18,030 Excess claim 4,88,645
The disallowance made by the Assessing Officer on account of his claim for exemption under Section 54F of the Act to the extent of Rs.4,88,645/- was challenged by the assessee in an appeal filed before the learned CIT(A). During the course of appellate proceedings before the learned CIT(A), the submission made before the Assessing Officer was reiterated on behalf of the assessee. The learned CIT(A), however, did not find merit in the same and proceeded to confirm the disallowance made by the Assessing Officer on account of assessee’s claim for exemption under Section 54F to the extent of Rs.4,88,645/- vide paragraph No.6.1.1 of his impugned order which reads as under:-
“6.1.1. I find that the appellant’s working u/s 54F is out of total LTCG earned i.e. Rs.79,18,030/- and not out of balance LTCG i.e. after subtracting investment u/s 54FC that comes to 59,18,030/- (Rs.79,18,030 –
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Rs.20,00,000). The Ld. AR fairly agreed the flaw in its own working of exemption u/s 54F and therefore, it deserves to be set aside. I am in full agreement of the AO’s working of exemption u/s 54F available to the appellant. I do not find any infirmity in the assessment order. Hence, withdrawal of excess LTCG u/s 54F amounting to Rs.4,88,645/- is hereby upheld. Both the grounds fail accordingly.”
Aggrieved by the order of the learned CIT(A), the assessee has preferred this appeal before the Tribunal.
At the time of hearing fixed in this case today, none has appeared on behalf of the assessee nor any application seeking adjournment has been filed in spite of the fact that notice to the said hearing was sent to the assessee by RPAD at the address given in the appeal memo. It is also noted from the record that there was a similar non-compliance on the part of the assessee when this appeal was fixed for hearing earlier on 12.11.2021, 16.03.2022, 10.06.2022 and 08.07.2022. This appeal of the assessee is, therefore, being disposed of ex parte after hearing the arguments of learned Departmental Representative and perusing the relevant material available on record. It is observed that the exemption under Section 54F of the Act was wrongly claimed by the assessee at Rs.59,18,030/- after taking into consideration the amount of Long Term Capital Gain at Rs.79,18,030/- as against the net Long Term Capital Gain of Rs.59,18,030/- after reducing the exemption of Rs.20,00,000/- claimed under Section 54EC of the Act. As noted by the learned CIT(A) in paragraph No. 6.1.1. of his impugned order, this mistake in the working of exemption under Section 54F was accepted by the authorized representative of the assessee and keeping in view the same, the learned CIT(A) upheld the action of the Assessing Officer in disallowing the claim of the assessee for excess exemption of Rs.4,88,645/- under Section 54F of the Act. I, therefore, find no infirmity in the impugned
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order of the learned CIT(A) in confirming the disallowance made by the Assessing Officer on this issue and upholding the same, I dismiss the appeal filed by the assessee.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 3rd October, 2022 at Ahmedabad.
Sd/-
(P.M. JAGTAP) VICE-PRESIDENT Ahmedabad, Dated 03/10/2022 *Bt आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त ( अपील ) / The CIT(A)- 5. �वभागीय ��त�न�ध आयकर अपील�य अ�धकरण/DR,ITAT, Ahmedabad, , 6. गाड� फाईल /Guard file.
आदेशानुसार/ BY ORDER,