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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy
Assessment Year: 2011-12 Gopal Chandra Bose.……………..............….……...........…………..……………….…...……..….…….......Appellant 188, Sarat Sarani Bally More Hooghly – 712 103 [PAN : ADUPB 3486 G] Vs. Income Tax Officer, Ward-24(1), Hooghly.……......……….........…………..………….…............Respondent Appearances by: Shri Himadri Mukhopadhyay, Advocate, appeared on behalf of the assessee. Shri Pijush Mukherjee, JCIT D/R. appearing on behalf of the Revenue. Date of concluding the hearing : November 29th, 2018 Date of pronouncing the order : February 1st , 2019 ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-6, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 01/06/2018, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2011-12.
The assessee is an individual and derives income from commission and other sources. During the year he had income from Long Term Capital Gain (LTCG). The issue that arises for my consideration is the computation of income under the head Long Term Capital Gains.
The facts relevant to these issues are as follows:- The assessee had acquired through inheritance, on death of his father on 10/05/1979, the subject property. This property was sold on 07/12/2010, for a sale consideration of Rs.2,80,000/-. The market value assessed by the Stamp Valuation Authority (SVA) was Rs.3,55,000/-. The Assessing Officer accepted the claim of the assessee that the cost of acquisition should be Rs.50,000/-. He allowed indexation on this Assessment Year: 2011-12 Gopal Chandra Bose cost only from the year in which the assessee was first held by the assessee that is on 10/05/1979. The assessee further sold off the property along with a two storied building on 04/08/2010, 06/12/2010 and 07/12/2010, for a total consideration of Rs.53,80,000/-. The total market value of these three properties as assessed by the Stamp Valuation Authority, was Rs.82,48,862/-. The details are given at page 6 para 3 of the assessment order. The Assessing Officer adopted the valuation made by the Stamp Valuation Authority of the state as full value of the consideration u/s 50C of the Act, i.e. Rs. 82,48,862/-. The Assessing Officer records that during the course of hearing, the assessee stated that he had no objection in this regard.
The assessee had purchased two plots of land jointly on 02/05/1998 for a purchase consideration of Rs.50,000/- & Rs.60,000/-, respectively. Thereafter he constructed a two storied residential building on these plots, the cost of which is supported by a valuation certificate from a registered valuer filed by the assessee. Though the plots were purchased in joint names, it was agreed that the entire income from long term capital gain would be assessed in the hands of the assessee from Gopal Chandra Das as the entire property belonged to him. The Assessing Officer had taken the cost of acquisition of the three properties sold at Rs.1,60,000/- and the indexed cost of acquisition at Rs.5,78,320/-. The chart as given in para 12 page 4 of the assessment order is extracted for ready reference:-
3.1. The Assessing Officer notes that the assessee had constructed a two storied residential building in the year 2000. The total covered area of the ground floor and of this residential building was 3684 sq.ft. The assessee had claimed to have incurred total
Assessment Year: 2011-12 Gopal Chandra Bose cost of improvement of the property sold at R.14,55,636/- and in support of the claim he submitted a valuation report from a registered valuer dt. 26/03/2014. The Assessing Officer adopted this value of Rs.14,55,636/- as the total cost of improvement of the property sold and after indexation arrived at a figure of Rs.26,50,558/- i.e., (14,55,636 x 711 / 389)/-.
3.1.1. The assessee claimed exemption u/s 54 of the Act. He purchased two plots of land measuring 2.4 Acres, each on 18/11/2010 and 14/06/2010, for Rs.4,10,650/- and Rs.19,05,530/-, respectively. By taking these facts into consideration the Assessing Officer computed the LTCG as follows:-
Aggrieved, the assessee carried the matter in appeal before the ld. First Appellate Authority without success.
Assessment Year: 2011-12 Gopal Chandra Bose 4.1. It was contended before the ld. CIT(A) that prior to sale of the inherited property on 07/12/2010, expenditure of Rs.2,80,780/-, was incurred by the assessee on various dates in addition to the cost of acquisition of Rs.50,000/- and the Assessing Officer has not considered this expenditure. Regarding the sale of two other properties, on 04/08/2010 for Rs.37 Lakhs and on 9/12/2010, for Rs.14 Lakhs/-, it was contended that the assessee had incurred certain expenditure to the tune of Rs.2,78,800/-, for the purpose of repair of the damaged portion of the buildings, painting etc. to put the asset in a saleable condition and that this cost of improvement has to be considered while computing LTCG. Further the assessee claimed that he incurred expenditure by way of brokerage amounting to Rs.3 Lakhs and Rs.4,50,000/-, respectively.
The ld. First Appellate Authority rejected this claim of the assessee by holding that the assessee has not furnished any evidence in support of this claims.
Further aggrieved, the assessee is in appeal before us.
I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:-
As regards the claim of the having incurred expenditure on the property sold to put the same in saleable condition, I find that such a claim was not made before the Assessing Officer. In fact the Assessing Officer seems to have accepted all the submissions made by the assessee. Moreover, no evidence is furnished by the assessee in support of his claims. Under these circumstances, I am unable to accept the claim of the assessee that he has incurred expenditure to the tune of Rs.2,80,780/- and Rs. 2,78,800/-, for the improvement of the assets, which have been sold. Similarly, there is no evidence whatsoever on the claims of payment of commission. This claim was also made for the first time before the ld. CIT(A). As there is no evidence filed in support of these contentions, this claim of the assessee is dismissed.
Assessment Year: 2011-12 Gopal Chandra Bose 8. As the issue relates to the computation of LTCG, I find from the computation that the Assessing Officer has granted deduction u/s 54 of the Act of Rs.23,16,580/-. While doing so, total sale consideration has been adopted at Rs.82,48,862/-, which is the value u/s 50C of the Act.
8.1. I find that the Visakhapatnam Bench of the ITAT in the case of Deputy Commissioner of Income-tax, Circle-2 (1), Vijayawada v. Dr. Chalasani Mallikarjuna Rao [2016] 75 taxmann.com 270 (Visakhapatnam - Trib.), considered the issue and held that the sale consideration to be taken for the purpose of computation of exemption u/s 54 of the Act. At para 13 of his order, the Tribunal held as follows:-
“13. Considering the facts and circumstances of the case and also applying the ratio of the case laws discussed above, we are of the view that the assessee is eligible for exemption u/s. 54 of the Act, if the net sale consideration is invested in construction or purchase of new residential house. In the present case on hand, the assessee has invested net sale consideration for construction of new residential house property. Though, the full value of consideration as defined u/s. 50C of the Act is more than the net sale consideration as referred in section 54F(1) of the Act, once the net sale consideration has been fully applied under the provisions of section 54 of the Act, then the deeming consideration as defined u/s. 50C of the Act cannot be brought into the provisions of section 54F of the Act. Therefore, we are of the view that the assessee is eligible for exemption u/s. 54 of the Act, therefore, the whole of the capital gain is not chargeable to tax even if the capital gain is computed by taking the value as per the provision of section 50C of the Act. Therefore, we direct the A.O. to allow the exemption u/s. 54 of the Act.”
8.2. Applying the propositions of law laid down in the above case-law, to the fact of the case on hand, the deduction u/s 54 of the Act, has to be calculated on the actual consideration for an amount of Rs.55,80,000/-, as this is total consideration and not Rs.82,48,862/-. The computation should be as follows:- Total sale consideration Rs.50,09,984/- [Cost of indexation] (minus) Rs. 5,78,320/- [indexed cost of improvement] (minus) Rs.26,60,558/- = Rs.17,71,106/- (LTCG).
Assessment Year: 2011-12 Gopal Chandra Bose 9. As admittedly, the cost of new house acquired is Rs.28,68,580/-, the entire capital gain of Rs.17,71,106/-, is exempt u/s 54 of the Act. Thus, there is no balance LTCG that has to be taxed in this case. Hence, in view of the above discussion, relief is granted to the assessee and the addition made u/s 54F of the Act, on account of long term capital gains, is hereby deleted.
In the result, appeal of the assessee is allowed in part.