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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ : NEW DELHI
Before: SHRI J.S. REDDY & SHRI KULDIP SINGH
relied upon the order passed by the AO as well as the ld. CIT (A).
Undisputedly, the assessee has purchased a plot in question from a housing society in the year 2002 for a sale consideration of Rs.7,500/- against circle rate of Rs.6,57,500/- and sold the same in 2009 for a sum of Rs.5,00,000/- against the circle rate of Rs.16,43,000/-; that the assessee computed the capital gains on the actual sale consideration recorded in the sale deed; that the assessee has invested the capital gains computed by him in specified bonds as per provisions contained u/s 54EC and claimed the complete exemption.
In the backdrop of the aforesaid facts and circumstances, the first question arises for determination in this case is:-
“as to whether capital gains are to be computed on actual amount received or on the deemed amount accrued to the assessee?
Issue in controversy has already been set at rest by the Hon’ble jurisdictional High Court in case cited as Smt. Nilofer I Singh (2009) 309 ITR 233 wherein it is held that computation of capital gain is to be done as per provisions contained u/s 48 of the Act by taking into consideration the actual cost of sale consideration received by the assessee and not the deemed cost of consideration u/s 50C of the Act. Following the law laid down by Hon’ble jurisdictional High Court in the judgment of Smt. Nilofer I Singh (supra), coordinate Bench of the ITAT, Jaipur in case cited as Nand Lal Sharma (supra) returned the findings in favour of the assessee in an identical question. Operative part of the decision rendered by the coordinate Bench in the aforesaid referred case is as under:-
“3.8 Apropos Ground No.2 (b), Hon'ble Delhi High Court in the case of CIT vs. Smt. Nilofer I Singh (supra) has categorically held that mode of computation of capital gain is statutorily defined u/s 48 of the Act which uses the words actual cost of "consideration" and not the deemed cost of consideration u/s 50C. We find merit in the arguments of the ld. AR that Section sac is deeming fiction by which stamp duty value of the asset sold is to be substituted for actual consideration. This being purely a fiction, its scope is limited to Section 50C only and cannot be enlarged without a specific reference. In the absence of any enabling statutorily provision, a fiction cannot be imported in other section. This view has been square adopted by Hon'ble Delhi High Court in the case of CIT vs. Smt. Nilofer Singh (supra) and followed it by this Bench ITAT in the case of Gyan Chand Batra vs. ITO (supra). Respectfully following the same, we hold that while computing exemption u/s 54, the actual sale consideration is to be taken into consideration and not the stamp duty valuation u/s 50C. Thus, assessee's claim of exemption as made in the return of income as raised in Ground No. 2 of the assessee is allowed.”
AO without disputing the fact that the actual cost of consideration of the property in question was Rs.5,00,000/- computed the capital gains on the basis of circle rate which were at Rs.16,43,000/-. Ld. CIT (A) has also perpetuated the error committed by the AO which is not sustainable in the eyes of law.
We are of the view that on the basis of actual sale consideration of Rs.5,00,000/- received by the assessee, the long term capital gain came to be Rs.2,93,211/-.
So, in view of the decisions rendered by the Hon’ble jurisdictional High Court in case cited as Smt. Nilofer I Singh (supra), we are of the considered view that lower revenue authorities have erred in computing the capital gain in the instant case on the basis of deemed cost of consideration u/s 50C whereas AO was statutorily required to compute the capital gain as per provisions contained u/s 48 of the Act on the basis of actual cost of consideration received by the assessee.
The next question arises for determination in this case is :-
“as to whether lower revenue authorities have erred in computing the capital gain by ignoring the fact that the assessee has invested entire capital gain of Rs.2,93,211/- in specified bonds as per section 54EC?” 14. Provisions contained u/s 54EC are categoric enough to cover the case of the assessee because when the assessee has invested entire capital gain in the specified bond as per provisions contained u/s 54EC, the entire capital gain earned by him shall be exempted, if the cost of investment in the specified assets is not less than the amount of the capital gains. The word “cost” appearing in section 54EC is defined in Explanation to section 54EC as under :-
“Capital gain not to be charged on investment in certain bonds. 54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified 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 long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer 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 acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45: Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees: …… Explanation.—For the purposes of this section,— (a) "cost", in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset;”
So, in the given circumstances, AO as well as CIT (A) have erred in computing the capital gain in this case to the tune of Rs.11,36,211/- by computing the capital gain on the basis of deemed cost of consideration as against actual cost of consideration required u/s 48 of the Act and have also lost sight of the fact that assessee has invested the entire capital in specified bonds as per provisions contained u/s 54EC of the Act. So, we answer the aforesaid question in favour of the assessee.
In view of what has been discussed above, present appeal filed by the assessee is hereby allowed. Order pronounced in open court on this 20th day of July, 2016.