ARUN D. TEJUJA,MUMBAI vs. ITO 18(1)(2), MUMBAI

This appeal, filed by the assessee, being 15th July 2013 passed by learned Commissioner of Income Tax (Appeals)- 29, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2005-06, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 28th December, 2007 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act,1961 (Hereinafter called “the Act”).

The grounds of appeal

The Learned Assessing Officer and the Commissioner of Income Tax (Appeal) erred in taxing the Capital Gain of Rs. 3,21,183/- on sale of Jewellery though the said Capital Gain was re-invested in purchase of Flat allowable u/s 54F.

The Brief facts of the case are that the assessee is an individual deriving income from business,capital gains and other sources. During the year under consideration, the assessee has earned long term capital gain on sale of two flats and jewellery. The capital gain worked out by the assessee are as under:-

Before the ld. CIT(A) , the assessee contended that the matter should be referred to the DVO as the A.O. has adopted the valuation as per the stamp authorities i.e. Rs. 53,40,611/- as against actual sale consideration of Rs. 42 lacs. It was submitted that stamp duty value is arbitrary and without any basis. The matter was remanded by learned CIT(A) to the A.O. to get the property valued by DVO , and the DVO determined the valuation of these ITA 6061/Mum/2013 5 properties at Rs. 22,66,000/- and Rs. 36,98,000/- , totaling Rs. 59.64 lacs for two flats instead of Rs. 53,40,611/- and accordingly the A.O. in his remand report worked out the capital gain at Rs. 30,91,414/- , instead of Rs. 24,68,025/- as was done by the AO in the assessment order. With respect to deduction under section 54/54F of the Act , the same was allowed to the assessee by the learned CIT(A) to the extent of Rs. 25,00,000/- which was invested by the assessee on 23-09-2005 for acquiring new asset before filing of return of income for the year under consideration on 17-10-2005, as the same was invested within extended time for filing return of income us 139(4) of the Act . However, the A.O. was directed by learned CIT(A) to tax the balance capital gains amounting to Rs. 5,91,414/- in the hands of the assessee for the year under consideration, vide appellate orders dated 15-07- 2013 passed by learned CIT(A).

The ld. Counsel for the assessee contended that the market value of the property should be adopted as per the value adopted by the stamp authorities which was determined at Rs. 53,40,611/- instead of Rs. 59,64,000/-adopted by the DVO, as against actual sale consideration of Rs. 42 lacs for both the flats. It was contended by learned counsel for the assessee that the assessee has invested Rs. 30,51,846/- in the new flat instead of Rs. 25 lacs i.e Rs. 5,51,846 for stamp duty, registration charges and other miscellaneous expenses, which has not been allowed by learned CIT(A). It was submitted that the authorities below have erred in not allowing investment of Rs. 5,51,846/- while computing deduction u/s 54/54F of the Act. It was submitted that the assessee had also earned long term capital gain on sale of jewellery though the said capital gain was reinvested in purchase of flat and the same is not considered for the purposes of deduction u/s 54F of the Act.

The ld. D.R. relied on the order of the ld. CIT(A).

We have considered the rival contentions and also perused the material available on record. We have observed that the assessee has sold two flats for a total consideration of Rs. 42 lacs. Stamp duty authorities have valued the two flats at Rs. 50,40,611/- while the DVO has determined the value of the two flats at Rs. 59,64,000/-. The DVO valuation is higher than the value adopted by the stamp duty authorities. The stamp duty authorities have adopted the full value of the two flats at Rs. 50,40,611/- and in view of provisions of Section 50C(3) of the Act, the value as adopted by stamp duty authorities shall have to be adopted to be full value of consideration of the property for computing capital gains under provisions of the Act , as the valuation adopted by DVO is higher than stamp duty authorities valuation. The assessee is entitled for the deduction u/s 54/54F of the Act in accordance with law for all the investment made in the new eligible before the date of filing of return of income as provided u/s 139 of the Act or wherein the amount is deposited in specified capital gains account maintained with bank before the time stipulated u/s 139(1) of the Act . The assessee has stated to have invested in the new residential property on 23 September, 2005 while the due date of filing return as extended by CBDT was 31.08.2005 but the said investment was made before the expiry of date of filing of return of income as stipulated u/s 139(4) of the Act and the assessee had diled return of income on 17-10-2005 wherein the investment was made prior to filing of return of income with the Revenue, and hence the assessee will be ITA 6061/Mum/2013 7 entitled for the deduction. The ld. CIT(A), on appeal allowed the deduction to the tune of Rs. 25 lacs while it is the claim of the assessee that the assessee has further spent an amount of Rs. 5,51,846/- towards stamp duty, registration charges and other miscellaneous expenses in the new house property. In our view, this claim of the assessee for being eligible for higher deduction u/s 54/54F of the Act on the grounds that the said sum was spent before the filing of return of income on 17.10.2005 within time stipulated u/s 139(4) of the Act required verification by the AO and hence we are inclined to set aside and restore this issue to the file of the A.O. with direction to verify the claim of the assessee of having spent the amount of Rs. 5,51,846/- towards stamp duty, registration and other miscellaneous expenses with respect to the acquisition of eligible new asset, prior to the filing of return of income on 17.10.2005. The assessee is also directed to produce all necessary and relevant evidences and explanation before the A.O. which shall be admitted by the A.O. for his verification. The assessee claim of allowability of deduction u/s 54F of the Act with respect to sale of jewellary u/s 54F of the Act also needs to be set aside and restored to the file of the A.O. for verification with a direction to decide the issue in accordance with the provisions of section 54/54F of the Act and compute the deduction on merits, keeping in view the investment made in new eligible asset as provided u/s 54/54F of the Act by 17-10-2005 i.e. before the date of filing of return of income with Revenue, as held to be allowable by recent judgment of Hon’ble Bombay High Court in the case of Humayun Suleman Merchant v. CCIT , (2016) 387 ITR 421(Bom.). Needless to say that the A.O. shall provide proper and sufficient opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. We order accordingly.

In the result, the appeal filed by the assessee in 2005-06 is allowed for statistical purposes.