2010 (7) TMI 621 - AT - Income Tax

LTCG - Exemption u/s 54F(1)(a) - Income escaping assessment - . It is evident from the reasoning of the Assessing Officer that he was in possession of information that the assessee had sold a property for Rs. 36 lakhs in Bangalore which was not finding a place anywhere in the earlier return of income which was processed under section 143(1) - the capital gains arising from the transfer of any long term capital asset for the purpose of section 54F has to be worked out applying section 48 without imposing section 50C into it - Needless to mention that the words such capital gain and capital gains mentioned in section 54F(1)(a) & (b) of the Act refers to the capital gains arising from the transfer of any long term capital asset worked out as mentioned in section 54F(1) of the Act read with section 48 and not worked out as mentioned in section 45(1) read with sections 48 and 50C of the Act - its unreserved appreciation and applauds to the assessee s contribution in his younger days in defending the nation against the imperialism as a freedom fighter - In the result, the appeal of the assessee is dismissed

Issues Involved:
1. Justification of the CIT(A) in upholding the LTCG of Rs. 14.06 lakhs.
2. Exemption qualification under section 54F(1)(a) of the Act.
3. Adoption of Rs. 36 lakhs as sale consideration under section 50C of the Act.
4. Excessiveness of the taxable Long Term Capital Gain.
5. Liability to be charged interest under sections 234A and 234B.
6. Awarding costs and refund of institution fees.
7. Validity of the Assessing Officer's order under section 143(3) read with section 147 of the Act.

Detailed Analysis:
1. Justification of the CIT(A) in upholding the LTCG of Rs. 14.06 lakhs:
The assessee contended that the sale consideration was Rs. 20 lakhs, not Rs. 36 lakhs as adopted by the Assessing Officer based on the stamp valuation authority's assessment. The CIT(A) upheld the Assessing Officer's decision, stating that the provisions of section 50C are applicable, and the value adopted by the stamp duty authority is valid, even if the actual receipt was Rs. 20 lakhs. The CIT(A) emphasized that the legislative intent behind section 50C was to tax transactions above recorded values.

2. Exemption qualification under section 54F(1)(a) of the Act:
The assessee argued that the entire sale proceeds were utilized for constructing a house, thus qualifying for exemption under section 54F. The Assessing Officer allowed exemption only to the extent of Rs. 20 lakhs, the actual sale consideration received. The Tribunal noted that section 54F is an exemption provision and a complete code in itself, and the computation of exemptions should be within its framework without imposing the fiction created by section 50C.

3. Adoption of Rs. 36 lakhs as sale consideration under section 50C of the Act:
The Tribunal upheld the adoption of Rs. 36 lakhs as the sale consideration for computing capital gains under section 50C, as the assessee did not dispute the stamp valuation authority's assessment. The Tribunal clarified that section 50C creates a legal fiction for the purpose of section 48, and the charge is created on the enhanced profits or gains arrived at from this fiction.

4. Excessiveness of the taxable Long Term Capital Gain:
The Tribunal addressed the computation of capital gains, stating that the capital gain for the purpose of section 54F should be worked out as per section 48 without imposing section 50C. The maximum exemption allowable under section 54F would be the capital gain worked out without section 50C, and any excess investment in the new asset beyond the net consideration would not increase the exemption.

5. Liability to be charged interest under sections 234A and 234B:
The Tribunal did not find any merit in the ground raised by the assessee regarding the liability to be charged interest under sections 234A and 234B, dismissing it as consequential.

6. Awarding costs and refund of institution fees:
The Tribunal dismissed the ground for awarding costs and refund of institution fees, considering the complexity of the issue involved.

7. Validity of the Assessing Officer's order under section 143(3) read with section 147 of the Act:
The Tribunal upheld the validity of the Assessing Officer's order, stating that the Assessing Officer had reason to believe that income had escaped assessment, justifying the assumption of jurisdiction under section 147.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the Assessing Officer's computation of capital gains and the applicability of section 50C. The Tribunal also clarified the interpretation and application of sections 45, 48, 50C, and 54F, emphasizing that the computation of exemptions under section 54F should be within its framework without extending the fiction created by section 50C.

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