2016 (10) TMI 1203 - AT - Income Tax

Long term capital gains assessed as per sec. 50C - assessee has sold the property for a consideration and invested in NABARD bonds for claiming exemption of capital gains - Held that - In the assessee s case, the assessee disputed the guideline value during the pendency of assessment proceedings and filed the appeal before the SRO Therefore, in all fairness, we consider it necessary to refer the valuation to the Departmental valuation cell for determining the fair market value. Accordingly, we remit the matter back to the file of Assessing Officer to readjudicate the issue after the receipt of the valuation report from DVO on merits. The issue regarding long term capital gains is allowed for statistical purposes. Sale consideration of the property was invested in a specified bond to claim exemption u/s 54EC therefore, there is no capital gains - assessee has sold the property and received the sale consideration of ₹ 19,01,000/- and the entire sale consideration was invested in NABARD bonds u/s 54EC of the Act - Held that - We heard the rival submissions and perused the material placed before us. We have carefully gone through the provisions of sec. 54EC of the Act. As per sec. 54EC of the Act, if the cost of 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 to the capital gains tax. In this case, though te assessee has invested the entire sale consideration, capital gains has to be worked out by taking the guideline value u/s 50C of the Act. - Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
- Assessment of long term capital gains under sec. 50C of the Income-tax Act, 1961.
- Dispute regarding valuation of property and referral to Departmental valuation cell.
- Claim of exemption u/s 54EC of the Act and assessment of capital gains.

Analysis:

Assessment of Long Term Capital Gains under Sec. 50C:
The case revolved around the assessment of long term capital gains as per sec. 50C of the Income-tax Act, 1961. The Assessing Officer found that the assessee sold a property for a consideration of &8377; 19.01 lakhs, while the guideline value set by the Registrar of Stamp Duty was &8377; 27,90,200/-. Consequently, the Assessing Officer invoked sec. 50C and taxed the difference amount of &8377; 6,33,533/-. The appellant contended that the property was sold under distress due to encroachment, and the excess stamp duty was paid unknowingly. The appellant argued that the matter should have been referred to the valuation officer before invoking sec. 50C. The Tribunal remitted the issue back to the Assessing Officer for reevaluation after obtaining a valuation report from the Departmental valuation cell.

Dispute Regarding Valuation of Property and Referral to Departmental Valuation Cell:
The appellant disputed the guideline value during the assessment proceedings and filed an appeal before the Stamp Duty Authority. The Tribunal opined that in fairness, the valuation should be referred to the Departmental valuation cell for determining the fair market value. The Tribunal directed the Assessing Officer to readjudicate the issue post receipt of the valuation report. The Tribunal highlighted the importance of following the provisions of sec. 50C and the necessity to refer valuation disputes to the Departmental valuation cell.

Claim of Exemption u/s 54EC of the Act and Assessment of Capital Gains:
The appellant claimed exemption u/s 54EC of the Act by investing the entire sale consideration in NABARD bonds. The contention was that since the entire sale consideration was invested in specified bonds, there should be no assessment of capital gains. However, the Tribunal dismissed this argument, stating that capital gains must be calculated based on the guideline value determined under sec. 50C. The Tribunal emphasized that even if the sale consideration was fully reinvested, capital gains assessment should consider the guideline value for tax purposes.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, remitting the valuation issue back to the Assessing Officer while dismissing the claim of exemption u/s 54EC. The judgment underscored the importance of adhering to valuation provisions and considering guideline values for accurate assessment of capital gains.