2017 (7) TMI 1257 - AT - Income Tax

Benefit of deduction u/s 54F - Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house - Long term capital gains - Reliance of full value of consideration as mentioned in section 50C - Held that - Language of section 54F explaining the meaning of net consideration is very clear expecting an assessee to reinvest only the actual consideration received by the assessee and not the deemed value of consideration u/s 50C. The deeming fiction as provided in section 50C in respect of the words full value of consideration is to be applied only to section 48 and therefore, meaning of full value of consideration as referred to in Explanation to Section 54F(1) is not governed by the meaning of the words full value of consideration as mentioned in section 50C. The provisions of section 54F of the Act are to be looked independently by ignoring section 50C of the Act. CIT-A had rightly relied on the decision of CIT vs Jagriti Agarwal (2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT) that even if the assessee had deposited the net sale consideration in capital gain account scheme within the due date prescribed u/s 139(4) of the Act for reinvestment in another property, then the assessee should be treated as having satisfied the basic conditions of claiming deduction u/s 54F. The assessee had filed his return of income on 20.3.2012 which is well within the time limit prescribed u/s 139(4) and it is not in dispute that before the date of filing of such return, the assessee had duly deposited the sale consideration in capital gains account scheme. Hence the assessee would be entitled for deduction u/s 54F for the reinvestment made in the new property. There was no occasion for the AO to look into the total amount of reinvestment made by the assessee in new property in terms of section 54F - remand this issue to the file of the AO for the limited purpose of examination of reinvestment of ₹ 6 crores (actual sale consideration received) in new residential property and re-compute the long term capital gains accordingly. - Appeal of revenue allowed for statistical purposes.

Summary

Issues:
1. Justification of upholding the levy of long term capital gains.
2. Treatment of due date for exemption u/s 54F.
3. Implication of Section 50C on sale consideration.

Issue 1: Justification of upholding the levy of long term capital gains:
The appeal by the Revenue questioned the decision of the Learned Commissioner of Income Tax (Appeals) in upholding the levy of long term capital gains. The case involved an individual who sold commercial property and reinvested the proceeds in a flat and a plot of land. The Assessing Officer (AO) observed discrepancies in the reinvestment process, leading to the denial of exemption u/s 54F. The AO also adjusted the sale consideration value based on section 50C, resulting in computed long term capital gains. However, the CIT(A) considered the submission regarding the due date for filing returns and directed a re-examination of the reinvestment details. The Tribunal agreed with the CIT(A) that the assessee had satisfied the conditions for claiming deduction u/s 54F and remanded the issue to the AO for re-computation of capital gains based on the actual reinvestment amount.

Issue 2: Treatment of due date for exemption u/s 54F:
The dispute centered on whether the due date for filing returns should be as per section 139(1) or 139(4) of the Income Tax Act. The assessee argued that the net consideration was deposited in the capital gain account scheme within the extended period under section 139(4), citing relevant case law. The Tribunal concurred with the assessee, emphasizing that the due date under section 139(4) should be considered for claiming deduction u/s 54F. The Tribunal highlighted that the provisions of section 54F required reinvestment of the actual consideration received, not the deemed value under section 50C. The decision was influenced by the interpretation of 'net consideration' under section 54F, independent of section 50C, as endorsed by previous tribunal rulings.

Issue 3: Implication of Section 50C on sale consideration:
The Revenue raised concerns regarding the adoption of sale consideration under section 50C, leading to a higher value than declared by the assessee. While acknowledging the correctness of adopting the higher value, the Tribunal clarified that section 50C's deemed consideration was relevant only for section 48 of the Act. The Tribunal emphasized that the provisions of section 54F should be considered separately, focusing on the actual consideration received for reinvestment. The decision highlighted the need to interpret 'full value of consideration' under section 54F independently, disregarding the application of section 50C. The Tribunal directed a reassessment by the AO based on the actual sale consideration reinvested by the assessee.

In conclusion, the Tribunal partially allowed the Revenue's appeal for statistical purposes, emphasizing the need for a re-examination of the reinvestment details for accurate computation of long term capital gains. The judgment provided clarity on the due date for claiming deductions under section 54F and the limited applicability of section 50C's deemed consideration in determining capital gains.