2018 (3) TMI 1878 - AT - Income Tax

Exemption u/s 54 - purchase of a residential house within one year before or two years after from the date of transfer or construction of a residential house within three years from the date of transfer - HELD THAT - It is clear that on the date when assessee entered into the agreement, the construction had only commenced. The agreement was for construction of the flat and giving it to the assessee in a built up condition. It was not the purchase of an already built residential house. Once the payments were for construction, only the amounts paid by the assessee within a period of three years from the date of transfer of asset, giving rise to the capital gains could be considered for deduction u/s.54 of the Act. The date of transfer of the asset giving rise to the capital gains was 15th November, 2012 and the payments made by the assessee to M/s. Aarthik Properties Limited after the said date was ₹ 5,00,000/- only. We are therefore of the opinion that lower authorities were justified in restricting the claim u/s.54 of the Act to the amounts paid by the assessee after 15.11.2012. Computation of capital gains - application of Section 50C - disallowance of claim for improvement - HELD THAT - Assessing Officer is left with no choice but to consider the full value of consideration at the amount fixed by the DVO, if it is lower than what has been fixed for stamp duty. We cannot find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals) on this issue also. As for the claim for improvement expenses assessee himself had withdrawn the ground assailing disallowance of improvement expenses. We thus do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Appeal of the assessee stands dismissed.

Summary

Issues:
1. Computation of capital gains on the sale of a property.
2. Claim for deduction under Section 54 of the Income Tax Act, 1961.
3. Application of Section 50C of the Act for determining full value of consideration.
4. Disallowance of claim for improvement expenses.

Detailed Analysis:
1. The appellant contested the computation of capital gains arising from the sale of a property at a specific location in Chennai. The Assessing Officer considered the full value of consideration as declared in the document, despite the market value being higher. The appellant also claimed deduction under Section 54 of the Act for reinvestment in a new property. The Assessing Officer restricted the deduction to the amount paid after the sale date, citing ineligibility for pre-sale investments. The appellant challenged these decisions on grounds of statutory provisions and judicial precedents.

2. The issue of deduction under Section 54 of the Act was crucial in this case. The appellant argued that the cost of construction before the sale date should also be allowed as a deduction, relying on relevant legal provisions and court judgments. However, the authorities upheld the restriction to post-sale investments only. The disagreement centered on the interpretation of the statute regarding the timing of investments for claiming deductions on capital gains.

3. Section 50C of the Act was invoked to determine the full value of consideration for the property sale. The appellant contested the application of this section, emphasizing that only the actual consideration received should be considered for computing capital gains. The Commissioner directed a reevaluation based on the value fixed by the Department Valuation Officer, which the appellant challenged. The interpretation of Section 50C and its impact on capital gains calculation was a contentious issue in this judgment.

4. The disallowance of improvement expenses claimed by the appellant was another aspect of the case. The appellant failed to provide substantial evidence for the claimed improvement costs, leading to withdrawal of the related ground during the appeal. The authorities found no reason to interfere with this decision, as the appellant voluntarily withdrew the claim. The issue of substantiating improvement expenses and its impact on capital gains computation was resolved based on the appellant's actions.

In conclusion, the judgment addressed multiple issues related to capital gains computation, deduction claims under Section 54, application of Section 50C for valuation, and disallowance of improvement expenses. The decision favored the authorities' stance on these matters, leading to the dismissal of the appellant's appeal. The detailed analysis of each issue highlighted the statutory provisions, factual background, arguments presented, and the final judicial interpretation, providing a comprehensive understanding of the legal complexities involved in the case.