2017 (3) TMI 25 - AT - Income Tax

Computation of capital gain - adoption of value of the land - Held that - In this case as on 10.02.2007, the guideline value of the property was not more than ₹ 80,15,000/-, the price agreed between the parties. On 01.08.2007 the guideline value was revised to ₹ 1,20,00,000/-. Since the assessee agreed to sell the property for ₹ 80,15,000/- on 10.02.2007 which is much more than the guideline value which existed on 10.02.2007, this Tribunal is of considered opinion that the Assessing Officer has to accept the sale consideration of ₹ 80,15,000/- under Section 50C of the Act. In other words, the guideline value which exists on the date of agreement for sale, has to be taken in to consideration for the purpose of determining the fair market value under Section 50C of the Act. Therefore this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to accept the sale consideration at ₹ 80,15,000/- as agreed between the parties in the agreement for sale dated 10.02.2007. Claim of exemption under Section 54F - Held that - The Parliament in their wisdom thought it fit to grant exemption in respect of the capital gain which was used for construction or purchase of property till the due date for filing of return of income under Section 139 (1) of the Act. The assessee could not use the sale consideration within the due date under Section 139 (1) of the Act, the same shall be deposited in any one of the capital gain account. The Apex court while considering the due date held that the due date means, the date prescribed under Section 139 (1) of the Act. The Apex Court in the case of Prakash Nath Khanna and Another v CIT (2004 (2) TMI 3 - SUPREME Court) has examined these issue and found that the due date means the date under Section 139 (1) of the Act and not the date under Section 139 (4) of the Act. This Tribunal is of considered opinion that the Assessing Officer has rightly allowed the claim of the assessee with regard to the capital gain utilized for purchasing the flat till the due date for filing the return of income under Section 139 (1) of the Act. Therefore this Tribunal did not find any reason to interfere with the orders of the lower authorities. Accordingly, the same is confirmed.

Summary

Issues Involved:
Computation of capital gain; Consideration for determining capital gain; Application of Sections 54 and 54F of the Income Tax Act, 1961.

Analysis:

1. Computation of Capital Gain:
The appeal pertains to the computation of capital gain by the Assessing Officer for the assessment year 2009-10. The assessee entered into an agreement for the sale of land on 10.02.2007, with a sale consideration of ?80,15,000. However, due to a mistake in the parent document, the sale could not be completed immediately. A rectification deed was executed, and the sale deed was registered on 06.05.2008. The State Government revised the guideline value of the land, but the sale consideration remained at ?80,15,000. The Assessing Officer referred the valuation to the Valuation Officer, who valued the land at ?91,50,000. The Assessing Officer adopted this value as consideration, allowing exemption only for the amount paid by the assessee until 30.09.2009.

2. Consideration for Determining Capital Gain:
The disagreement arises regarding the date to be considered for determining the value of the property. The assessee argues that the guideline value or market value at the time of the agreement should be taken, not the value at the execution of the sale deed. The Departmental Representative contends that the date of the sale deed is crucial for valuation. The Tribunal held that the guideline value at the time of the agreement must be considered for determining the fair market value under Section 50C of the Act.

3. Application of Sections 54 and 54F of the Income Tax Act:
The assessee claimed exemption under Sections 54 and 54F of the Act for investing in a flat. The Tribunal clarified that the capital gain utilized for purchasing the flat until the due date for filing the return of income under Section 139(1) should be considered for exemption. Citing the Supreme Court's interpretation, the Tribunal upheld the Assessing Officer's decision to allow the claim based on the due date under Section 139(1) of the Act.

In conclusion, the Tribunal set aside the lower authorities' orders regarding the computation of capital gain and directed the Assessing Officer to accept the sale consideration as agreed in the original agreement. The Tribunal confirmed the Assessing Officer's decision on the claim of exemption under Sections 54 and 54F of the Act, based on the capital gain utilized until the due date for filing the return of income under Section 139(1).