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2017 (10) TMI 312 - AT - Income TaxDetermination of extent of deduction under section 54F - Capital gain computation - net consideration for the purposes of section 54F - consideration as determined under section 50C - Held that - The consideration which is actually received or accrued as a result of transfer has to be invested in the new asset. In the instant case, undisputedly, the consideration which has accrued to the assessee as per the sale deed is ₹ 24,60,000 and the whole of the said consideration has been invested in the capital gains accounts scheme for purchase of the new house property which is again not been disputed by the Revenue. The consideration as determined under section 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee. Rather, it is a value which has been deemed as full value of consideration for the limited purposes of determining the income chargeable as capital gains under section 48 of the Act. Therefore, in the instant case, the provisions of section 54F(1)(a) are complied with by the assessee and the assessee shall be eligible for deduction in respect of the whole of the capital gains so computed under section 45 read with section 48 and section 50C of the Act. We are therefore of the considered view that the provision of section 50C(1) of the Act are not applicable to section 54F for the purpose of determining the meaning of full value of consideration. Appeal filed by the Revenue is dismissed.
Issues Involved:
1. Deletion of addition of Rs. 70,00,800/- by the CIT(A). 2. Applicability of Section 50C(1) to Section 54F for determining the full value of consideration. Issue 1: Deletion of Addition of Rs. 70,00,800/- by the CIT(A): The Revenue appealed against the CIT(A)'s order which deleted the addition of Rs. 70,00,800/-. The Assessing Officer (AO) had taken the full value of consideration as per Section 50C of the Income Tax Act, which was Rs. 96,03,000/-, as opposed to the actual sale consideration of Rs. 24,60,000/-. The AO computed the long-term capital gains (LTCG) based on this deemed consideration and allowed the deduction under Section 54F only to the extent of the actual investment in the new house property, which was Rs. 24,60,000/-. The CIT(A) held that the provisions of Section 50C are deeming provisions for computing capital gains under Section 48 and do not apply to other provisions of the Act, including Section 54F. Therefore, the CIT(A) directed the AO to compute and allow the deduction under Section 54F based on the actual sale consideration of Rs. 24,60,000/-. Issue 2: Applicability of Section 50C(1) to Section 54F for Determining the Full Value of Consideration: The Tribunal examined whether the deemed consideration under Section 50C should be considered for the purpose of Section 54F. The Tribunal noted that Section 50C is a deeming provision specifically for Section 48 to prevent tax evasion through undervaluation of property. However, Section 54F pertains to the exemption on capital gains when the sale consideration is reinvested in a new house. The Tribunal emphasized that the term "net consideration" in Section 54F refers to the actual consideration received or accruing from the transfer, not the deemed consideration under Section 50C. The Tribunal cited various judicial precedents, including the decisions in cases like Gyan Chand Batra vs. ITO and Nandlal Sharma vs. ITO, which supported the interpretation that Section 50C's deeming fiction is limited to Section 48 and does not extend to Section 54F. Detailed Analysis: 1. Deletion of Addition: The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 70,00,800/-. The AO had computed the LTCG based on the deemed consideration of Rs. 96,03,000/- as per Section 50C, but the CIT(A) held that the actual sale consideration of Rs. 24,60,000/- should be considered for the purpose of Section 54F. The Tribunal agreed with the CIT(A) that the deeming provisions of Section 50C are specific to Section 48 and do not apply to Section 54F. 2. Applicability of Section 50C(1) to Section 54F: The Tribunal provided a detailed explanation of the legal provisions and judicial precedents to support its conclusion that Section 50C's deeming fiction does not extend to Section 54F. The Tribunal noted that Section 54F requires the actual consideration received or accruing from the transfer to be reinvested in a new house to claim exemption on capital gains. The Tribunal emphasized that the term "net consideration" in Section 54F is defined as the actual consideration received or accruing, not the deemed consideration under Section 50C. The Tribunal cited various judicial precedents, including the decisions in Gyan Chand Batra vs. ITO and Nandlal Sharma vs. ITO, which supported this interpretation. Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order. The Tribunal concluded that the provisions of Section 50C(1) are not applicable to Section 54F for determining the full value of consideration. The Tribunal held that the deduction under Section 54F should be computed based on the actual sale consideration received or accruing, not the deemed consideration under Section 50C. The Tribunal's decision was in line with various judicial precedents and supported the assessee's contention that the actual sale consideration should be considered for the purpose of claiming exemption under Section 54F.
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