2023 (6) TMI 763 - AT - Income Tax

Capital gain computation - computation of indexed cost of acquisition - Reference to DVO for determining FMV of the property in terms of provisions of Sec. 50C - Denial of deduction u/s. 54F - HELD THAT - AO is completely erred in adopting full value of consideration in terms of provisions of Sec. 50C even though, he had referred the valuation of the property to the DVO. We further noted that in two co-owners case 2019 (11) TMI 1795 - ITAT CHENNAI Tribunal has set aside the issue to the file of the Ld.CIT(A) to readjudicate the issue of computation of long term capital gains from sale of property after receipt of the Valuation Report from the DVO in terms of provisions of Sec. 50C. Since, the assessee is one of the co-owners of the property sold by family members, by following the decision of ITAT, Chennai Benches, in other co-owner case, we set aside the issue to the file of the Ld.CIT(A) for re-adjudication after receipt of the Valuation Report from the DVO u/s. 50C. In so far as, the appeal filed by the Revenue is concerned, the main issue involved is deduction claimed u/s. 54F - Since, the main issue of computation of full value of consideration in terms of provisions of Sec. 50C has been set aside to the file of the CIT(A), and other consequential issues like deduction towards indexed cost of acquisition and deduction claimed u/s. 54F also needs to be re-adjudicated by the CIT(A).

Summary

Issues involved:
The judgment involves the following issues:
1. Computation of full value of consideration under Section 50C
2. Denial of deduction under Section 54F

Issue 1: Computation of full value of consideration under Section 50C
The assessee contested the adoption of sale consideration under Section 50C, arguing that the property consisted of two distinct parts with different valuations. The AO had referred the property valuation to the DVO but completed the assessment before receiving the DVO's report. The tribunal found the AO's actions erroneous and set aside the issue for re-adjudication by the Ld.CIT(A) after the DVO's report is obtained, following a similar decision in another co-owner case.

Issue 2: Denial of deduction under Section 54F
The Revenue challenged the Ld.CIT(A)'s decision to allow deduction under Section 54F, claiming the assessee failed to provide evidence of complying with the construction timeline. The Ld.CIT(A) had allowed the deduction without proof of construction completion. The tribunal agreed that if the main issue of full value of consideration is remanded, the deduction issue should also be reconsidered. Therefore, the tribunal directed the Ld.CIT(A) to re-adjudicate the indexed cost of acquisition and deduction claimed under Section 54F in accordance with the law.

Separate Judgment:
No separate judgment was delivered by the judges in this case.