2015 (6) TMI 482 - AT - Income Tax

Denial of exemption u/s 54 - deposit of net consideration into capital gain account scheme on 31-03-2009 - Held that - Section specific reference to sec. 139 cannot be construed only to sec. 139(1) alone but it includes all the sub-section of 139 including 139(4). Therefore if the sale consideration is utilized for the construction or purchase of a new residential house before due date of filing of return u/s 139(4) i.e. 31-3- 2010 in this case the same will be eligible for exemption u/s 54. Thus the assessee s claim for exemption is eligible u/s 54 of the Act. See CIT vs. Jagriti Agarwal (2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT) - Decided in favour of assessee. Mode of computation of capital gain - LTCG computed by AO on the basis of value adopted by the stamp valuation authority in terms of Section 50C as against the Long term capital gain computed by the assessee on the basis of actual sale consideration - Held that - While computing exemption u/s 54 the actual sale consideration is to be taken into consideration and not the stamp duty valuation u/s 50C. Thus assessee s claim of exemption as made in the return of income as raised is allowed. See CIT vs. Smt. Nilofer Singh (2008 (8) TMI 165 - DELHI HIGH COURT ) and Gyan Chand Batra vs. ITO 2010 (8) TMI 528 - ITAT JAIPUR - Decided in favour of assessee. Cost of construction of a room and boundary wall disallowed - Held that - No infirmity in the orders of lower authorities as there is no mention of boundary wall in the sale deed. Besides no evidence was furnished by the assessee before the AO to substantiate its claim of having constructed the boundary wall. - Decided against assessee.

Summary

Issues:
1. Denial of exemption under Section 54 of the Income Tax Act, 1961.
2. Computation of long-term capital gain based on stamp valuation authority's value versus actual sale consideration.
3. Disagreement on the cost of construction for indexation purposes.

Issue 1: Denial of Exemption under Section 54:
The appellant contested the denial of exemption under Section 54 by the Assessing Officer (AO) for an amount of Rs. 29.10 lacs. The appellant argued that the purchase of a new residential house in March 2009, even though beyond the due date of return under Section 139(1), was within the time limit of filing a belated return under Section 139(4). Citing various case laws, the appellant claimed eligibility for exemption under Section 54, emphasizing that the provision includes all subsections of Section 139, not just Section 139(1). The Tribunal agreed with the appellant's interpretation, allowing the claim for exemption under Section 54.

Issue 2: Computation of Long-term Capital Gain:
Regarding the computation of long-term capital gain, the appellant disputed the AO's calculation based on the stamp valuation authority's value, which resulted in a higher gain compared to the actual sale consideration. The appellant argued that Section 48 of the Income Tax Act specifies the computation method, emphasizing the use of actual sale consideration for determining capital gains. Citing judicial precedents, including the judgment of the Delhi High Court, the appellant contended that the deeming provisions of Section 50C should not extend to Section 48. The Tribunal concurred with the appellant's stance, directing the consideration of actual sale value for computing the exemption under Section 54.

Issue 3: Disagreement on Cost of Construction for Indexation:
The appellant claimed a higher cost of construction for indexation purposes, which the AO disputed, citing the absence of mention of a boundary wall in the sale deed. The appellant argued that the boundary wall was constructed for security purposes, supporting the claimed improvement cost. However, as no evidence was provided to substantiate the construction of the boundary wall, the Tribunal upheld the lower authorities' decision, dismissing the appellant's claim regarding the cost of construction for indexation.

In conclusion, the Appellate Tribunal ITAT Jaipur ruled in favor of the appellant on the denial of exemption under Section 54 and the computation of long-term capital gain based on actual sale consideration. However, the Tribunal upheld the lower authorities' decision on the disagreement regarding the cost of construction for indexation. The judgment highlighted the importance of interpreting statutory provisions accurately and adhering to established legal principles in tax matters.