2017 (7) TMI 658 - AT - Income Tax

Claim of deduction u/s 54/54F - amount deposited in specified capital gains account maintained with bank before the time stipulated u/s 139(1) - Held that - The assessee has sold two flats for a total consideration of ₹ 42 lacs. Stamp duty authorities have valued the two flats at ₹ 50,40,611/- while the DVO has determined the value of the two flats at ₹ 59,64,000/-. The DVO valuation is higher than the value adopted by the stamp duty authorities. The stamp duty authorities have adopted the full value of the two flats at ₹ 50,40,611/- and in view of provisions of Section 50C(3) the value as adopted by stamp duty authorities shall have to be adopted to be full value of consideration of the property for computing capital gains under provisions of the Act, as the valuation adopted by DVO is higher than stamp duty authorities valuation. The assessee is entitled for the deduction u/s 54/54F in accordance with law for all the investment made in the new eligible before the date of filing of return of income as provided u/s 139 of the Act or wherein the amount is deposited in specified capital gains account maintained with bank before the time stipulated u/s 139(1) of the Act. The assessee has stated to have invested in the new residential property on 23 September, 2005 while the due date of filing return as extended by CBDT was 31.08.2005 but the said investment was made before the expiry of date of filing of return of income as stipulated u/s 139(4) of the Act and the assessee had diled return of income on 17-10-2005 wherein the investment was made prior to filing of return of income with the Revenue, and hence the assessee will be entitled for the deduction. CIT(A), on appeal allowed the deduction to the tune of ₹ 25 lacs while it is the claim of the assessee that the assessee has further spent an amount of ₹ 5,51,846/- towards stamp duty, registration charges and other miscellaneous expenses in the new house property. In our view, this claim of the assessee for being eligible for higher deduction u/s 54/54F of the Act on the grounds that the said sum was spent before the filing of return of income on 17.10.2005 within time stipulated u/s 139(4) of the Act required verification by the AO and hence we are inclined to set aside and restore this issue to the file of the A.O. with direction to verify the claim of the assessee of having spent the amount of ₹ 5,51,846/- towards stamp duty, registration and other miscellaneous expenses with respect to the acquisition of eligible new asset, prior to the filing of return of income on 17.10.2005.

Summary

Issues:
1. Valuation of property for computation of capital gain.
2. Allowability of deduction under section 54/54F of the Income Tax Act.
3. Treatment of capital gain on sale of jewellery reinvested in purchase of property.

Issue 1: Valuation of property for computation of capital gain

The appeal was filed against the appellate order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2005-06. The assessee contended that the sale consideration of two flats should be valued at ?59,64,200/- as per the Departmental Valuation Officer (DVO) instead of ?53,40,600/- as per the Stamp Duty Ready Reckoner. The Assessing Officer (AO) computed the capital gain based on the valuation by the Stamp Authorities under Section 50C of the Income Tax Act. The assessee requested a valuation by an approved valuer, but the AO rejected this request. The Commissioner remanded the matter to the AO, resulting in a higher valuation by the DVO. The Tribunal held that the value adopted by the stamp authorities had to be considered for computing capital gains, as per Section 50C(3) of the Act. The Tribunal allowed the appeal on this issue.

Issue 2: Allowability of deduction under section 54/54F of the Income Tax Act

The assessee claimed a deduction under section 54/54F for investing in a new property. The AO disallowed the deduction as the investment was made after the due date for filing the return of income. However, the Commissioner allowed the deduction for the amount invested before the extended due date. The Tribunal noted that the assessee had invested ?25,00,000/- before the due date and further spent ?5,51,846/- on stamp duty, registration charges, and other expenses. The Tribunal directed the AO to verify the additional expenses claimed by the assessee and allowed the appeal for further verification.

Issue 3: Treatment of capital gain on sale of jewellery reinvested in purchase of property

The assessee had reinvested the capital gain from the sale of jewellery in the purchase of a property, but this reinvestment was not considered for deduction under section 54F by the AO. The Tribunal set aside this issue and directed the AO to decide on the allowability of the deduction in accordance with the provisions of section 54/54F. The Tribunal also referred to a judgment of the Bombay High Court for guidance on the matter. The Tribunal allowed the appeal for this issue and instructed the AO to provide a proper opportunity for the assessee to be heard.

In conclusion, the Tribunal allowed the appeal for statistical purposes, addressing the valuation of property, the deduction under section 54/54F, and the treatment of capital gain on the sale of jewellery reinvested in the purchase of property. The Tribunal provided detailed directions for further verification and consideration by the Assessing Officer in each issue.