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2019 (1) TMI 342 - AT - Income TaxExemption u/s 54F - whether the actual sale consideration has to be taken or the value adopted by the Stamp Valuation Authority (SVA) for the purpose of levy of stamp duty for registration as per Section 50C has to be taken - Held that - We are of the considered view that the view taken, on this issue that the deeming fiction provided u/s 50C in respect of the term full value of consideration is to be applied only to Section 48. The meaning of net consideration as regards Section 54F(1) is not governed by the meaning of full value of consideration as mentioned in Section 50C. Similar view was taken by the Mumbai B Bench of the Tribunal in the case of Raj Babbar v. Income-tax Officer - 11(1)(3), Mumbai 2013 (1) TMI 237 - ITAT MUMBAI - We direct AO not to adopt the deemed consideration arrived at u/s 50C of the Act, while computing the deduction of the assessee for the purpose of Section 54F of the Act and take into account only net consideration as held by different benches of the ITAT. Denying the claim u/s 54F on the ground that what was purchased was a plot of land and not a residential house - Held that - In this case the assessee has investment the net sale consideration in a plot of land and had advanced money to the builder for construction. This action as per the propositions of the Courts is sufficient compliance of Section 54F of the Act. Mere investment would be enough - AO without any material holds the agreement entered into by the assessee with M/s. Hill View Builders as an afterthought. No investigation is done nor any material contrary to the evidence produced by the assessee is brought on record. Such an action of AO cannot be countenanced. The assessee has discharged the burden of proof that lay on her. The onus shifted to the revenue and this burden is not discharged by the revenue. Thus, we hold that the Assessing Officer was wrong in denying the claim of the assessee for deduction u/s 54F Exemption u/s 54F on the deposit made by the assessee in the Capital Gains Accounts Scheme - Held that - As decided in the case of ITO vs. K.C. Gopalan 1999 (9) TMI 955 - KERALA HIGH COURT has taken a similar view that it is not necessary that the very same consideration that is received on sale of property, as such, should be utilised for construction of new building. Also in the case of CIT vs. Kapil Kumar Agarwal 2015 (12) TMI 1075 - PUNJAB AND HARYANA HIGH COURT held that Section 54F nowhere envisages that sale consideration obtained by assessee from sale of original capital asset is mandatorily required to be utilized for purposes of meeting cost of new asset. It held that investment made by the assessee may be sourced other than entirely from the capital gains. The propositions laid down in these case-law, when applied to the facts of the case on hand, has to lead to a conclusion that this objection of the revenue authorities cannot be sustained. Whether the assessee, at the time of claim of exemption u/s 54F was already in possession of two residential properties i.e., a house in Gurgaon and a pent house - The assessee was owner of 1/4th share in a residential house in Gurgaon - Held that - Section 2(47) of the Act, lays down that transfer would include a transaction allowing possession of an immovable property in part performance of a contract of a nature referred to in Section 53A of the transfer of property Act. In the case on hand, part performance of a contract has taken place and possession has been handed over. Under these circumstances, the claim of the assessee that her 1/4th share in the house property in Gurgaon has been transferred, has to be accepted. Hence we hold that the assessee has only one house property as on the date of sale of the plots of land giving rise to long term capital gain. Hence this issue is decided in favour of the assessee. Thus the assessee is entitled to deduction u/s 54F on the net sale consideration invested ₹ 52,40,000/-. AO is directed to compute the long term capital gain accordingly. - decided in favour of assessee
Issues Involved:
1. Applicability of Section 50C for computing deduction under Section 54F. 2. Eligibility for deduction under Section 54F for investment in a plot and subsequent construction. 3. Use of borrowed funds for deposit in Capital Gains Account Scheme. 4. Ownership of multiple residential properties affecting Section 54F exemption. Issue-wise Detailed Analysis: 1. Applicability of Section 50C for computing deduction under Section 54F: The first issue addressed was whether the value adopted by the Stamp Valuation Authority (SVA) under Section 50C should be considered for computing the deduction under Section 54F. The tribunal ruled in favor of the assessee, citing multiple precedents, including the Visakhapatnam Bench of ITAT and the Jaipur Bench of the Tribunal. It was established that the deeming fiction under Section 50C applies only to Section 48 for computing capital gains and not for determining the "net consideration" under Section 54F. Therefore, the actual sale consideration should be used for computing the deduction under Section 54F. 2. Eligibility for deduction under Section 54F for investment in a plot and subsequent construction: The second issue was whether the assessee's investment in a plot and subsequent agreement for construction qualifies for deduction under Section 54F. The tribunal referred to various high court judgments, including those from Madhya Pradesh, Karnataka, and Calcutta High Courts, which support the view that substantial investment in construction qualifies for Section 54F deduction even if the construction is not completed within three years. The tribunal found that the assessee had made substantial payments to the developer and thus was eligible for the deduction. 3. Use of borrowed funds for deposit in Capital Gains Account Scheme: The third issue was whether the use of borrowed funds for depositing in the Capital Gains Account Scheme disqualifies the assessee from claiming exemption under Section 54F. The tribunal ruled in favor of the assessee, citing precedents from the Hyderabad Bench of ITAT and the Kerala High Court, which clarified that there is no requirement that the sale proceeds themselves must be used for the deposit. The essential condition is that the investment should be made within the stipulated time. 4. Ownership of multiple residential properties affecting Section 54F exemption: The final issue was whether the assessee's ownership of multiple properties disqualified her from claiming the exemption under Section 54F. The tribunal found that the assessee had transferred her 1/4th share in a Gurgaon property through a registered General Power of Attorney and possession certificate in 2003, which was before the Supreme Court's 2012 judgment in Suraj Lamp & Industries Pvt. Ltd. The tribunal concluded that the assessee did not own more than one residential property at the time of the sale, thus qualifying for the exemption under Section 54F. Conclusion: The tribunal directed the Assessing Officer to compute the long-term capital gain by considering the actual sale consideration and allowing the deduction under Section 54F for the assessee's investments. The appeal of the assessee was allowed.
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