2019 (12) TMI 1100 - AT - Income Tax

LTCG - exemption u/s 54F - Long term capital gain on the sale of the property by adopting deemed sale value u/snder section 50C - HELD THAT - AO admitted the claim of the assessee for exemption u/s 54F(1)(b) in respect of investment on long term capital gain but instead of taking actual sale consideration received, has adopted the figure of sale consideration by invoking Section 50C. This is not in accordance with the provision of Section 50C which has created a deeming fiction. Section 54F is an exemption provision and it has given its applicability in itself, therefore, Section 50C will not come under picture. The Long Term Capital Gain exemption is admissible u/s 54F(1)(b) of the Income Tax Act, 1961 wherein total taxable gain comes to ₹ 2,68,830/- only as the investment made by the assessee adopting the figure of the actual sale consideration received in consequence with Section 54F. Therefore, CIT(A) while enhancing the addition has ignored the very effect of the provisions of Section 54F. Besides this, the CIT(A) while enhancement has not given any reasons as to why the enhancement is necessary and why the assessee is not justified in adopting the figure of the actual sale consideration received. Thus the Assessing Officer as well as CIT(A) failed to justify the stand by making addition of ₹ 30,17,456/- in respect of long term capital gain without granting exemption u/s 54F - Appeal of the assessee is allowed.

Summary

Issues:
Appeal against order enhancing long term capital gain addition without specific notice; Misdirection in calculating long term capital gain; Denial of exemption under Section 54F; Dispute over working of exemption u/s 54; Application of Section 50C in calculating exemption u/s 54F.

Analysis:
The appeal was filed against the order enhancing the long term capital gain addition without issuing a specific notice, challenging the misdirection in calculating long term capital gain, and disputing the denial of exemption under Section 54F. The appellant argued that the Commissioner erred in not allowing the benefit of exemption from long term capital gain in view of the provisions under Section 54F(1)(a) of the Act. The appellant contended that the CIT(A) misdirected in calculating the long term capital gain without considering the investment made in the purchase of the residential house, which is the main issue. The appellant emphasized that the provisions of Section 54F were not correctly applied, leading to an unjust denial of exemption.

The Assessing Officer admitted the claim for exemption under Section 54F(1)(b) but calculated the addition by adopting the figure of sale consideration under Section 50C, contrary to the provision's intent. The Tribunal noted that Section 54F is an exemption provision with its own applicability, distinct from Section 50C's deeming fiction. The Tribunal found that the CIT(A) had overlooked the provisions of Section 54F while enhancing the addition, failing to provide adequate justification for disregarding the actual sale consideration received by the assessee. The Tribunal held that the Assessing Officer and CIT(A) failed to justify the addition of long term capital gain without granting the exemption under Section 54F, ultimately allowing the appeal of the assessee.

The arguments presented by the appellant were supported by various case laws highlighting that Section 50C is applicable for determining sale consideration for capital gain computation, not for exemption purposes. The Tribunal emphasized that Section 54F is a standalone exemption provision, and the deeming fiction of Section 50C should not influence its application. The Tribunal's decision was based on the clear interpretation of the statutory provisions and the specific purpose of Section 54F in granting exemptions related to long term capital gains.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the correct application of Section 54F for calculating exemptions related to long term capital gains and rejecting the inappropriate use of Section 50C in determining the addition of long term capital gain. The Tribunal's decision underscored the importance of adhering to statutory provisions and ensuring that exemptions are granted in accordance with the specific provisions of the Income Tax Act.