2021 (8) TMI 1201 - AT - Income Tax

Long tern capital gain - Valuation of property - determination of fair market value of the property - adoption of the deemed sales consideration according to the provisions of Section 50 C - HELD THAT - As the difference between stamp duty valuation u/s 50C is just 8.98 % higher than the actual sale consideration. Only actual sale consideration should be taken for working out capital gain. Accordingly, additional ground raised by the assessee is allowed. Deduction u/s 54 - whether it is to be restricted to only one residential unit against the total investment made by the assessee in two adjoining residential unit - HELD THAT - Assessee has purchased two adjacent units of house property and claimed deduction u/s 54 of the Act. For the impugned assessment year section 54 provided exemption in investment in a‟ residential house and which is amended by Finance Act, 2014 wherein, word a‟ has been replaced by word one ‟. This amendment is prospective in nature cannot be given a retrospective effect. In view of this, in the facts and circumstances of the case whether the assessee has purchased two adjacent residential houses, according to us the assessee is entitled to deduction u/s 54 of the Act on the amount invested in both the houses. Addition u/s 69 - Unexplained investment in purchases of property - HELD THAT - Source of the fund is available with the assessee for payment to the builder and further the medical exigencies are meet by the Govt is not denied, We found that in absence of any other evidences contrary , benefit of cash available on hand should be granted four source of investment of ₹ 1 lakh with the builder. Accordingly, we direct the ld AO to delete the addition - Decided in favour of assessee. Adopting indexed cost of acquisition shown by the assessee - HELD THAT - AO has considered the indexed cost of acquisition without giving any reason that why he is not agreeing with the indexed cost of acquisition shown by the assessee of ₹ 6,991,206 as shown in the computation of income. Therefore we agree with the argument of the learned authorised representative. We direct the ld AO to consider the cost of acquisition of the property sold/transferred for computation of capital gain. Thus, Ground is allowed.

Issues Involved:
1. Adjudication by CIT(A) on only two grounds.
2. Misinterpretation of Section 50C(2) by CIT(A).
3. Restriction of deduction under Section 54 to one residential unit.
4. Addition under Section 69 for unexplained investments.
5. Incorrect adoption of indexed cost of acquisition.

Issue-wise Detailed Analysis:

1. Adjudication by CIT(A) on only two grounds:
The appellant contended that the CIT(A) erred by adjudicating only two grounds instead of three, as raised by the appellant. This issue was noted but not separately adjudicated as it was intertwined with other grounds.

2. Misinterpretation of Section 50C(2) by CIT(A):
The appellant argued that CIT(A) misinterpreted Section 50C(2) by adopting the stamp duty value of ?1,59,31,035 as deemed sale consideration without awaiting the District Valuation Officer (DVO) report, which valued the property at ?1,48,10,000. The Tribunal admitted an additional ground challenging the adoption of deemed sales consideration under Section 50C, considering the difference between actual consideration and stamp duty value was less than 10%. The Tribunal referenced various coordinate bench decisions, concluding that the actual sale consideration should be taken for computing capital gains. Thus, this ground was allowed in favor of the appellant.

3. Restriction of deduction under Section 54 to one residential unit:
The appellant contested the restriction of deduction under Section 54 to ?15,48,136 for one residential unit instead of the total investment in two adjoining units. The Tribunal agreed with the appellant, citing judicial precedents that allowed deduction for investment in multiple residential units if they are adjacent. The Tribunal referenced the decisions of the Hon'ble Delhi High Court in CIT Vs. Gita Duggal and other High Courts, concluding that the appellant is entitled to deduction under Section 54 for both units. Hence, this ground was allowed.

4. Addition under Section 69 for unexplained investments:
The appellant challenged the addition of ?50,000 under Section 69 for unexplained investments, arguing that the amount was withdrawn from the bank and kept at home for medical emergencies. The Tribunal found that the appellant had withdrawn ?1,60,000 from the bank, out of which ?1,00,000 was used for property investment. In the absence of evidence to the contrary, the Tribunal held that the source of funds was adequately explained and directed the deletion of the ?50,000 addition. This ground was allowed.

5. Incorrect adoption of indexed cost of acquisition:
The appellant argued that the Assessing Officer (AO) incorrectly adopted the indexed cost of acquisition as ?69,21,021 instead of ?69,91,206. The Tribunal found no reason provided by the AO for this discrepancy and directed the AO to consider the correct indexed cost of ?69,91,206 for computing capital gains. Thus, this ground was allowed.

Conclusion:
The Tribunal partly allowed the appeal, favoring the appellant on the grounds of deemed sale consideration under Section 50C, deduction under Section 54 for multiple residential units, deletion of addition under Section 69, and correction of the indexed cost of acquisition. The order was pronounced in the open court on 11/08/2021.

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