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2022 (7) TMI 1202 - AT - Income TaxCapital gain computation - adoption of value as deemed consideration u/s. 50C as against the actual sale consideration of the impugned property u/s 50C - HELD THAT - In the present case, it is noted that the Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2) of the Act despite specific prayer made by the assessee at the first stage. AO and the CIT(A) have also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we hold that the CIT(A) was not justified in confirming the action of the AO in adopting deemed sale consideration in violation of section 50C(2) of the Act. The failure of the AO to follow the procedure as prescribed under section 50C (2) in particular, and therefore, the CIT(A) action in confirming such order is held unjustified and against law by sustaining stamp duty value of property Rs. 11,19,40,441/- as deemed sale consideration u/s. 50C against actual sale consideration and fair market value Rs. 8,81,00,000/-. Accordingly, the AO is directed to adopt the value of sale consideration at Rs. 8,81,00,000/- of the subject property for the purpose of computation of Long Term Capital Gains. Allowability of deduction to the assessee u/s. 54F - appellant has ownership of more than one residential house - HELD THAT - Admittedly, the AO had accepted the contention of the assessee that the said residential houses are unsold properties of the trading business of the assessee and the assessee himself has reflected the seven residential house properties as stock in trade in his books of account and thus it is not disputed by the AO that the aforesaid seven house properties were accounted for by the assessee in his books of accounts as stock in trade. Thus, in our considered opinion, the said residential houses cannot be taken as capital asset within the meaning of Section 2(14) - it cannot be held that the assessee owned more than one residential house as on the date of transfer of the impugned properties. It is also not disputed that the assessee had purchased new house property within specified period as per provisions of Section 54 of the Act and the conditions stipulated u/s. 54F stands fulfilled by the assessee. Thus, taking into consideration, the facts, circumstances of the case and written submissions of the assessee, we feel that the ld. CIT(A) has been justified in judiciously allowing the deduction u/s. 54F of the Act, to the assessee and therefore, we concur with the findings of the ld. CIT(A). Thus Ground No. 1 of the Department is dismissed Sustaining gain from sale of building of discontinued business treated as short term capital gain in terms of Section 50 - HELD THAT - Even if Section 50 is to be applied as per the dictum of the AO, then full value of the consideration had to be reduced from the complete block of WDV i.e. all building (Jodhpur and Jaipur). However, the AO had reduced the WDV of Jodhpur in his assessment order where as he should have reduced the WDV of both the places of Jodhpur and Jaipur meaning thereby the AO has treated separate building from block of depreciable asset. In view of the matter, we feel that there has been lacuna on the part of the lower authorities in applying Section 50 of the Act, on building of Jodhpur. Thus, consideration peculiar the facts, and circumstances of the case, it would not be justified to approved the findings of the lower authorities. We find merit in the contentions of the appellant and therefore, accept the prayer of the appellant that provisions of section 50 of the Act are not applicable in the case of the assessee and thus, the Ground No. 2 of the assessee is allowed. Addition of notional rent on old unusable house - HELD THAT - It is noted from the available record that the assessee had 07 buildings at Jawahar Nagar which were held by the assessee as stock in trade for trading purpose. The conditions of the house building was very old, dilapidated condition and not fit for habitable purposes. AO also deployed his Inspector to inspect the conditions of the building whose report was silent on the evidences produced by the assessee during the assessment proceedings which approved the validity of the submission of the Assessee as to the state of affairs of the building. It is also imperative to mention that the case of Ansal Housing Finance Leasing Co. Ltd. ( 2009 (8) TMI 846 - ITAT MUMBAI cited by the authorities below does not apply to the facts of the present case. As in the case of M/s. Ansal Housing Finance Leasing Co. Ltd. (Supra) there was a new building ready to use in for habitable purpose whereas in the assesses case it was a damaged/dilapidated and inhabitable building. Therefore, the finding of the AO/CIT(A) based on decision of Ansal Housing Finance Leasing Co. Ltd. are devoid merit. Considering the facts and circumstances of the case we do not incline to agree with the findings of the ld. CIT(A). Thus, the Ground No. 3 of the assessee is allowed.
Issues Involved:
1. Deduction under Section 54F of the Income Tax Act, 1961. 2. Adoption of value under Section 50C of the Income Tax Act, 1961. 3. Classification of gain from sale of building as short-term capital gain under Section 50 of the Income Tax Act, 1961. 4. Computation of notional rent on old unusable house properties. Detailed Analysis: 1. Deduction under Section 54F of the Income Tax Act, 1961: The department contended that the assessee was not eligible for deduction under Section 54F as the assessee owned more than one house property. The CIT(A) allowed the deduction, noting that the properties in question were held as stock-in-trade and not as capital assets. The properties were old, unusable, and not fit for habitation, and the assessee had purchased a new house property within the specified period. The Tribunal agreed with the CIT(A), emphasizing that the properties held as stock-in-trade cannot be considered as capital assets for the purpose of Section 54F. Therefore, the ground raised by the department was dismissed. 2. Adoption of value under Section 50C of the Income Tax Act, 1961: The department argued that the CIT(A) erred in allowing relief to the assessee by considering a lesser value under Section 50C. The assessee contended that the stamp duty value exceeded the fair market value and that the AO failed to refer the matter to the District Valuation Officer (DVO) as required under Section 50C(2). The CIT(A) upheld the AO's action in adopting the stamp duty value but directed the AO to adopt the correct stamp duty value for the buildings. The Tribunal found that the AO should have referred the matter to the DVO upon the assessee's objection and concluded that the CIT(A) was not justified in confirming the AO's action. The Tribunal directed the AO to adopt the actual sale consideration for computing capital gains, allowing the assessee's appeal and dismissing the department's corresponding ground. 3. Classification of gain from sale of building as short-term capital gain under Section 50 of the Income Tax Act, 1961: The assessee argued that the gain from the sale of the building should be treated as long-term capital gain since the building was kept as an investment for more than three years and no depreciation was claimed. The AO and CIT(A) treated the gain as short-term under Section 50, as the building was part of a block of assets on which depreciation had been claimed. The Tribunal noted that the building was excluded from the block of assets and treated as an investment asset from the assessment year 2013-14. The Tribunal found merit in the assessee's contention and held that the provisions of Section 50 were not applicable, thus allowing the assessee's ground. 4. Computation of notional rent on old unusable house properties: The AO added notional rent to the assessee's income, relying on the decision in CIT vs Ansal Housing Finance & Leasing Co. Ltd. The assessee contended that the properties were old, dilapidated, and not fit for habitation. The CIT(A) directed the AO to compute the Annual Letting Value (ALV) based on municipal value, standard rent, and fair rent. The Tribunal found that the decision in Ansal Housing Finance & Leasing Co. Ltd. was not applicable as the properties in question were not habitable. The Tribunal agreed with the assessee that the properties were not fit for letting out and allowed the assessee's ground. Conclusion: The Tribunal dismissed the department's appeal and allowed the assessee's appeal, providing relief on all contested grounds. The Tribunal emphasized the importance of referring valuation disputes to the DVO and clarified the treatment of properties held as stock-in-trade versus capital assets for tax purposes.
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