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TMI Blog2016 (10) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 50C of the Act. Therefore, we reverse the order of the CIT (A) and uphold the action of the A.O. in adopting value as per section 50C of the Act for the purpose of computation of capital gains. Eligibility for claiming exemption u/s. 54 - Held that:- The assessee is eligible to claim exemption u/s. 54 of the Act, even though the construction of the new residential house was commenced prior to the date of transfer of original asset. In the present case on hand, on perusal of the facts available on record, we find that the assessee has commenced construction of new house property in the month of November, 2004 and completed construction in the month of March, 2007. The transfer of asset has been taken place in the month of January, 2007. The construction of new house property has been completed within 3 years from the date of transfer of asset. Therefore, the assessee is eligible for exemption u/s. 54 of the Act. Whether the assessee needs to invest the net sale consideration as a result of transfer or the full value of consideration as defined u/s. 50C? - Held that:- The assessee is eligible for exemption u/s. 54 of the Act, if the net sale consideration i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty at Dr.No.32-7- 3A, P.S. Nagar, Vijayawada for a consideration of ₹ 60 lakhs by way of registered un-possessory sale-cum-GPA vide document no.52/2007. As per the said document, the market value of the property for the purpose of payment of stamp duty has been fixed at ₹ 82,04,000/-. The assessee has computed capital gains by adopting sale consideration of ₹ 60 lakhs and claimed exemption u/s. 54 of the Act towards construction of another residential house property. During the course of assessment proceedings, in order to verify the applicability of provisions of section 50C of the Act and to ascertain the correctness of exemption claimed u/s. 54 of the Act, the A.O. issued a show cause notice and asked to furnish details of sale and computation of long term capital gains along with proof of investments in construction of residential house property. In response to show cause notice, the assessee submitted that the provisions of section 50C of the Act has no application, as the assessee has transferred property by way of registered un-possessory sale-cum- GPA. The provisions of section 50C of the Act are applicable, where the property has been transferred by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l house within 3 years from the date of such transfer. Since, the construction of property was commenced before transfer of asset, the assessee is not eligible for exemption u/s. 54 or 54F of the Act. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT (A). Before the CIT (A), the assessee reiterated the submissions made before the A.O. The CIT (A) after considering the explanations of the assessee held that the provisions of section 50C of the Act has no application when the property has been transferred by way of un-possessory sale-cum-GPA. The CIT (A) further held that the provisions of section 50C of the Act are applicable when the property has been transferred for a consideration which is less than to that of the guidelines value payable as per SRO, then the value as per the SRO has to be adopted on which stamp duty is payable by the transferor. Since, the impugned property was not registered, value as per SRO is not applicable and hence the A.O. was on a wrong footing. Thus, the fair market value as adopted by the A.O. is not sanctified and as such the same is not sustainable. As regards exemption u/s. 54 of the Act, the CIT (A) held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry sale-cum-GPA. It is an admitted fact that the assessee has transferred property by way of registered sale-cum-GPA. The assessee has computed long term capital gain by adopting sale consideration of ₹ 60 lakhs shown in the sale deed. The only dispute is that whether the provisions of section 50C of the Act are applicable or not when the property is transferred by sale-cum-GPA. In this case, admittedly, the assessee himself has admitted long term capital gain on transfer of asset. The moment transfer took place within the meaning of section 2(47)(v) of the Act, the deeming fiction provided u/s. 50C of the Act are applicable, when the sale consideration shown in the sale deed is less than the market value determined by the stamp duty authority for the purpose of payment of stamp duty. 8. In the present case on hand, on perusal of the facts available on record, we find that the sale-cum-GPA is registered in the office of the SRO. The stamp duty authority has determined the market value of the property at ₹ 82,04,000/- and has collected adhoc stamp duty of ₹ 50,000/-. It is also an admitted fact that the assessee himself has admitted long term capital gain. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014] 222 Taxman 2. A similar view was expressed by the Hon'ble High Court of Karnataka, in the case of CIT v. J.R. Subramanya Bhat [1987] 165 ITR 571, which was in turn followed by the Hon'ble High Court of Allahabad in the case of CIT v. H.K. Kapoor [1998] 234 ITR 753. Therefore, we are of the considered view that the assessee is eligible to claim exemption u/s. 54 of the Act, even though the construction of the new residential house was commenced prior to the date of transfer of original asset. In the present case on hand, on perusal of the facts available on record, we find that the assessee has commenced construction of new house property in the month of November, 2004 and completed construction in the month of March, 2007. The transfer of asset has been taken place in the month of January, 2007. The construction of new house property has been completed within 3 years from the date of transfer of asset. Therefore, the assessee is eligible for exemption u/s. 54 of the Act. 11. Having said that let us examine, for the purpose of exemption u/s. 54 of the Act, the full value of consideration as defined under the provisions of section 50C of the Act is applicable or actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as full value of the consideration for the purposes of 5. 48. Sec. 50C provides a deeming provision for considering the full value of consideration as the value adopted for stamp duty. In modern statutes, the expression 'deem' is used a great deal and for many purposes. It is at times used to introduce artificial conceptions which are intended to go beyond legal principles or to give an artificial construction of a word for phrase, Thus the artificial meaning of full value of the consideration has been given in s. 50C for the purpose of s, 48. One is entitled to ascertain the purpose for creating a statutory fiction. After ascertaining the purpose, full effect must be to the statutory fiction and it should be carried to its logical conclusion and to that end, it be proper and even necessary to assume all those facts on which alone fiction can operate legislature in its wisdom has referred to s. 48 in s. 50C for adopting the same value market value. Hence, the deeming fiction as provided in s. 50C in respect of the word value of consideration' is to be applied only for s. 48. The words 'full value of consideration mentioned in other provisions of the Act are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTR (Gau) 71 : (2003) 262 ITR 587 (Gau)applied. (Paras 7.3 to 7.5) 13. Considering the facts and circumstances of the case and also applying the ratio of the case laws discussed above, we are of the view that the assessee is eligible for exemption u/s. 54 of the Act, if the net sale consideration is invested in construction or purchase of new residential house. In the present case on hand, the assessee has invested net sale consideration for construction of new residential house property. Though, the full value of consideration as defined u/s. 50C of the Act is more than the net sale consideration as referred in section 54F(1) of the Act, once the net sale consideration has been fully applied under the provisions of section 54 of the Act, then the deeming consideration as defined u/s. 50C of the Act cannot be brought into the provisions of section 54F of the Act. Therefore, we are of the view that the assessee is eligible for exemption u/s. 54 of the Act, therefore, the whole of the capital gain is not chargeable to tax even if the capital gain is computed by taking the value as per the provision of section 50C of the Act. Therefore, we direct the A.O. to allow the exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X
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