THE DCIT, CIRCLE - 2(1), Vijayawada V. Dr. Chalasani Mallikarjuna Rao, Vijayawada

ITA 206/VIZ/2013

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9766 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value
• Section: 143(3); 50C; 54F; 142(1); 147; 148; 54; 10

Judgement Text

ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.206/VIZAG/2013 ( / ASSESSMENT YEAR: 2007-08) DCIT, CIRCLE - 2(1), VIJAYAWADA VS. DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA [PAN: ABWPC9171D ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI ARAVINDAKSHAN, DR / RESPONDENT BY : SHRI C. SUBRAHMANYAM, AR / DATE OF HEARING : 14.09.2016 / DATE OF PRONOUNCEMENT : 21.10.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), VIJAYAWADA DA TED 1.1.2013 AND IT PERTAINS TO THE ASSESSMENT YEAR 2007-08. ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A DOCTOR BY PROFESSION, RUNNING A HOSPITAL UNDER THE NAME AND S TYLE OF M/S. VENNELA TALLI PILLALA VAIDYASALA. THE ASSESSEE HAD FILED H IS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 29.7.2007 DECLARING TOTAL INCOME OF ` 5,12,727/-. THE ASSESSMENT FOR THE YEAR HAS BEEN COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS 'THE ACT') ON 5.5.2009 DETERMINING TOTAL INCOME AT ` 5,64,340/-. SUBSEQUENTLY, THE ASSESSMENT HAS BEEN RE-OPENED U/S 147 OF THE ACT, F OR THE REASONS RECORDED BY ISSUING NOTICE U/S 148 OF THE ACT ON 8. 3.2011. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICE U/S 142(1) AND 143(2) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, TH E AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED BOOKS OF ACCOUNTS AND OTHER DETAILS CALLE D FOR. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SOLD A RESIDENTIAL HOUSE PROP ERTY 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 PROP ERTY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY HAS BEEN FIXED AT ` 82,04,000/-. THE ASSESSEE HAS COMPUTED CAPITAL GAINS BY ADOPTING SAL E CONSIDERATION OF ` ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 3 60 LAKHS AND CLAIMED EXEMPTION U/S 54 OF THE ACT TO WARDS CONSTRUCTION OF ANOTHER RESIDENTIAL HOUSE PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN ORDER TO VERIFY THE APPLICABILITY O F 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 NOT ICE AND ASKED TO FURNISH DETAILS OF SALE AND COMPUTATION OF LONG TER M CAPITAL GAINS ALONG WITH PROOF OF INVESTMENTS IN CONSTRUCTION OF RESIDE NTIAL HOUSE PROPERTY. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBM ITTED THAT THE PROVISIONS OF SECTION 50C OF THE ACT HAS NO APPLICA TION, AS THE ASSESSEE HAS TRANSFERRED PROPERTY BY WAY OF REGISTERED UN-PO SSESSORY SALE-CUM- GPA. THE PROVISIONS OF SECTION 50C OF THE ACT ARE APPLICABLE, WHERE THE PROPERTY HAS BEEN TRANSFERRED BY WAY OF REGISTERED SALE DEED. AS REGARDS THE EXEMPTION U/S 54 OF THE ACT, THE ASSESS EE HAS SUBMITTED THAT HE HAS INVESTED SALE CONSIDERATION TOWARDS CON STRUCTION OF RESIDENTIAL HOUSE PROPERTY AND HAS INVESTED AN AMOU NT OF ` 62,74,701/-. THE ASSESSEE FURTHER SUBMITTED THAT THE CONSTRUCTIO N OF HOUSE WAS STARTED IN THE MONTH OF NOVEMBER, 2004 AND COMPLETE D IN THE MONTH OF MARCH, 2007, TO THIS EFFECT, FURNISHED A COPY OF VA LUATION REPORT OBTAINED FROM THE REGISTERED VALUER. ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 4 4. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE, HELD THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASS ESSEE THAT THE PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLIC ABLE WHEN THE PROPERTY IS TRANSFERRED BY UN-POSSESSORY SALE-CUM-G PA. THE A.O. FURTHER OBSERVED THAT IT IS ABUNDANTLY CLEAR FROM T HE DOCUMENT THAT THE SAID DOCUMENT HAS BEEN REGISTERED IN THE OFFICE OF THE SUB REGISTRAR AND THE SUB REGISTRAR HAS DETERMINED STAMP DUTY VAL UE OF ` 82,04,000/- AND ALSO COLLECTED STAMP DUTY OF ` 50,000/-. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HIMSELF ADMITTED CAPITAL GAINS IN THE RETURN OF INCOME WHICH CLEARLY INDICATES THE TRANSFER OF PROPERTY. IT IS ILLOGICAL AND IMPROPER ON THE PART OF THE ASSESSEE TO SAY THAT TR ANSFER HAS TAKEN PLACE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAI N, BUT THE PROVISIONS OF SECTION 50C OF THE ACT HAS NO APPLICATION. THE MOMENT THE TRANSFER TOOK PLACE WITHIN THE MEANING OF SECTION 2(47)(V) O F THE ACT, THE DEEMING FICTION PROVIDED UNDER THE PROVISIONS OF SE CTION 50C OF THE ACT ARE APPLICABLE WHEN THE CONSIDERATION SHOWN IN THE SALE DEED IS LESS THAN THE MARKET VALUE DETERMINED FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. AS REGARDS THE EXEMPTION U/S 54 OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE HAS MADE A CLAIM OF EXEMPTION U/S 54F OF THE ACT TOWARDS TRANSFER OF A RESIDENTIAL HOUSE PROPERTY. THE PROVISIONS OF SECTION 54F OF THE ACT ARE APPLICABLE TO THE TRANSF ER OF ANY CAPITAL ASSET ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 5 OTHER THAN RESIDENTIAL HOUSE PROPERTY. HOWEVER, TH E ASSESSEE HAS TRANSFERRED A RESIDENTIAL HOUSE PROPERTY, THEREFORE , THE PROVISIONS OF SECTION 54F OF THE ACT ARE NOT APPLICABLE. THE A.O . FURTHER OBSERVED THAT THE ASSESSEE HAD INVESTED THE SALE PROCEEDS OF THE RESIDENTIAL PROPERTY BEFORE THE DATE OF TRANSFER OF THE PROPERT Y. IN ORDER TO CLAIM DEDUCTION U/S 54 OR 54F OF THE ACT, THE ASSESSEE HA S TO INVEST SALE PROCEEDS FOR CONSTRUCTION OF RESIDENTIAL HOUSE WITH IN 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 A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE CIT(A) AF TER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE HELD THAT THE PROVISIO NS OF SECTION 50C OF THE ACT HAS NO APPLICATION WHEN THE PROPERTY HAS BE EN TRANSFERRED BY WAY OF UN-POSSESSORY SALE-CUM-GPA. THE CIT(A) FURT HER HELD THAT THE PROVISIONS OF SECTION 50C OF THE ACT ARE APPLICABLE WHEN THE PROPERTY HAS BEEN TRANSFERRED FOR A CONSIDERATION WHICH IS L ESS 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. ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 6 SINCE, THE IMPUGNED PROPERTY WAS NOT REGISTERED, VA LUE AS PER SRO IS NOT APPLICABLE AND HENCE THE A.O. WAS ON A WRONG FO OTING. THUS, THE FAIR MARKET VALUE AS ADOPTED BY THE A.O. IS NOT SAN CTIFIED AND AS SUCH THE SAME IS NOT SUSTAINABLE. AS REGARDS EXEMPTION U/S 54 OF THE ACT, THE CIT(A) HELD THAT THE ASSESSEE IS ELIGIBLE TO CL AIM EXEMPTION TOWARDS INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE PRO PERTY, WHETHER OR NOT THE SAID PROPERTY CONSTRUCTION WAS COMMENCED BEFORE THE DATE OF TRANSFER OF ASSET. THE CIT(A) FURTHER HELD THAT IT WAS IMMATERIAL THAT THE CONSTRUCTION OF THE NEW HOUSE WAS STARTED BEFOR E THE SALE FOR THE PURPOSE OF DEDUCTION U/S 54 OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 6. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE PROVISIONS OF SEC TION 50C OF THE ACT ARE APPLICABLE WHEN THE PROPERTY HAS BEEN TRANSFERR ED BY UN-POSSESSORY SALE-CUM-GPA. THE A.O. WAS OF THE OPINION THAT THE TRANSFER TOOK PLACE WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT, AS THE ASSESSEE HAS TRANSFERRED THE ASSET BY WAY OF UN-POSSESSORY SALE- CUM-GPA REGISTERED IN THE OFFICE OF SRO. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESSEE HAS SHOWN A CONSIDERATION OF ` 60 LAKHS, WHEREAS THE STAMP DUTY AUTHORITY HAS DETERMINED THE MARKET VALUE OF T HE PROPERTY AT ` ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 7 82,04,000/-. THE PROVISIONS OF SECTION 50C OF THE ACT ARE APPLICABLE, THE MOMENT THE SALE CONSIDERATION SHOWN IN THE SALE DEE D IS LESS THAN THE MARKET VALUE OF THE PROPERTY DETERMINED BY THE STAM P DUTY AUTHORITY. IT IS THE CONTENTION OF THE ASSESSEE THAT THE PROVI SION OF SECTION 50C OF THE ACT HAS NO APPLICATION AS THE PROPERTY IS NOT T RANSFERRED BY REGISTERED SALE DEED. THE ASSESSEE FURTHER CONTEND ED THAT HE HAD TRANSFERRED PROPERTY BY WAY OF UN-POSSESSORY SALE-C UM-GPA AND THE MARKET VALUE DETERMINED BY THE STAMP DUTY AUTHORITY IS NOT FINAL. THE ASSESSEE FURTHER CONTENDED THAT THOUGH THE SALE-CUM -GPA IS REGISTERED IN THE OFFICE OF THE SUB-REGISTRAR, THE ASSESSEE HA S NOT ACCEPTED THE VALUE DETERMINED BY THE SRO AND UNLESS THE SALE DEE D IS REGISTERED THE VALUE DETERMINED BY THE SRO IS NOT FINAL. THEREFOR E, THE A.O. WAS NOT CORRECT IN APPLYING THE PROVISIONS OF SECTION 50C O F THE ACT. 7. HAVING HEARD BOTH THE PARTIES AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD, WE FIND NO MERIT IN THE ARGUME NTS OF THE ASSESSEE FOR THE REASON THAT IT IS ILLOGICAL AND IMPROPER ON THE PART OF THE ASSESSEE TO SAY THAT THE TRANSFER WITHIN THE MEANIN G OF SECTION 2(47)(V) OF THE ACT TAKES PLACE, BUT NO APPLICATION OF PROVI SIONS OF SECTION 50C OF THE ACT, WHEN THE PROPERTY HAS BEEN TRANSFERRED BY WAY OF UN- POSSESSORY SALE-CUM-GPA. IT IS AN ADMITTED FACT TH AT THE ASSESSEE HAS ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 8 TRANSFERRED PROPERTY BY WAY OF REGISTERED SALE-CUM- GPA. THE ASSESSEE HAS COMPUTED LONG TERM CAPITAL GAIN BY ADOPTING SAL E 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 C ASE, ADMITTEDLY, THE ASSESSEE HIMSELF HAS ADMITTED LONG TERM CAPITAL GAI N ON TRANSFER OF ASSET. THE MOMENT TRANSFER TOOK PLACE WITHIN THE M EANING 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 TH E 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 F ACTS 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 M ARKET 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 ASS ESSEE HIMSELF HAS ADMITTED LONG TERM CAPITAL GAIN. THIS CLEARLY SHOW S THAT THE TRANSFER TOOK PLACE WITHIN THE MEANING OF SECTION 2(47)(V) O F THE ACT. THE MOMENT TRANSFER TOOK PLACE, THE DEEMING PROVISIONS PROVIDED IN SECTION 50C OF THE ACT ARE APPLICABLE WHEN THE SALE CONSIDE RATION SHOWN IN THE ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 9 SALE DEED IS LESS THAN THE VALUE DETERMINED BY THE STAMP DUTY AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. SINCE, T HERE IS A DIFFERENCE BETWEEN CONSIDERATION SHOWN IN THE SALE DEED AND TH E VALUE DETERMINED BY THE SRO, THE DEEMING PROVISIONS OF SECTION 50C O F THE ACT ARE CLEARLY APPLICABLE. THE CIT(A) WITHOUT APPRECIATING THE FA CTS SIMPLY OBSERVED THAT THERE IS NO APPLICATION OF THE PROVISIONS OF S ECTION 50C OF THE ACT. THEREFORE, WE REVERSE THE ORDER OF THE CIT(A) AND U PHOLD THE ACTION OF THE A.O. IN ADOPTING VALUE AS PER SECTION 50C OF TH E ACT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. 9. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE I S ELIGIBLE FOR CLAIMING EXEMPTION U/S 54 OF THE ACT. THE A.O. OBSERVED THA T THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXEMPTION U/S 54 OF THE ACT, FOR THE REASON THAT THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WAS COMME NCED BEFORE THE DATE OF TRANSFER OF ASSET. THE A.O. FURTHER OBSERV ED THAT THE ASSESSEE HAS COMMENCED THE CONSTRUCTION OF NEW HOUSE BEFORE THE TRANSFER OF ASSET AND ALSO HAS INVESTED AMOUNT OUT OF BORROWED FUND, THEREFORE NOT ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. IT IS T HE CONTENTION OF THE ASSESSEE THAT THE DATE OF COMMENCEMENT OF CONSTRUCT ION IS IMMATERIAL, BUT IT IS ONLY THE DATE OF COMPLETION OF CONSTRUCTI ON. AS PER THE ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 10 PROVISIONS OF SECTION 54 OF THE ACT, THE CONSTRUCTI ON OF NEW RESIDENTIAL HOUSE SHOULD BE COMPLETED WITHIN 3 YEARS FROM THE D ATE OF TRANSFER OF ORIGINAL ASSET, HOWEVER, THE SECTION DOES NOT PRESC RIBE ANY CONDITION AS TO DATE OF COMMENCEMENT OF CONSTRUCTION. 10. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FO R THE REASON THAT THE ACT DOES NOT PRESCRIBE ANY CONDITION AS TO THE DATE OF COMMENCEMENT OF CONSTRUCTION OF NEW HOUSE PROPERTY. THE ONLY CONDITION IS THAT CONSTRUCTION OF THE HOUSE PROPERT Y SHOULD BE COMPLETED WITHIN 3 YEARS FROM THE DATE OF TRANSFER. THE DATE OF COMMENCEMENT OF CONSTRUCTION IS IRRELEVANT AND THE CONSTRUCTION MAY BE COMMENCED EVEN BEFORE THE TRANSFER OF ASSET AS HELD BY THE HONBLE HIGH COURT OF DELHI, IN THE CASE OF CIT VS. BHARATHI MISHRA (2014) 222 T AXMAN 2. A SIMILAR VIEW WAS EXPRESSED BY THE HONBLE HIGH COURT OF KAR NATAKA, IN THE CASE OF CIT VS. J.R.SUBRAHMANYA BHAT (1987) 165 ITR 571, WHICH WAS IN TURN FOLLOWED BY THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. H.K. KAPOOR (1998) 234 ITR 753. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ELIGIBLE TO CLAIM EXEMPTI ON 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 AVAIL ABLE ON RECORD, WE ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 11 FIND THAT THE ASSESSEE HAS COMMENCED CONSTRUCTION O F NEW HOUSE PROPERTY IN THE MONTH OF NOVEMBER, 2004 AND COMPLET ED CONSTRUCTION IN THE MONTH OF MARCH, 2007. THE TRANSFER OF ASSET HA S 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 PURPOS E OF EXEMPTION U/S 54 OF THE ACT, THE FULL VALUE OF CONSIDERATION AS D EFINED UNDER THE PROVISIONS OF SECTION 50C OF THE ACT IS APPLICABLE OR ACTUAL CONSIDERATION RECEIVED AS A RESULT OF TRANSFER OF ASSET. SECTION 54 OF THE ACT PROVIDES FOR EXEMPTION WHERE THE ASSESSEE INVESTS NET SALE C ONSIDERATION FOR THE PURPOSE OF ACQUIRING NEW HOUSE, THEN THE COST OF NE W HOUSE SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE CAPITAL GAINS . THE TERM NET SALE CONSIDERATION HAS BEEN DEFINED TO MEAN THE FULL VAL UE OF THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TH E TRANSFER OF THE CAPITAL ASSET AFTER DEDUCTION OF ANY EXPENDITURE IN CURRED, WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER. SIMILARLY , THE PROVISIONS OF SECTION 50C OF THE ACT, COMES INTO OPERATION WHEN T HE SALE CONSIDERATION IS LESS THAN VALUE ADOPTED BY ANY AUT HORITY OF THE STATE ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 12 GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF TRANSFER OF ASSETS. 12. THE QUESTION IS WHETHER THE ASSESSEE NEEDS TO I NVEST THE NET SALE CONSIDERATION AS A RESULT OF TRANSFER OR THE FULL V ALUE OF CONSIDERATION AS DEFINED U/S 50C OF THE ACT. THE FULL VALUE OF CONS IDERATION AS DEFINED U/S 50C OF THE ACT IS A DEEMING CONSIDERATION WHICH IS APPLICABLE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN UNDER THE PR OVISIONS OF SECTION 48 OF THE ACT. THE NET SALE CONSIDERATION AS A RES ULT OF TRANSFER OF CAPITAL ASSET IS A CONSIDERATION RECEIVED OR ACCRUE D AS A RESULT OF TRANSFER. THERE IS DIFFERENCE BETWEEN NET SALE CON SIDERATION AND FULL VALUE CONSIDERATION. IN OUR CONSIDERED VIEW, IF TH E ASSESSEE INVESTS NET SALE CONSIDERATION FOR THE PURPOSE OF PURCHASE/CONS TRUCTION OF NEW RESIDENTIAL HOUSE PROPERTY, THEN HE IS ELIGIBLE FOR EXEMPTION U/S 54 OF THE ACT, EVEN THOUGH THE FULL VALUE OF CONSIDERATIO N IS MORE THAN THE NET SALE CONSIDERATION AS A RESULT OF TRANSFER. DEEMIN G FICTION AS PROVIDED U/S 50C OF THE ACT IN RESPECT OF THE WORDS FULL VAL UE OF CONSIDERATION IS TO BE APPLIED ONLY TO SECTION 48 OF THE ACT AND THE REFORE MEANING OF FULL VALUE OF CONSIDERATION AS REFERRED TO IN EXPLANATIO N TO SECTION 54F(1) OF THE ACT IS NOT GOVERNED BY THE MEANING OF THE WORDS FULL VALUE OF CONSIDERATION AS MENTIONED IN SECTION 50C OF THE AC T AS HELD BY THE ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 13 COORDINATE BENCH OF ITAT JAIPUR IN THE CASE OF GYAN CHAND BATRA VS. ITO (2010) 6 ITR 147. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: FROM SUB-S. (1) OF S. 50C, IT IS CLEAR THAT IN CASE THE CONSIDERATION RECEIVED IS LESS THAN THE VALUE ADOPTED BY STAMP VA LUATION AUTHORITY THEN THE VALUE SO ADOPTED IS TO BE TAKEN AS FULL VALUE O F 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 ARTIFIC IAL MEANING OF FULL VALUE OF THE CONSIDERATION HAS BEEN GIVEN IN S. 50C FOR T HE 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 R EFERRED TO S. 48 IN S. 50C FOR ADOPTING THE SAME VALUE MARKET VALUE. HENCE, TH E 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 CO NSIDERATION MENTIONED IN OTHER PROVISIONS OF THE ACT ARE NOT GOVERNED BY THE MEANING OF FULL VALUE CONSIDERATION AS CONTAINED IN S. 50C. THE NATURAL M EANING OF FULL VALUE OF CONSIDERATION REFERS TO CONSIDERATION SPECIFIED IN THE SALE DEED. HENCE, FOR THE MEANING OF FULL VALUE OF CONSIDERATION MENTIONE D IN DIFFERENT PROVISIONS OF THE ACT EXCEPT IN S. 48, ONE WILL HAV E TO CONSIDER TI VALUE OF CONSIDERATION AS SPECIFIED IN SALE DEED. CIT VS. S MT. NILOFER I. SINGH (2009) 22 (DEL) 277: (2008) 14 DTR (DEL) 108: (2009 ) 309 ITR 233 (DEL) RELIED ON. (PARA 7.1) IN EXPLANATION TO S. 54F(1), IT IS MENTIONED THAT NE T CONSIDERATION MEANS THE FULL VALUE A CONSIDERATION RECEIVED OR AC CRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS REDUCED BY ANY EXP ENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. T HE MEANING OF FULL VALUE OF CONSIDERATION IN EXPLANATION TO S. 54F(1) WILL N OT BE GOVERNED BY MEANING O WORDS 'FULL VALUE OF CONSIDERATION' AS ME NTIONED IN S. 50C. THE VALUE ADOPTED FOR STAMP DUTY IS TO BE CONSIDERED AS FULL VALUE OF CONSIDERATION FOR THE PURPOSE OF COMPUTING THE CAPI TAL GAINS UNDER S. 48. SEC. 54F(1) SAYS THAT CAPITAL GAINS IS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SUB-CLS. (A) AND (B) OF S. 54F(1) . IN THE INSTANT CASE, THE COST OF NEW ASSET IS NOT LESS THAN THE NET CONSIDER ATION THUS THE WHOLE OF ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 14 THE CAPITAL GAINS WILL NOT BE CHARGED EVEN IF THE C APITAL GAINS HAS BEEN COMPUTED BY ADOPTING THE VALUE ADOPTED BY STAMP REG ISTRATION AUTHORITY. IT IS CLEARLY MENTIONED IN S. 54F(4) ALSO THAT NET C ONSIDERATION WHICH IS NOT APPROPRIATED TOWARDS THE PURCHASE OF NEW ASSET THE SAME IS TO BE TAXED IN CASE SUCH NET CONSIDERATION NOT APPROPRIATED IS NOT DEPOSITED IN THE CAPITAL GAIN ACCOUNT. IT IS NOT NECESSARY THAT THE NEW ASSET SHOULD BE GOT REGISTERED BEFORE FILING OF THE RETURN. THE REQUIRE MENT OF LAW IS THAT NET CONSIDERATION IS REQUIRED TO BE APPROPRIATED TOWARD S THE PURCHASE OF THE NEW ASSET. THUS DEDUCTION UNDER S. 54F IS CLEARLY A PPLICABLE. DEEMING PROVISIONS AS MENTIONED IN S. 5OC WILL NOT BE APPLI CABLE TO S. 54F SO FAR AS THE MEANING OF FULL VALUE OF CONSIDERATION IS CONCE RNED AS DEEMING PROVISION MENTIONED IN S. 50C IS FOR SPECIFIC ASSET AND FOR THE PURPOSE OF S. 48. HENCE THE ASSESSEE IS ENTITLED FOR DEDUCTION UN DER S. 54F.CIT VS. ACE BUILDERS (P) LTD. (2005) 195 CTR (BORN) 1 . (2006) 281 ITR 210 (BORN) AND CIT VS. ASSAM PETROLEUM INDUSTRIES (P) LTD. (2003) 185 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 P URCHASE OF NEW RESIDENTIAL HOUSE. IN THE PRESENT CASE ON HAND, TH E 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, W E ARE OF THE VIEW THAT ITA NO.206/VIZAG/2013 DR. CHALASANI MALLIKARJUNA RAO, VIJAYAWADA 15 THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 54 OF TH E 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 PROVISIO N OF SECTION 50C OF THE ACT. THEREFORE, WE DIRECT THE A.O. TO ALLOW TH E EXEMPTION U/S 54 OF THE ACT. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21 ST OCT16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 21.10.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-2(1), CENTRAL R EVENUE BUILDINGS, M.G. ROAD, VIJAYAWADA 2. / THE RESPONDENT DR. CHALASANI MALLIKARJUNA RAO, PROP. VENNELA TALLI PILLALA VAIDYASALA, NEAR BENZ CIRCLE, VIJAYAWADA. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM