Smt.Barnali Dhar, Kolkata V. A.C.I.T.,Circle-34, Kolkata

ITA 2193/KOL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8338 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 22-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Principle of natural justice; Cost of acquisition; Fair market value; Capital Gains
• Section: 139; 143(3); 50C; 54F; 142(1); 143(2); 55A; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “B”, KOLKATA BEFORE SHRI MANISH BORAD, HON’BLE ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, HON’BLE JUDICIAL MEMBER ITA No.2193/Kol/2019 Assessment Year: 2015-16 Smt. Barnali Dhar C/o. S.D. Verma, Advocate, 2 nd Floor, 7, Rabindra Sarani, Kolkata – 700 001. PAN: AJPPD 6989 D Vs. ACIT, CIRCLE-34, Kolkata (Appellant) (Respondent) Present for: Appellant by : None Respondent by : Smt. Ranu Biswas, ACIT, DR Date of Hearing : 21.04.2022 Date of Pronouncement : 12.07.2022 O R D E R PER SONJOY SARMA, JM: This is an appeal filed by the assessee pertaining to the assessment year (in short ‘A.Y.’) 2015-16 is directed against the order of Ld. CIT(A)- 10, Kolkata dated 30.07.2019 which is arising out of the assessment order passed u/s 143(3) of the Income Tax Act, 1961(in short ‘the Act’) dated 27.12.2017. The assessee in this appeal has taken the following grounds of appeal: “1. That in the facts and in the circumstances of the case and in law, the Ld. CIT(A)- 10 was not justified in not deleting a sum of Rs. 9933057/- being the amount wrongly included by the appellant under the head capital gain, while filing return of income whereas as per section 54F no amount is liable to be taxed. 2. The appellant craves leave to add/alter or modify any grounds of appeal at hearing stage.” ITA No.2193/KOL/2019 Smt. Barnali Dhar A.Y. 2015-16 2 2. Brief facts of the case are that the return of income was e-filed by assessee on 25.08.2015 declaring total income of Rs. 1,01,41,590/-. The case of the assessee was selected for scrutiny through CASS. Accordingly, notice u/s 143(2) & 142(1) of the I.T. Act, 1961 were issued to assessee, in response to the same, the ld. AR appeared and submitted balance sheet, profit and loss account and the details as requisitioned in notice. 3. During the course of assessment proceedings, it was observed that the assessee has realized capital gain of Rs. 2,15,90,819/-. The calculation of which is as under: Full value of consideration Rs. 10,46,60,259/- Deduction u/s 48 Rs. 8,30,69,440/- LTCG Rs. 2,15,90,819/- Deduction claimed u/s 54F Rs. 1,16,57,762/- It was observed that the amount invested in new property by the assessee is Rs. 1,16,57,762/- and the entire amount is claimed as deduction.” 4. However, according to the AO deduction can be claimed u/s 54F is as under: “Amount of exemption = Capital Gain x cost of new house Net Consideration = 2,15,90,819+1,16,57,762 10,46,60,259 Rs. 24,04,928/- 5. Dissatisfied with the order passed by the AO, assessee preferred an appeal before the ld. CIT(A) raising the following grounds: “i. That the action of the ld. Assessing Officer in disallowing a sum of Rs. 9252834/- under section 54F out of total claim of Rs. 11657762/- as made in the return of income, is arbitrary and uncalled for. ii. The ld. Assessing Officer was duty bound to make a reference to valuation officer as per express provisions contained under section 50C(2) and thus assessment framed without such reference is null and void and amounts to miscarriage of justice. iii. That the ld. Assessing Officer has erred in law in making a reference to the valuation officer under section 55A without granting any opportunity to the appellant of being heard which is against the principles of natural justice and thus the assessment so framed in liable to be quashed. ITA No.2193/KOL/2019 Smt. Barnali Dhar A.Y. 2015-16 3 iv. That the appellant craves leave to add or alter or modify any other ground or appeal at the hearing stage.” 6. However, the ld. CIT(A) partly allowed the appeal with the following observation: “1. I have carefully considered the submissions of the appellant in the backdrop of the observations recorded by the Ld. AO in the impugned order. It is noted that the assessee had sold an immovable property for a consideration of Rs.1,00,00,000/- whereas the deemed value u/s 50C was Rs. 10,46,60,259/-. Thè cost of acquisition of the property adopted was the FMV as on 01.04.1981 and the indexed cost of acquisition worked out to Rs. 8,30,69,440/-. The gross capital gain accordingly worked out to Rs.2,15,90, 819/-. From the facts on record it is noted that the aforesaid computation of gross capital gain of Rs.2,15,90, 819/- is neither disputed by the Ld. AO or the appellant. Against the gross Long Term Capital Gain, the appellant had claimed deduction of Rs.1, 16,57,762/- u/s 54F of the Act and accordingly declared the net taxable capital gain of Rs.99,33,057/- in the return of income. It was the appellant's case that her case fell within the ambit of Section 54F(a) and that since cost of new asset was not lower than the actual sale proceeds; the appellant was entitled to deduction of Rs.1,16,57,762/-. The Ld. AO in her impugned order was however not agreeable to the manner of computation of the deduction u/s 54F of the Act. Accordingly the Ld. AO the net consideration" for thee purposes of Section 54F ought to be the deemed stamp duty value of Rs.10,46,60,259/- substituted for the full value of consideration u/s 50C and not the actual proceeds of Rs.1,00,00,000/- received by the appellant. Hence, the Ld. AO concluded that the case of the appellant fell under Section 54F(b) and hence worked out the proportionate deduction at Rs.24,04,928/- as opposed to Rs.1,16,57,762/- claimed by the appellant thereby resulting in net addition to the taxable LTCG of Rs.92,52,834/-.” 7. At the time of hearing the ld. AR submitted that the ld. CIT(A) did not decide core issue in connection with the appeal as appellant invested an aggregate sum of Rs. 1,16,57,772/- against net consideration of Rs. 1,00,00,000/- and thus no gain is taxable under the head of capital gain, since the assessee’s entire net consideration was invested in u/s 54F and accordingly no income is chargeable under the head of capital gain though the appellant has included a sum of Rs. 99,33,057/- (LTCG Rs. 2,15,90,819/- - Rs. 1,16,57,762/-) due to wrong impression of law and it should be excluded. On the other hand, ld. DR vehemently opposed the submission made by the ld. AR and he supported the decision made by the ld. CIT(A). ITA No.2193/KOL/2019 Smt. Barnali Dhar A.Y. 2015-16 4 8. We after hearing the rival submission of parties and material available on record and going through the decision of the Co-ordinate Bench of ITAT, Jaipur in the case of ITO, Ward -2(1), Ajmer vs Shri Raj Kumar Parashar involving similar facts circumstances as involved in the present case. In the decided case also the assessee had sold an immovable property for a consideration of Rs.24,60,000/- whereas the actual investment in the property was Rs.24,63,610/-. The market value of the property determined for stamp duty purposes was Rs.96,30,000/-. The assessee had claimed that his case fell under Section 54F(a) and therefore claimed the entire sum of Rs.24,60,000/- by way of deduction u/s 54F of the Act. The Ld. AO however held that the 'net consideration' for the purposes of Section 54F has to be read with Section 50C and therefore held that the assessee's case fell under Section 54F(b) and allowed proportionate deduction. On appeal the Hon'ble Tribunal upheld the contention of the assessee by observing as under: “8. We have heard the rival contentions and perused the material available on record. Firstly, it is not in dispute that the AO has rightly taken the full value of consideration as determined by the stamp duty authorities as per explicit provisions of section 50C of the Act and has determined the long term capital gains of Rs 94,60, 800 after providing indexed cost of acquisition. 9. The limited controversy revolves around determination of extent or deduction under section 54F to the assessee. As per Revenue, the AO has rightly allowed the benefit of deduction u/s 54F to the assessee to the extent of actual investment of Rs 24,60,000 in the new house property. Per contra, the contention of the assessee is that where the whole of the actual sale consideration of Rs 24,60, 000 has been invested in the new house property, the whole of the capital gains, even though worked out in terms of section 50C of the Act, would be eligible for deduction under section 54F of the Act and the assessee is not liable to pay any capital gains tax. 10. To appreciate the issue under consideration, we refer to the provisions of section 54F which reads as under: “54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, ITA No.2193/KOL/2019 Smt. Barnali Dhar A.Y. 2015-16 5 within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date Constructed, one residential house in India (hereafter in this section referred to as the net asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Explanation.-For the purposes of this section- "net consideration" in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or Construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset.” 11. On perusal of the above provisions, it is clear that the where the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45. What is therefore relevant is the investment of the net consideration in respect of the original asset which has been transferred and where the net Consideration is fully invested in the new asset, the whole of the capital gains shall not be charged under section 45 of the Act. The net consideration for the purposes of section 54F has been defined as the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred ITA No.2193/KOL/2019 Smt. Barnali Dhar A.Y. 2015-16 6 wholly and exclusively in connection with such transfer. In other words, the consideration which is actually received or accrued as a result of transfer has to be invested in the new asset. In the instant case, undisputedly, the consideration which has accrued to the assessee as per the sale deed is Rs 24,60,000 and the whole of the said consideration has been invested in the capital gains accounts scheme for purchase of the new house property which is again not been disputed by the Revenue. The consideration as determined under section 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee. Rather, it is a value which has been deemed as full value of consideration for the limited purposes of determining the income chargeable as capital gains under section 48 of the Act. Therefore, in the instant case the provisions of section 54F(1)(a) are complied with by, the assessee and the assessee shall be eligible for deduction in respect of the whole of the capital gains so computed under section 45 read with section 48 and section 50C of the Act. The decisions of the Coordinate Benches as referred supra support the case of the assessee. The subject issue was not for consideration before the Hon'ble Karnataka High Court and hence, the same doesn't support the case of the revenue. We are therefore of the considered view that the provision of section 50C(1) of the Act are not applicable to section 54F for the purpose of determining the meaning of full value of consideration. 12. In the result, the appeal filed by the Revenue is dismissed. 3. Following the above decision of the Hon’ble ITAT, Jaipur (supra), I therefore held that the assessee’s claim of deduction u/s 54F was correct and as per law. The provisions of section 50C could not be read into section 54F and therefore the term ‘net consideration’ ought to be understood to mean the actual sale proceeds. Accordingly, the AO is directed to allow the deduction u/s 54F as claimed by the appellant in his return of income. 4. Since the initial contention of the appellant regarding claim of deduction u/s 54F has been upheld, the alternative grounds involving application of section 50C(2), reference to DVO have become academic in nature and are therefore dismissed an infructuous. In the final result, appeal filed by the appellant is treated as “partly allowed”. 9. We are going through the above decision of the Co-ordinate Bench and perusing the material available on record of the considered view that the net consideration is fully invested in new asset, the whole capital gain should not be charged under section 45 of the Act, considering the given facts and circumstances of the case, we, therefore, delete ITA No.2193/KOL/2019 Smt. Barnali Dhar A.Y. 2015-16 7 addition of Rs. 99,33,057/- being the amount wrongly included by the appellant under the head capital gain, and considering the same as per section 54F of the Act, no amount is liable to be taxed. Accordingly, appeal of the assessee is allowed. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 12.07.2022. Sd/- Sd/- (MANISH BORAD) (SONJOY SARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Kolkata, Dated: 12.07.2022 Biswajit, Sr. P.S. Copy to: 1. The Appellant: Smt. Barnali Dhar. 2. The Respondent: ACIT, Circle-34, Kolkata.ACIT, Circle-34, Kolkata. 3. The CIT, Concerned, 4. The CIT (A) Concerned, 5. The DR Concerned Bench //True Copy// [ By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata