A.Shajahan Sait, CHENNAI V. DCIT, CHENNAI

ITA 34/CHNY/2017

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7430 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 05-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value; Revised return; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 50C; 54F; 48; 22

Judgement Text

, A/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL A/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NO.34 /MDS./2017 ( / ASSESSMENT YEAR :2012-13) A.SHAJAHAN SAIT, 15/23, CHAMIERS ROAD, NANDANAM CHENNAI 600 035. VS. THE DCIT, NON-CORPORATE CIRCLE-2, CHENNAI 35. PAN AAVPS 9917 P ( / APPELLANT ) ( / RESPONDENT ) ! ' # / APPELLANT BY : MR.ABHISHEK MURALI,ADVOCATE $% ! ' # / RESPONDENT BY : MR.ASHISH TRIPATHI, JCIT,DR & ' ' ( ) / DATE OF HEARING : 16.03.2017 *+ ' ( ) /DATE OF PRONOUNCEMENT : 22.03.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-2, CHENNA I DATED 28.10.2016 PERTAINING TO ASSESSMENT YEAR2012-13. ITA NO. 34/MDS/2017 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS F OR OUR CONSIDERATION. A) THE LD.CIT(A) ERRED IN CONFIRMING THAT DEDUCTI ON U/S.54F SHOULD BE ALLOWED PROPORTIONATELY BY CONSIDERING T HE VALUE ADOPTED FOR STAMP DUTY PURPOSES U/S.50C AS NET CONSIDERATION. B) THE LD.CIT(A) ERRED IN NOT APPRECIATING THAT THE DEEMING PROVISIONS CONTAINED IN SEC.50C CANNOT BE IMPORTED FOR THE PURPOSE OF EXPLAINING THE MENAING OF THE NET CONSI DERATION MENTIONED IN EXPLANATION U/S.54F(1) OF THE ACT, SIN CE HE DEEMING FICTION OF SEC.50C IS LIMITED FOR THE SPECI FIC PURPOSE OF SEC.48 OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT THE DEEMED CONS IDERATION U/S.50C CANNOT BE INVESTED IN THE NEW HOUSE PROPERT Y AS THE SAME WAS NOT RECEIVED AND THE ACTUAL CONSIDERATION RECEI VED SHOULD BE TAKEN AS THE FULL VALUE OF CONSIDERATION FOR INVEST MENT U/S.54F OF THE ACT. ACCORDING TO ASSESSEE, THE DEEMING FICTION CRE ATED BY VIRTUE OF SEC.50C IN DETERMINING CAPITAL GAINS CANNOT BE EX TENDED TO SEC.54F OF THE ACT. BEFORE THE AO, THE ASSESSEE CONTENDED THAT CAPITAL GAINS ITA NO. 34/MDS/2017 3 ARISING FROM TRANSFER OF ANY LONG TERM CAPITAL GAIN S ASSET FOR THE PURPOSE OF SEC.54F HAS TO BE WORKED OUT BY APPLYING SEC.48 WITHOUT IMPOSING SEC.50C INTO IT IN THE STRENGTH OF THE FOL LOWING CASE LAWS:- A) IN THE CASE OF PRAKASH KARNWAT VS. ITO IN 49 SOT 160 (JAIPUR- TRIB) B) IN THE CASE OF GYAN CHAND BATRA VS ITO IN 8 TAXM AN.COMM 22(JAIPUR) 3.1 THE LD. ASSESSING OFFICER HAD NOT ACCEPTED THE CONTENTION OF THE ASSESSEE. ACCORDING TO THE AO, FIRSTLY THE FUL L VALUE OF THE CONSIDERATION ON THE TRANSFER OF THE PROPERTY HAS T O BE DETERMINED, BY APPLYING THE APPROPRIATE PROVISIONS. IN THIS CAS E, THE AO INVOKED THE PROVISIONS OF THE SECTION 50C OF THE ACT SINCE THE VALUE ADOPTED FOR STAMP DUTY PURPOSES I.E. ` 52,88,105/- IS MUCH HIGHER THAN THAT CLIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE I.E. ` 15,00,000/-. THUS, THE AO HAD ADOPTED THE SUM OF ` 52,88,105/- AS THE NET CONSIDERATION. THE AO HAD PROCEEDED TO ALLOW DEDUCT ION U/S.54F, TO THE EXTENT OF INVESTMENT MADE BY THE ASSESSEE IN CO NSTRUCTING A SEPARATE FLOOR IN THE EXISTING HOUSE, TO THE TUNE O F 15,40,000/- FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT ITA NO. 34/MDS/2017 4 VS. P.V.NARISMHAN (47 TAXMAN 89)(MAD.). AGGRIEVED, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE JAIPUR BENCH IN THE CASE OF GYAN CHAND BATRA VS ITO IN (2010) 133 T TJ 0482 WHEREIN THE TRIBUNAL HELD AS UNDER:- 7.1 FROM THE ABOVE SUB-SECTION, 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 S. 48 OF THE ACT. 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 'DEE M' 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 P RINCIPLES 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 OF THE IT ACT FOR THE PURPOSE OF S. 48 OF THE IT ACT. ONE IS ENTITLED TO ASCERTAIN THE PURPOSE FOR CREATING A STATUTORY FICTION. AFTER ASCERTAININ G THE PURPOSE, FULL EFFECT MUST BE GIVEN TO THE STATUTORY FICTION AND IT SHOUL D BE CARRIED TO ITS LOGICAL CONCLUSION AND TO THAT END, IT WOULD BE PROPER AND EVEN NECESSARY TO ASSUME ALL THOSE FACTS ON WHICH ALONE FICTION CAN O PERATE. THE LEGISLATURE ITA NO. 34/MDS/2017 5 IN ITS WISDOM HAS REFERRED TO S. 48 OF IT ACT IN S. 50C FOR ADOPTING THE SAME VALUE AS FAIR MARKET VALUE. HENCE, THE DEEMING FICTION AS PROVIDED IN S. 50C IN RESPECT OF THE WORDS 'FULL VALUE OF CO NSIDERATION' IS TO BE APPLIED ONLY FOR S. 48 OF THE IT ACT. THE WORDS 'FU LL VALUE OF CONSIDERATION' AS MENTIONED IN OTHER PROVISIONS OF THE ACT ARE NOT GOVERNED BY THE MEANING OF FULL VALUE OF CONSIDERATION AS CONTAINED IN S. 50C OF THE IT ACT. THE NATURAL MEANING OF FULL VALUE OF CONSIDERATION REFERS TO CONSIDERATION SPECIFIED IN THE SALE DEED. THE HON'BLE DELHI HIGH COURT IN THE CASE CIT VS. SMT. NILOFER I. SINGH (2009) 221 CTR (DEL) 277: (2008) 14 DTR (DEL) 108: (2009) 309 ITR 233(DEL) HAD HELD THAT FULL VAL UE OF CONSIDERATION REFERS TO THE CONSIDERATION SPECIFIED IN THE SALE D EED. FOR DECIDING THE MEANING OF WORDS 'FULL VALUE OF CONSIDERATION', THE HON'BLE DELHI HIGH COURT HAS REFERRED TO THE DECISION OF HON'BLE APEX COURT AT P. 237 AS UNDER : 'THIS CONTROVERSY HAS ALREADY BEEN SETTLED BY THE S UPREME COURT IN THE CASE OF CIT VS. GEORGE HENDERSON & CO. LTD. (1967) 66 ITR 622(SC), THE VERY EXPRESSION 'FULL VALUE OF CONSIDE RATION' WAS UNDER CONSIDERATION OF THE SUPREME COURT IN THE CON TEXT OF THE PROVISIONS OF THE INDIAN IT ACT, 1922. THE PROVISIO NS OF S. 12B OF THE 1922 ACT PERTAIN TO CAPITAL GAINS. SUB-S. (1) W AS IN PARI MATERIA TO S. 45(1) OF THE PRESENT ACT AND SUB-S. ( 2) OF S. 12B OF THE 1922 ACT WAS IN PARI MATERIA TO THE PROVISIONS OF S. 48 OF THE PRESENT ACT. THE SUPREME COURT WAS OF THE VIEW THAT THE EXPRESSION 'FULL VALUE OF CONSIDERATION' IN THE MAI N PART OF S. 12B(2) OF THE ACT CANNOT BE CONSTRUED AS HAVING A R EFERENCE TO THE MARKET VALUE OF THE ASSET TRANSFERRED BUT THE E XPRESSION ONLY MEANT, THE FULL VALUE OF A CONSIDERATION RECEIVED B Y THE TRANSFEROR IN EXCHANGE OF THE CAPITAL ASSET TRANSFERRED BY HIM . THE SUPREME COURT ALSO OBSERVED THAT IN THE CASE OF A SALE THE FULL VALUE OF CONSIDERATION IS THE FULL SALE PRICE ACTUALLY PAID. IT WAS FURTHER OF THE VIEW THAT THE EXPRESSION 'FULL VALUE' MEANS THE WHOLE PRICE WITHOUT ANY DEDUCTION, WHATSOEVER, AND IT CANNOT RE FER TO THE ADEQUACY OF THE PRICE BARGAINED FOR. NOR DID IT HAV E ANY NECESSARY REFERENCES TO THE MARKET VALUE OF THE CAPITAL ASSET WHICH IS THE SUBJECT-MATTER OF THE TRANSFER.' ITA NO. 34/MDS/2017 6 HENCE, FOR THE MEANING OF FULL VALUE OF CONSIDERATI ON AS MENTIONED IN DIFFERENT PROVISIONS OF THE ACT EXCEPT IN S. 48, ON E WILL HAVE TO CONSIDER THE FULL VALUE OF CONSIDERATION AS SPECIFIED IN SALE DE ED. 7.2 BEFORE ASCERTAINING AS TO HOW THE DEDUCTION UND ER S. 54F IS TO BE GIVEN, IT WILL BE USEFUL TO REPRODUCE S. 54F(1) : ' 54F. (1) SUBJECT TO THE PROVISIONS OF SUB-S. (4), W HERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR AN HUF, THE C APITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, N OT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS, WITHIN A PERIOD OF ON E 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 DA TE CONSTRUCTED, A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERR ED TO AS THE NEW ASSET), THE CAPITAL GAIN SHALL BE DEALT WITH IN ACC ORDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SA Y,' (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN T HE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER S. 45; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE N ET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPIT AL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION A S THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION, SHALL NOT BE CHARGED UNDER S. 45 : PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY WHERE' (A) THE ASSESSEE' (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE, OTHER THA N THE NEW ASSET, ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR ITA NO. 34/MDS/2017 7 (II) PURCHASES ANY RESIDENTIAL HOUSE, OTHER THAN TH E NEW ASSET, WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET; OR (III) CONSTRUCTS ANY RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF THREE YEARS AFTER THE DATE OF TR ANSFER OF THE ORIGINAL ASSET; AND (B) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER T HAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET, IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PRO PERTY'. 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 REDU CED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER. ' 7.3 IN EXPLANATION TO S. 54F(1), IT IS MENTIONED TH AT NET CONSIDERATION MEANS THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AS RE DUCED BY ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. THE MEANING OF FULL VALUE OF CONSIDERATION IN EXPLANATIO N TO S. 54F(1) WILL NOT BE GOVERNED BY MEANING OF WORDS 'FULL VALUE OF CONS IDERATION' AS MENTIONED IN S. 50C. THE VALUE ADOPTED FOR STAMP DU TY IS TO BE CONSIDERED AS FULL VALUE OF CONSIDERATION FOR THE P URPOSE OF COMPUTING THE CAPITAL GAINS UNDER S. 48. SEC. 54F(1) SAYS THAT CA PITAL GAINS IS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SUB-SS. ( A) AND (B) OF S. 54F(1) OF THE ACT. IN THE INSTANT CASE, THE COST OF NEW AS SET IS NOT LESS THAN THE NET CONSIDERATION THUS THE WHOLE OF THE CAPITAL GAI NS WILL NOT BE CHARGED EVEN IF THE CAPITAL GAINS HAS BEEN COMPUTED BY ADOP TING THE VALUE ADOPTED BY STAMP REGISTRATION AUTHORITY. IT IS CLEA RLY MENTIONED IN S. 54F(4) ALSO THAT NET CONSIDERATION WHICH IS NOT APP ROPRIATED TOWARDS THE PURCHASE OF NEW ASSET THEN 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 SHO ULD BE GOT REGISTERED BEFORE FILING OF THE RETURN. THE REQUIREMENT 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. ITA NO. 34/MDS/2017 8 7.4 WE HAVE ALSO CONSIDERED THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDERS (P) LTD. (SUPRA ). SEC. 50 OF THE IT ACT PROVIDES THAT CAPITAL GAINS ON SALE OF DEPRECIABLE ASSET IS TO BE DEEMED AS SHORT-TERM CAPITAL GAINS . THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT FICTION LIMITED TO S. 50 WILL APPLY TO COMPUTATION OF CAPITAL GAINS AND NOT TO EXEMPTION PROVISIONS. FOR ALLOWING DEDUCTION UNDER S. 54E, ONE WILL HAVE NO DISTINCTION BETWEEN DEPRECIABLE ASSET AND NON-DE PRECIABLE ASSET. HENCE, IT IS CLEAR THAT DEEMING FICTION MENTIONED I N ONE SECTION WILL NOT AUTOMATICALLY APPLY TO ALL THE PROVISIONS. IN CASE DEEMING FICTION HAS BEEN CREATED IN SPECIFIC PROVISION OF THE ACT THEN HON'B LE GAUHATI HIGH COURT IN THE CASE OF CIT VS. ASSAM PETROLEUM INDUSTRIES (P) LTD. (SUPRA) ALSO HELD THAT S. 54E IS NOT CONTROLLED BY S. 50. HENCE DEEMIN G PROVISIONS AS MENTIONED IN S. 50C WILL NOT BE APPLICABLE TO S. 54 F SO FAR AS THE MEANING OF FULL VALUE OF CONSIDERATION IS CONCERNED AS DEEM ING PROVISION MENTIONED IN S. 50C IS FOR SPECIFIC ASSET AND FOR THE PURPOSE OF S. 48 OF IT ACT, 1961. 7.5 WE ARE AWARE THAT HON'BLE APEX COURT IN THE CA SE OF GOETZE (INDIA) LTD. VS. CIT (2006) 204 CTR (SC) 182: (2006 ) 284 ITR 323(SC) HAS HELD THAT THE AO HAS NO POWER TO ENTERTAIN A CL AIM MADE OTHERWISE THAN BY WAY OF REVISED RETURN . IT WAS MADE CLEAR T HAT THE DECISION IS RESTRICTED TO THE POWER OF THE AO TO ENTERTAIN THE CLAIM FOR DEDUCTION OTHERWISE THAN BY REVISED RETURN AND DID NOT IMPING E ON THE POWER OF THE TRIBUNAL UNDER S. 254 OF THE ACT. REFERENCE HAS BEE N MADE TO THE DECISION OF NATIONAL THERMAL POWER COM. LTD. VS. CIT (19 99) 157 CTR (SC) 249. IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED THE D EDUCTION UNDER S. 54F BEFORE THE LEARNED CIT(A) AND THE LEARNED CIT(A) HA S ENTERTAINED SUCH CLAIM. THEREFORE, THE ISSUE OF CLAIM CAN BE CONSIDE RED. HENCE WE HOLD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER S . 54F OF THE ACT. ALTERNATIVELY, THE CLAIM OF THE ASSESSEE IN RESTRIC TING THE CAPITAL GAINS TO THE EXTENT OF RS.1,39,377 IS CORRECT. SINCE WE ARE HOLDING THAT THE ASSESSEE IS ENTITLED TO GET DEDUCTION FOR THE ENTIR E CAPITAL GAINS UNDER S. 54F, THEREFORE, THE ALTERNATIVE CLAIM IS NOT CONSID ERED. 4.1 IN VIEW OF THE ABOVE, IN OUR OPINION THE PROVI SIONS OF THE SECTION 54F OF THE ACT ARE CODE ITSELF. THERE IS NO THING TO BAR BENEFITS OF EXEMPTION U/S.54F OF THE ACT IN RESPECT OF THE CAPITAL ITA NO. 34/MDS/2017 9 GAINS RELATABLE TO THE FAIR VALUE OF CONSIDERATION AS PER THE DEEMED FICTION U/S.50C OF THE ACT. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 22 ND MARCH, 2017 AT CHENNAI. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND MARCH , 2017 . 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