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2013 (1) TMI 237 - AT - Income TaxDeduction u/s 54F - allowable with reference to sale consideration actually received on sale of plot of land at Lonavala reinvested in construction of the residential house OR the full value of consideration deemed to have been received as adopted by the AO - whether the appellant was entitled to deduction u/s 54F in respect of construction of only one of the two floors constructed above the existing residential house when the appellant explained that both the floors constituted one house only? - Held that:- Provisions of section 54F (1) states that the provisions of section (a) and (b) read with the explanation on 'net consideration' decides if any chargeable capital gains u/s 45 exists or not subject to the conditions specified therein. As per the provisions of section 54F(1)(a) no capital gains are chargeable u/s 45 if the cost of the cost of the new asset is not less than the net consideration in respect of the original asset. The principle of proportionate exemption vide clause (b) above is put into service. It is a settled issue that the provisions of section 54F are code by itself. Thus, provisions of sections 45, 48, 50C and 54F suggest that there is nothing to bar benefits of exemption u/s 54F in respect of the capital gains relatable to the FVC as per the deemed fiction u/s 50C. Clause (a) of section 54F(1) specifies that if the cost of the new asset is not less than the net consideration in respect of the original asset, there is no chargeable capital gains u/s 45. In the instant case, the cost of the new asset is Rs. 17,65,752/- and 'net consideration' as defined is '..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' i.e. Rs. 16,87,000 as per sec 50C and Rs. 8 lakhs as per the sale deed. The said clause (a) refers to the provisions of section 45. In the given facts of the instant case, no chargeable capital gains arises u/s 45, thus, in this case, with investment of Rs. 17,65,752/- in new asset, the cost of the new asset is not less than the net consideration (NC) in respect of the original asset. Of course, the 'net consideration' has two variants depending on FVC adopted and in this case, the NCs are quantitatively lesser than the cost of the new asset leaving no chargeable capital gains u/s 45. Therefore, the assessee is not chargeable to any capital gains considering the given facts of the case and also the said clause (a) of section 54F(1). The cost of the new asset is Rs. 24 lakhs and 'net consideration' as defined is '..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' i.e. Rs. 36 lakhs as per sec 50C and Rs. 20 lakhs as per the sale deed. Therefore, it is case where the cost of the new asset is not less than net consideration u/s 50C and more than the net consideration as per the sale deed. Therefore, the decision of the Tribunal in this case is distinguishable on facts. Therefore, clause (a) of section 54F(1) of the Act does not apply. Where the assessee invested total full value consideration of Rs. 16,87,000/- (as per the SRO) in the residential house, which is one house only as it has only one kitchen, and these FVC is less than the invested amounts of 17,65,752/-, during the specified period, the assessee is not chargeable to tax on the capital gains u/s 45. Therefore, considering the provisions of section 54F(1)(a) the order of the CIT(A) is not proper in denying exemption in respect of the capital gains relatable to the deemed full value of the consideration mentioned in section 50C of the Act. Accordingly, the grounds raised by the assessee are allowed and in favour of the assessee.
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