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2021 (11) TMI 1160 - AT - Income TaxQuantum of Investment in house Property for Computation of Exemption u/s 54F - adopting deemed sale consideration as per provisions of section 50C - As submitted when the assessee has objected for adopting deemed sale consideration, as per provisions of section 50C the AO ought to have referred matter to the Departmental Valuation Officer and further adopt value as determined by the DVO - HELD THAT:- From plain reading of sub-section (1) & (2) of section 50C, it is very clear that the AO is bound to adopt fair market value, if there is difference between agreed consideration and guideline value of the property. Before adopting deemed consideration, it is bounden duty of the AO to refer valuation to the DVO, in case the assessee filed objection for adopting deemed consideration. In this case, there is a difference between agreed consideration as per sale deed and market value of the property as per guideline value. Also an admitted fact that the assessee has filed her objections before the AO for adopting guideline value of the property. It is also an admitted fact that the AO had referred valuation to the DVO. But, fact remains that before the DVO determines value of the property, the AO has completed assessment by adopting deemed sale consideration as per provisions of section 50C - AO has completely erred in adopting deemed sale consideration, as per provisions of section 50C when he himself referred valuation of property to the DVO. Computation of exemption u/s.54F - As many expenditure in construction activity is incurred on day to day basis for which the assessee’s cannot keep bills and supporting vouchers. Therefore, for this reason genuine expenditure incurred for construction of building cannot be rejected. It is a well settled principles of law by the decision of various High Courts, including case of C.Aryama Sundaram [2018 (8) TMI 864 - MADRAS HIGH COURT] that construction may commence before date of sale of asset, but should be completed on or before period of three years from the date of sale of original asset. Therefore, we are of the considered view that the Assessing Officer has erred in not considering amount spent towards construction of building prior to the date of sale of original asset. Adoption of deemed consideration for the purpose of exemption u/s.54 - The deeming fiction provided for computing full value of consideration as a result of transfer of property as per provisions of section 50C of the Act is only applicable for determining full value of consideration as defined u/s.48 of the Act and thus, for the purpose of computing exemption u/s.54F of the Act, deeming fiction provided u/s.50C cannot be enlarged because, one cannot expect a person to perform impossible things, as when the assessee receives a particular amount from transfer of property, he cannot be expected to reinvest amount over and above consideration received for transfer of property. AO has erred in adopting deemed consideration for the purpose of computation of exemption u/s.54F. Thus we set aside order passed by learned CIT(A) and restore the issue to file of the Assessing Officer and direct him to recompute long term capital gain by adopting market value of the property determined by the DVO and also by considering amount invested by the assessee for construction of new house property in light of our directions. Appeal filed by the assessee is treated as allowed for statistical purposes.
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