TMI Blog2012 (6) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... orities u/s.50C or which was the actual sale value for the purpose of the deduction u/s. 54EC – Held that:- Section 54EC speaks of the actual capital gain which arises out of transfer of Long Term Capital Gain and not deeming amount, whereas section 50C provides for deeming fiction where value of consideration is adopted as per the Stamp Valuation Authorities or any Authority of the State Government - the deemed value cannot be considered for the purpose of exemption u/s 54EC, thus the claim of the appellant u/s. 54EC would be only Rs. 16,00,000/- which is the actual investment in the specified bonds - for the working of the Long Term Capital Gain, the sale consideration will be taken up as per the value determined u/s. 50C which here in this case is at Rs. 24,48,128 as per the value adopted by the Stamp Valuation Authorities. - IT APPEAL NO. 3745(MUM.) OF 2008 - - - Dated:- 28-3-2012 - G.E. VEERABHADRAPPA, AMIT SHUKLA, JJ. K. Shivaram for the Appellant. P.C. Maurya for the Respondent. ORDER Amit Shukla, Judicial Member This appeal has been preferred by the appellant against the order dated 17.03.2008, passed by CIT (Appeals) XXV, Mumbai for the quantum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertising that the property would be sold to the highest bidder. The highest bidder was one Shri Geharilal Harkalal Ranka. This property was actually purchased by the tenants and Shri Geharilal Haraklal Ranka was the confirmed party. This way the property was sold to the tenants through this person. Each of the tenants paid their share of price for purchasing the property. In this manner, the tenants became the owner after long negotiations vide agreement dated 10.06.1999. Later on, this building was demolished completely and new building was constructed. The total cost of purchase in the old property, demolishing charges and the construction of new property in the hands of the appellant came to Rs. 4,75,000/-. The new construction completed in the year relevant to Assessment Year 2002-03 and the possession was given to all the tenants. 3.1 Later on, the appellant sold the property on 17.09.2004 on a total consideration of Rs. 16,00,000/-. For determining the cost of acquisition for the purpose of calculating the capital gains, the appellant got the valuation of the property as on 10.06.1999 by an approved valuer who determined the market value of the property at Rs. 10,04,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) the appellant contented that as on 10.06.1999, the tenancy right in the said property was exchanged for ownership right and thus the cost of said premises has to be taken at the market value as on 10.06.1999 in view of the judgment of Hon'ble Bombay High Court in the case of CIT v. Abrar Alvi [2001] 247 ITR 312/117 Taxman 95. As for the cost of acquisition, the appellant relied upon the valuation report of the approved valuer who has determined the market value of the property as on 10.06.1999 at Rs. 10,04,475/-. 5.1 The CIT (Appeals) after considering the various clauses of agreement dated 10.06.1999 and the entire facts of the case and also the contention of the appellant held that, first of all, the judgment of Hon'ble Bombay High Court in the case of Abrar Alvi ( supra ) is not applicable in the appellant's case, as in that case ownership right was bought instead of the property and while in the case of the appellant the property was purchased through open bidding and not through ownership right. As regards to the cost of acquisition, the CIT (Appeals) held that the same would be at Rs. 4,75,000/-, as the property was purchased through open bidding which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of ITAT Mumbai Bench in the case of Balmukund P. Acharya v. ITO [2011] 48 SOT 385/15 taxmann.com 244. He also relied upon the judgment of Hon'ble Bombay High Court in the case of Abrar Alvi ( supra ). In short, his main contention are that firstly, it is a Long Term Capital Gain and secondly, the cost of acquisition should be taken at Rs. 10,04,475/- as per the value determined by the approved valuer. In the last, he made an alternate claim that if the value of the property is taken as per section 50C, then the same should be allowed for the purpose of deduction u/s.54EC. 7. On the other hand, the learned Sr. DR relied heavily upon the findings of the CIT (Appeals) and contented that it is Short Term Capital Gain as the possession in the newly constructed property was acquired in the Assessment Year 2003-04. He also placed reliance on the judgment of Bombay High Court in the case of CIT v. Dr. D.A. Irani [2000] 111 Taxman 600 for the proposition that even if the assessee was tenant before its purchase it was wholly irrelevant because at the time of purchase tenancy was extinguished and, hence, it has to be assessed from the date of acquisition of the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest and the right to the appellant in the property admeasuring 225 sq. ft. to which she was entitled to in the new building which was to come up after demolition of the old building. Thus, the date of acquisition in the said property can safely be held to be on 10.06.1999. It is also an undisputed fact that the sale was made on 17.09.2004, which fell into Assessment Year 2005-06. Thus from the date of 10.06.1999 till 17.09.2004, the period is of more than 36 months, hence the transaction in question is clearly a 'Long Term Capital Gain'. Thus the first issue is decided in the favour of the appellant and the finding given by the Assessing Officer as well as the CIT (Appeals) that it is a Short Term Capital Gain is reversed. We accordingly, hold that the transaction of sale of asset was 'Long Term Capital Gain'. 8.2 After holding that the sale of office amounted to Long Term Capital Gain, the second issue which comes for our consideration is to what would be the cost of acquisition of the said property. The appellant's claim is that, since she was a tenant for the last 30 years, therefore, she had a tenancy right which was exchanged for the ownership right vide agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from tax on Long Term Capital Gain when the capital gain arise from the transfer of Long Term Capital Asset and the whole or any part of the said capital gain is invested in certain bonds within the period of 6 months. Section 54EC speaks of the actual capital gain which arises out of transfer of Long Term Capital Gain and not deeming amount. Whereas section 50C provides for deeming fiction where value of consideration is adopted as per the Stamp Valuation Authorities or any Authority of the State Government. Even if the property has been sold at a lesser price but under the deeming fiction of section 50C, the value adopted by the Stamp Valuation Authorities is taken as sale consideration. Such a deeming fiction cannot be imported into section 54EC and hence the deemed value cannot be considered for the purpose of exemption u/s 54EC. Thus the claim of the appellant u/s. 54EC would be only Rs. 16,00,000/- which is the actual investment in the specified bonds. At the same time, for the working of the Long Term Capital Gain, the sale consideration will be taken up as per the value determined u/s. 50C which here in this case is at Rs. 24,48,128/-. To summarise our above findings, we h ..... 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