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2019 (9) TMI 552

..... tion rate for the purposes of determination of purchase consideration by applying provisions of Section 56(vii)(b) - HELD THAT:- AO has applied the aforesaid provision after comparing the purchase price of the land vis-à-vis the stamp duty valuation and added the difference in the hands of the assessee in proportion to his share in land holding. CIT(A) has upheld the aforesaid action of the AO. No infirmity in the order of the CIT(A) in this regard. Section 49(4) clearly provides that the benefit of the inflated cost of acquisition in view of the deeming provisions u/s 56(2)(vii)(b)(ii) would be available at the time of sale of the asset and capital gains will be accordingly reduced to the extent of such increase in deemed consideration. CIT(A) has given appropriate relief in this regard. We thus see no wrong in action of the CIT(A). The plea of the assessee that the agricultural land is rural land was raised for the first time before us. In the absence of any findings of the lower authorities on factual aspects, we decline to entertain the aforesaid new plea. We also find no merit in the plea of the assessee for its inapplicability of Section 56(2)(vii)(b)(ii) to the FY 201 .....

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..... .O. had erred in applying provisions of Sec 56(2)(vii)(b)(ii) r.w.s 50C of the Act. 3. Briefly stated, the assessee filed its return of income for AY 2014-15 which was subjected to scrutiny assessment. In the course of scrutiny assessment, the AO noticed that the assessee has purchased certain land parcels below stamp duty valuation rate. The AO accordingly replaced the stamp duty valuation rate for the purposes of determination of purchase consideration by applying provisions of Section 56(vii)(b) of the Act as tabulated in para 3 of the assessment order. 4. Aggrieved, the assessee preferred appeal before the CIT(A). 5. The assessee contended before the CIT(A) that in view of provisions of Section 49(4) r.w.s. 54B of the Act, the addition towards understatement of income under s.56(2)(vii)(b) of the Act is not sustainable in law. The CIT(A) however did not see any merit in the plea raised on behalf of the assessee and dismissed the first appeal. The CIT(A) dismissed the appeal of the assessee with the observations that amount of addition of ₹ 9,50,946/- under s. 56(2)(vii)(b) may be available in future under s.49(4) of the Act as and when the capital gain arises on transfer .....

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..... visions of the Act that it is not required to claim exemption under section 54B in income tax return itself but exemption is direct and having clear linkage with total cost of asset. The AO had never challenged the facts of deeming fiction of 49(4) in its reasoning of rejection of difference claim of section 54B of the Act, being ground no.2; iv. The assessee submits that it is important to note here that the AO had never challenged above facts and the stand taken by the appellant in its entire body of the assessment order. The assessee further submits that it is clear from the law that by inserting deeming fiction of Section 49(4), the value of addition to be made by assessing officer under section 56(2)(vii) shall be deemed to be the value which needs to be taken into account along with cost of purchase for the purpose of calculation of capital gain and the cost of new asset shall be increased to the extent of addition so made by the assessing officer. V The appellant submits that there is direct nexus between section 49(4) of the Act cost of asset and cost of asset which is required (o be considered while claiming exemption under section 54B of the Income Tax Act. 1961 and there .....

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..... is order, he has made addition of ₹ 9,50,946/- to the returned income of ₹ 20,29,270/- for the reasons as specified in the body of the order. The Appellant had never challenged this addition but the AO had rejected the additional claim of exemption u/s 54B of the Act and therefore, the appellant is in appeal before your honor. The appellant herewith make additional written submission on legal aspects as required by your honor. The arguments made under different propositions were already made under previous written submissions. The appellant herewith provide comparative statement of total income and attached original & revised computation of total income for ready reference of your honor. b. Submission of Comparative Statement of Income as required by your honor: The Appellant had argued in their previous written submission that the addition under section 56(2)(vii) would have direct linkage with cost of asset and therefore the exemption claim under section 54B of the Income Tax Act, 1961 against land sold would be increased to that extent as per section 49(4) read with section 54B of the Income Tax Act, 1961. The appellant would like to provide computation of total .....

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..... addition under section 56(2)(vii) would have direct linkage with cost of asset and therefore the exemption claim under section 54B of the Income Tax Act, against land sold would be increased to that extent as per section 49(4} read with section 54B of the Income Tax Act. 1961 2.4. After going through the relevant provisions of the Act, it is seen that the legislature has provided sub-section (4) to section 49 prescribing cost of acquisition with reference to certain modes of acquisition It states that where the capital gain arises from the transfer of a property, the value of which has been subject to income tax under clause (vii) or clause (vita) of sub section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii) or clause (vita). It means that in case the buyer of the property has acquired the property as capital asset, the legislature has prescribed the provision for cost step-up available to the buyer/transferee for the purpose of calculating capital gain at a later date when such property is sold / transferred by such person. Provision, such as sub-section (4) to .....

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..... the order of the CIT(A). 10. We have carefully considered the rival submissions. The taxability of deemed income under s.56(2)(vii)(b)(ii) of the Act is in question. The AO has applied the aforesaid provision after comparing the purchase price of the land vis-à-vis the stamp duty valuation and added the difference in the hands of the assessee in proportion to his share in land holding. The CIT(A) has upheld the aforesaid action of the AO. We do not see any infirmity in the order of the CIT(A) in this regard. Section 49(4) of the Act clearly provides that the benefit of the inflated cost of acquisition in view of the deeming provisions under s. 56(2)(vii)(b)(ii) of the Act would be available at the time of sale of the asset and capital gains will be accordingly reduced to the extent of such increase in deemed consideration. The CIT(A) has given appropriate relief in this regard. We thus see no wrong in action of the CIT(A). The plea of the assessee that the agricultural land is rural land was raised for the first time before us. In the absence of any findings of the lower authorities on factual aspects, we decline to entertain the aforesaid new plea. We also find no merit in .....

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