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TMI Blog2023 (6) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... s that net consideration is required to be appropriated towards the purchase of the new asset. Thus deduction under s. 54F is clearly applicable. The natural meaning of full value of consideration refers to consideration specified in the Sale Deed. In this regard, in the case CIT vs. Smt. Nilofer I. Singh [ 2008 (8) TMI 165 - DELHI HIGH COURT] had held that full value of consideration refers to the consideration specified in the sale deed. Thus when the assessee has invested entire actual sales consideration received by him in the purchase and construction of new house accordance with the provision of section 54F(1) thereafter the provision of section 50C has not been applicable - we are of the view that assessee is entitled to exemption under section 54F. Thus, the disallowance made is hereby deleted - Decided in favour of assessee. - HON BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER For the Assessee : Shri Mahendra Gargieya, Advocate For the Revenue : Ms Monisha Choudhary (Addl.CIT) ORDER PER: SANDEEP GOSAIN, J.M. This appeal by the assessee is directed against the order of ld. CIT(A), Ajmer dated 04.01.2018 for the assessment year 2013-14. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome declaring income of Rs. 3,97,590/- on 30.09.2013. The case of the assessee was selected for scrutiny through CASS. Accordingly notice under section 143(2) was issued on 02.09.2014 which was duly served on the assessee. Further notice under section 143(2) and notice under section 142(1) along with questionnaire were issued on 03.12.2014 seeking specific details which were served upon the assessee. Thereafter, notice under section 142(1) along with detailed questionnaire issued on 10.07.2015 fixing the case for hearing on 20.07.2015. In compliance, assessee s A/R attended and produced books of accounts, bank statement etc. which were examined on test check basis. During the year under consideration the assessee had sold a parental property for Rs. 20,78,310/- and shown long term capital gain at Nil after claiming exemption under section 54F of the IT Act. At the time of assessment, the assessee filed written reply claiming therein cost of construction of shop sold in FY 2012-13 at Rs. 2,57,500/- on estimation basis but failed to produce any documentary evidences to corroborate his claim. The assessee also failed to furnish documentary evidences in respect of year of constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the construction of new house. The meaning of full value of consideration as referred to in Explanation to s. 54F(1) is not governed by the meaning of the words 'full value of consideration' as mentioned in s. 50C of the Act. 4]The authority below has denied the deduction u/s 54F on the reason that the assessee has not deposited the consideration received in transfer of property in capital gain a/c as per provision of section 54F (4) of the Act. The observation/ finding recorded by the authority below is apparently contrary to the provisions of the law and also material available on record. It is submitted that the actual (consideration received by the assessee was invested in purchase of plot and construction of residential house before due date of filing of return i.e. 31/03/2014 as per provision of section 139(4) of the Act. Further also from the material available on record and documentary evidences furnished by the assessee which proves beyond doubts that the intention of the assessee for construction of residential house and accordingly the assessee has made investment of Rs. 23,89,100/- whereas he has received actual sales consideration of Rs. 11,60,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration 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 net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as 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 than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the 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 transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head 'Income from house property'. Explanation: For the purposes of this section, 'net con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CIT vs. George Henderson Co. Ltd. (1967) 66 ITR 622 (SC), the very expression 'full value of consideration' was under consideration of the Supreme Court in the context of the provisions of the Indian IT Act, 1922. The provisions of s. 12B of the 1922 Act pertain to capital gains. Sub-s. (1) was in parimateria to s. 45(1) of the present Act and sub-s. (2) of s. 12B of the 1922 Act was in parimateria 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 main part of s. 12B(2) of the Act cannot be construed as having a reference to the market value of the asset transferred but the expression only meant, the full value of a consideration received by 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 refer to the adequacy of the price bargained for. Nor did it have any necessary references to the market value of the capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in other provisions of the Act are not governed by the meaning of these words as mentioned in s. 50C Hence,for ascertaining the full value of consideration as mentioned in different provisions except s.48, consideration specified in sale deed has to be considered-Thus, meaning of full value of consideration as referred to in Explanation to s. 54F(1) is not governed by the meaning of the words full value of consideration' as mentioned in s. 50C-In the instant case, the cost of new asset is not less than the net consideration-Thus, whole of the capital gain is not chargeable to tax even if the capital gain is computed by taking the value adopted by the stamp registration authority-Hence, theassessee is entitled for exemption under s. 54F b] PRAKASH KARNAWAT vs. INCOME TAX OFFICER [ITAT JAIPUR] REPORTED IN 49 SOT 0160. 8. We find similar facts are involved in the present case. Assessee has received sale consideration of Rs. 40,00,000 which has been invested in the Bonds in view of provisions of s. 54EC. Therefore, assessee is entitled for deduction under s. 54F. The provisions of s. 50C are applicable for the purposes of s. 48 and for the purpose of s. 54F as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, whereas in the present case, the net consideration by all methods i.e. with or without application of 50C is lesser than the investment in the new asset. Further, we have examined the decision of the Tribunal in the case of Gyan Chand Batra (supra) dated 13.08.2011. Relevant facts of this case are that the assessee sold property for Rs. 10.81 lakhs and full value consideration as per the SRO is 19,24,987/-. Assessee purchased flat for Rs. 16.74 lakhs. It was held that in view of the provisions of section 54F(1), the assessee is entitled to deduction. The conclusions reads that the deeming fictions provided in section 50C in respect of the words 'full value of consideration' (FVC) is to be applied only to section 48 and, therefore, meaning of full value of consideration as referred to in Explanation to section 54F(1) is not governed by the meaning of the words 'full value of consideration' as mentioned in section 50C 17. Therefore, based on the factual matrix of the present case, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration 20,78,310/- Less:- Brokerage 40,000/- Net Consideration 20,38,310/- Less: Indexed Cost *F. Yr 1981 (6,156/-) *852/100 52,449/- Less Cost of Improvement (100000.00 *852/480) 1,77,500/- 2,29,949/- Capital Gain 18,08,361/- Less: Deduction u/s 54/54F (18,08,361 x 721000/116000) 11,23,989/- Long Term Capital Gain 6,84,372/- 3] The ld. CIT (A) ought to have allowed deduction u/s 54F amounting to Rs. 6,49,100/- and Rs. 19,00,000/- invested by the assessee in construction of residential house in A.Y. 2014-15 2015-16 respectively. The denial of the deduction only reason that the assessee has not deposited consideration in capital gain account. Particularly when entire net consideration received by the assessee was invested in the purchase of plot and construction of house as on 31/03/2014 which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration in the capital gain investment scheme u/s 54F(4) before the date of filing of return of income. Thus, the disputes, after the availability of the order of the ld. CIT(A),boil down to the issues narrated above, on which our submission follows hereinafter. 3. At the outset, the fats are not disputed that the assessee made total investment of Rs. 23,89,100/- towards the purchase of the plot and the construction thereon, of a new residential house starting from A.Y.2012-13 to A.Y. 2015-16 (as per the following table at page 2 of ITA WS): Previous year ended on Nature of investment Amount of Investment (Rs) Total Investment (Rs) PB Remark 31/03/2012 Purchase of plot 2,40,000 2,40,000 75 31/03/2013 Investment in const. of new house 5,00,000 7,40,000 93 31/03/2014 Investment in cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nandlal Sharma v/s ITO (2015) 172TTJ 412 (Jp) (DPB 1-5) held that: Time-Limit of making investment: Income-tax Act, 1961, s.54; In favour of: AssesseeCapital gains Exemption under s.54 Time-limit for investment Sec.54 refers to s.139 for the time-limit to acquire eligible new asset, which includes return under s.139(4) also i.e., time-limit of one year from the end of assessment year Therefore, assessee having utilized the sale consideration of his old house for the purchase of a new residential house before the due date of filing of return under s.139(4), the same is eligible for exemption under s.54 CIT vs. Md. Jagriti Agarwal (2011) 245 CTR (P H) 629: (2011) 64 DTR (P H) 333: (2011) 339 ITR 610 (P H), CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361: (2006) 286 ITR 274 (Gau), Fathuma Bai v/s ITO (2009) 32 DTR (Kar) 243 and CIT v/s Smt. Vrinder P. Issac (2011) 64 DTR (Kar) 376 relied on. (para 3.7) Conclusion: Assessee having utilized the sale consideration of his old house for purchase of new residential house before the due date of filing of return under s. 139(4), the same is eligible for exemption under s.54. 4.3.2 In CIT vs Rajesh Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be denied the benefit of deduction u/s 54F. 5.2 Supporting Case Laws:On this aspect direct decision are in the cases of Ajay Goyal vs ITO (2006) 99 TTJ 164 (JodTrib),wherein it was held that: ...There seems to be no dispute with regard to the fact that the sale proceeds of plot in question were utilised by the assessee within three years as required, but what is in dispute is the time of completion of the house in question......... When the assessee had invested this sale proceed within the stipulated time, and admittedly much more investment was needed in the construction of the house, it would be unjustified to hold that the assessee has not carried out the intention of the legislature. So, the assessee is entitled to the relief as claimed for. Jagan Nath Singh Lodha vs. ITO (2004) 85 TTJ (Jd) 173 relied on. 5.2.2 In Jagan NathSingh Lodha vs. ITO (2004) 85 TTJ 173 (JodhTrib), wherein it was held that: Intention of assessee from the very beginning being to purchase residential house and he having done so within two years of sale of plot, he was entitled to exemption under s. 54F in respect of the amount invested even though he failed to deposit the amount in Cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under s. 45. What is therefore, relevant is the investment of the net consideration in respect of the original asset which has been transferred and where the net consideration is fully invested in the new asset, the whole of the capital gains shall not be charged under s. 45. The net consideration for the purposes of s. 54F has been defined as 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. Thus, the consideration which is actually received or accrued as a result of transfer has to be invested in the new asset. In the instant case, the consideration which accrued to the assessee as per the sale deed is Rs. 24,60,000 and the whole of the said consideration has been invested in the Capital Gains Accounts Scheme for purchase of the new house property which is again not disputed by the Revenue. The consideration as determined under s. 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee. Rather, it is a value which has been deemed as full value of considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt furnished the relevant details and reliable basis for making the estimation. In any case, initially it was a case of vacant plot and thereon shops were constructed, which fact is not denied. 3. The CIT(A) didn t deny the fact (and otherwise this is in accordance with the human probability) that the assessee couldn t be expected to place supporting evidences to support the claim of the cost of acquisition and/or the improved cost of acquisition carried out several years before (i.e. around 30 years back in this case). In absence, a fair estimation is required to be made based on the reliable material only, (as contemplated u/s 144 and/or u/s 145 of the Act). The ld. CIT(A) completely failed to bring any material but made an estimation @ Rs. 1 lakh by rule of thumb. Lastly, at the outset we strongly rely the written submission filed before the Hon ble ITAT. Thus, the LTCG upheld by the CIT(A) at Rs.6,84,372/- deserves a complete a deletion. 5. On the other hand, the ld. D/R supported the orders of the revenue authorities. He placed reliance in the case of Arpit Khairari vs. ITO, (2020) 116 taxmann.com 720 (Jaipur Trib.) and the judgment of Hon ble Punjab Haryana Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 54F of the Act which is reproduced below :- 54F. (1) Subject to the provisions of sub-s. (4), where, in the case of an assessee being an individual or an HUF, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one 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 date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-- (a) if the cost of the new asset is not less than the 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 net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under s. 45: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new asset should be got registered before filing of the return. The requirement of law is that net consideration is required to be appropriated towards the purchase of the new asset. Thus deduction under s. 54F is clearly applicable. The Hon'ble ITAT, Chandigarh Bench in the case of Seema Sabharwal, ITA No. 272/Chd/2017 dated 05/02/2018 in which the Hon'ble Tribunal after considering decision of various High Courts including decision of Hon'ble Karnataka High Court on the identical facts has allowed the deduction u/s 54Fof the Act. The relevant finding recorded by the Hon'ble Tribunal reads as under: - 11. Though the Hon'ble High Court in relation to the issue of claim of exemption u/s 54F of the Act has held that what matters is the intention of the assessee to purchase/ construct new house. The Hon'ble Karnataka High Court has held that if the intention is not to retain cash but to invest in construction or any purchase in property and if such investment is made within the period stipulated therein, than section 54F(4) is not at all attracted. We may clarify here that provisions of section 54(2) are almost identically worded as in invested the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the meaning of full value of consideration. Gyanchand Batra vs. ITO (2010) 45 DTR (Jp)(Trib) 41 : (2010) 133 TTJ (Jp) 482, Prakash Karnawat vs. ITO (2012) 49 SOT 160 (Jp) and Nand Lal Sharma vs. ITO (2015) 122 DTR (Jp)(Trib) 404 : (2015) 172 TTJ (Jp) 412 followed; Gouli Mahadevappa vs. ITO Anr. (2013) 259 CTR (Kar) 579: (2013) 88 DTR (Kar) 59 : (2013) 356 ITR 90 (Kar) distinguished. Thus in our view also the natural meaning of full value of consideration refers to consideration specified in the Sale Deed. In this regard, 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 value of consideration refers to the consideration specified in the sale deed. 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 page 237 as under: This controversy has already been settled by the Supreme Court in the case of CIT vs. George Henderson Co. Ltd. (1967) 66 ITR 622 (SC), the very expression 'full value of consideration' was under consideration of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace of unaccounted income in the property transactions by presuming the sale consideration to be the value of the guideline value for registration in case it is stated lower than that value of registration. Thus when the assessee has invested entire actual sales consideration received by him in the purchase and construction of new house accordance with the provision of section 54F(1) thereafter the provision of section 50C has not been applicable in light of following judicial decisions. a] The Hon'ble ITAT Jaipur Bench in the case of Gyan Chand Batra V/S ITO reported in 133 TTJ 482 held as under: Capital gains-Exemption under s. 54F Full value of consideration vis a-vis value adopted for stamp duty Legislature in its wisdom has referred to s. 48 in s. 50C for adopting the stamp duty value as fair market value Hence, the deeming fiction as provided in s. 50C in respect of the words 'full value of consideration' is to be applied only to s. 48-Words 'full value of consideration' as mentioned in other provisions of the Act are not governed by the meaning of these words as mentioned in s. 50C Hence,for ascertaining the full value of consideration ..... 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