Income Tax Appellate Tribunal - Delhi
Prem Nath, New Delhi vs Assessee on 20 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'F' : NEW DELHI)
BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.1659/Del./2013
(ASSESSMENT YEAR : 2009-10)
Shri Prem Nath, vs. ITO, Ward 37 (3),
G - 15, Hans Bhawan, New Delhi.
1, Bahadurshah Zafar Marg,
New Delhi - 110 002.
(PAN : ACOPN4647E)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Anil Jain, CA
REVENUE BY : Shri Anil Kumar Sharma, Senior DR
Date of Hearing : 18.07.2016
Date of Order : 20.07.2016
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, Shri Prem Nath, by filing the present appeal, sought to set aside the impugned order dated 03.01.2013 passed by ld. Commissioner of Income-tax (Appeals)-XXVIII, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :-
"1. On the facts and circumstances of the case the lower authorities have erred in computing appellants income from long term capital gains on sale of land by adopting circle rate value of land at Rs.16,43,000/-2 ITA No.1659/Del./2013
instead of actual sale consideration of Rs.5,00,000/- received by the appellant.
2. On the facts and circumstances of the CIT(A) have erred in adopting circle rate value for computing capital gains instead of actual consideration without referring the matter to the Valuation Officer.
3. On the facts and circumstances of the case the CIT(A) erred in ignoring the appellant request for referring the matter to Valuation officer and not considering the case laws cited by appellant in this regard.
4. On the facts and circumstances of the case CIT(A) erred in construing that the provisions of section 50C are mandatory ignoring the provisions of sub section (2) of section 50C.
5. Appellant craves for grant of permission to add, amend, modify, delete or withdraw any ground of appeal at or any time before the hearing of the appeal."
2. Briefly stated the facts of this case are : pursuant to the notices issued during scrutiny proceedings, assessee put in appearance through Shri V. Ganesh, CA/AR who has attended the proceedings, filed necessary details and discussed the case. During the year under assessment, assessee declared capital gain on sale of property to the tune of Rs.2,93,211/- against which he has claimed deduction under section 54EC of the Income-tax Act, 1961 (for short 'the Act') of equal amount and in addition thereto, assessee declared short term capital loss of Rs.2,79,240/- on sale of mutual funds apart from income from other sources to the tune of 3 ITA No.1659/Del./2013 Rs.1,53,197/-. From the details furnished during the assessment proceedings, it has come on record that assessee has sold a property bearing Plot No.20 measuring 365.08 sq.meters comprised in Khasra No.133/K, 133/KH and 135/2 of Somalwada, Nagpur for a consideration of Rs.5,00,000/- to Mrs. Sakina, wife of Salimbhai Chimthanawala on 06.03.2009. From the perusal of the sale deed, it has come on record that circle rate of the aforesaid property as determined by the State Government is Rs.16,43,000/- whereas the assessee has declared the sale consideration of Rs.5,00,000/-. Consequently, the assessee was called upon to explain as to why the sale consideration be not taken at Rs.16,43,000/- in view of the provisions contained u/s 50C of the Act. Finding the explanation furnished by the assessee not tenable, the AO calculated the long term capital gain accrued to the assessee to the following effect :-
Sale consideration u/s 50C Rs.16,43,000/-
Indexed cost of acquisition (as declared by the assessee) Rs. 2,06,780/-
Rs.14,36,211/-
Less deduction u/s 54EC Rs. 3,00,000/- Long Term Capital Gain Rs.11,36,211/-
and made an addition thereof to the total income of the assessee.4 ITA No.1659/Del./2013
3. Assessee carried the matter before the ld. CIT (A) by challenging the assessment order who has dismissed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
5. During the appellate proceedings before the Tribunal, assessee sought to raise the additional grounds on the ground that earlier, the assessee was not conversant with the legal position that deeming provisions of section 50C (1) are not applicable to exemption provisions contained under section 54 to 54F, which are to the following effect:-
"1. Without prejudice to ground no.1 to 4 of the memo of appeal your appellant submits that on facts and in circumstances of the case and in law, the authorities below have erred in computing exemption eligible to appellant u/s 54EC on the basis of capital gains computed by invoking provisions of section 50C(1) instead of sale consideration as mentioned in the sale deed.
2. On the facts and circumstances of the case and in law your appellant submits that lower authorities have failed to appreciate that deeming provisions of computation of capital gains mentioned in section 50C (1) are applicable to section 48 and not exemption provisions as mentioned in section 54 to section 54F.5 ITA No.1659/Del./2013
3. Without prejudice to ground no.1 to 4 of the memo of appeal your appellant submits that lower authorities have erred in computing net taxable capital gains at Rs.11,36,211/- in spite of the fact that appellant had invested net amount of capital gains of Rs.2,93,211/- in specified Bonds as specified in section 54EC."
6. Without prejudice the merits of the case, we are of the considered view that additional grounds now sought to be raised by the assessee, which are legal grounds, are necessary for complete adjudication of the controversy at hand. So, we hereby allow the application moved under Rule 11 of Appellate Tribunal Rules, 1963 by the assessee to raise aforesaid additional grounds.
7. Ld. AR for the assessee challenging the impugned order contended inter alia that the deeming provisions contained u/s 50C (1) are not applicable to the case of the assessee in order to compute the exemption u/s 54EC; that the lower appellate authorities have lost sight of the fact that the assessee had invested net amount of capital gains of Rs.2,93,211/- in specified bonds as per provisions contained u/s 54EC and relied upon the decision rendered by Hon'ble jurisdictional High Court in case cited as Smt. Nilofer I Singh (2009) 309 ITR 233 and cases decided by ITAT, Jaipur Bench in cases cited as Nand Lal Sharma vs. ITO (2015) 172 TTJ 0412 (Jp) and Gyan Chand Batra vs. ITO (2010) 133 6 ITA No.1659/Del./2013 TTJ 0482. However, on the other hand, the ld. DR for the revenue relied upon the order passed by the AO as well as the ld. CIT (A).
8. Undisputedly, the assessee has purchased a plot in question from a housing society in the year 2002 for a sale consideration of Rs.7,500/- against circle rate of Rs.6,57,500/- and sold the same in 2009 for a sum of Rs.5,00,000/- against the circle rate of Rs.16,43,000/-; that the assessee computed the capital gains on the actual sale consideration recorded in the sale deed; that the assessee has invested the capital gains computed by him in specified bonds as per provisions contained u/s 54EC and claimed the complete exemption.
9. In the backdrop of the aforesaid facts and circumstances, the first question arises for determination in this case is:-
"as to whether capital gains are to be computed on actual amount received or on the deemed amount accrued to the assessee?
10. Issue in controversy has already been set at rest by the Hon'ble jurisdictional High Court in case cited as Smt. Nilofer I Singh (2009) 309 ITR 233 wherein it is held that computation of capital gain is to be done as per provisions contained u/s 48 of the Act by taking into consideration the actual cost of sale consideration received by the assessee and not the deemed cost of consideration u/s 50C of the Act. Following the law laid down by 7 ITA No.1659/Del./2013 Hon'ble jurisdictional High Court in the judgment of Smt. Nilofer I Singh (supra), coordinate Bench of the ITAT, Jaipur in case cited as Nand Lal Sharma (supra) returned the findings in favour of the assessee in an identical question. Operative part of the decision rendered by the coordinate Bench in the aforesaid referred case is as under:-
"3.8 Apropos Ground No.2 (b), Hon'ble Delhi High Court in the case of CIT vs. Smt. Nilofer I Singh (supra) has categorically held that mode of computation of capital gain is statutorily defined u/s 48 of the Act which uses the words actual cost of "consideration"
and not the deemed cost of consideration u/s 50C. We find merit in the arguments of the ld. AR that Section sac is deeming fiction by which stamp duty value of the asset sold is to be substituted for actual consideration. This being purely a fiction, its scope is limited to Section 50C only and cannot be enlarged without a specific reference. In the absence of any enabling statutorily provision, a fiction cannot be imported in other section. This view has been square adopted by Hon'ble Delhi High Court in the case of CIT vs. Smt. Nilofer Singh (supra) and followed it by this Bench ITAT in the case of Gyan Chand Batra vs. ITO (supra). Respectfully following the same, we hold that while computing exemption u/s 54, the actual sale consideration is to be taken into consideration and not the stamp duty valuation u/s 50C. Thus, assessee's claim of exemption as made in the return of income as raised in Ground No. 2 of the assessee is allowed."
11. AO without disputing the fact that the actual cost of consideration of the property in question was Rs.5,00,000/- computed the capital gains on the basis of circle rate which were at Rs.16,43,000/-. Ld. CIT (A) has also perpetuated the error 8 ITA No.1659/Del./2013 committed by the AO which is not sustainable in the eyes of law. We are of the view that on the basis of actual sale consideration of Rs.5,00,000/- received by the assessee, the long term capital gain came to be Rs.2,93,211/-.
12. So, in view of the decisions rendered by the Hon'ble jurisdictional High Court in case cited as Smt. Nilofer I Singh (supra), we are of the considered view that lower revenue authorities have erred in computing the capital gain in the instant case on the basis of deemed cost of consideration u/s 50C whereas AO was statutorily required to compute the capital gain as per provisions contained u/s 48 of the Act on the basis of actual cost of consideration received by the assessee.
13. The next question arises for determination in this case is :-
"as to whether lower revenue authorities have erred in computing the capital gain by ignoring the fact that the assessee has invested entire capital gain of Rs.2,93,211/- in specified bonds as per section 54EC?"
14. Provisions contained u/s 54EC are categoric enough to cover the case of the assessee because when the assessee has invested entire capital gain in the specified bond as per provisions contained u/s 54EC, the entire capital gain earned by him shall be exempted, if the cost of investment in the specified assets is not less than the 9 ITA No.1659/Del./2013 amount of the capital gains. The word "cost" appearing in section 54EC is defined in Explanation to section 54EC as under :-
"Capital gain not to be charged on investment in certain bonds.
54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified 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 long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer 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 acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45:
Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees:
......
Explanation.--For the purposes of this section,--
(a) "cost", in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset;"10 ITA No.1659/Del./2013
15. So, in the given circumstances, AO as well as CIT (A) have erred in computing the capital gain in this case to the tune of Rs.11,36,211/- by computing the capital gain on the basis of deemed cost of consideration as against actual cost of consideration required u/s 48 of the Act and have also lost sight of the fact that assessee has invested the entire capital in specified bonds as per provisions contained u/s 54EC of the Act. So, we answer the aforesaid question in favour of the assessee.
16. In view of what has been discussed above, present appeal filed by the assessee is hereby allowed.
Order pronounced in open court on this 20th day of July, 2016.
Sd/- sd/-
(J.S. REDDY) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 20th day of July, 2016
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-XXVIII, New Delhi.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.