N.L. Kalra, AM. :
The assessee has filed an appeal against the order of the learned CIT(A)-II, Jaipur, dt. 3rd Nov., 2009 for the asst. yr. 2006-07.
2. The assessee has raised four grounds of appeal and during the course of proceedings before us, the learned Authorised Representative has stated that grounds of appeal Nos. 2 and 3 are not pressed. Hence, these grounds of appeal are dismissed.
3. The grounds of appeal Nos. 1 and 4 of the assessee are as under :
"1. In the facts and circumstances of the case and in law the learned CIT(A) has erred in confirming the action of the AO in computing the long-term capital gains at Rs. 10,58,783 against the declared long-term capital gains of Rs. 5,558. The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by assessing the long-term capital gains at Rs. 5,558 only as declared by the assessee.
4. Alternatively, in the facts and circumstances of the case and in law the learned CIT(A) has erred in confirming the action of the AO in not allowing the exemption under s. 54F in respect of long-term capital gains. The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the exemption under s. 54F in respect of long-term capital gains."
3.1 During the assessment year under consideration, the assessee has sold a plot and declared the long-term capital gains of Rs. 5,558. The plot was sold at sale consideration of Rs. 10.81 lacs. The AO invoked the provisions of s. 50C of the Act and accordingly the full value of the consideration was taken at Rs. 19,24,987. The AO accepted the cost of purchase of the asset. In respect of cost of improvement the AO has not allowed any deduction since the assessee has not claimed deduction under s. 54F and therefore, the AO did not give deduction under s. 54F of the Act.
4. Before the learned CIT(A), the assessee contended that the assessee may be allowed relief under s. 54F by considering the full value of the consideration as shown by the assessee in the sale deed as compared to the full value of the consideration adopted by the AO in view of s. 50C of IT Act, 1961. Before the learned CIT(A) it was submitted that the capital gains arising from transfer of long-term capital asset will be exempted from tax in case net consideration based on full value of consideration in sale deed is invested within six months in specified assets. On this issue, reliance was placed on the decisions of Hon'ble Bombay High Court in the case of Commissioner Of Income-Tax v. Ace Builders Pvt. Ltd. [2005] 195 CTR (Bom) 1 : [2006] 281 ITR 210 (Bom.) and Hon'ble Gauhati High Court in the case of CIT v. Assam Petroleum Industries (P.) Ltd. [2003] 185 CTR (Gau.) 71 : [2003] 262 ITR 587 (Gau.). It was submitted that if s. 54F is invoked then the provision of s. 50C is not applicable. It was further submitted that assessee has purchased a flat within period of two years from the date of transfer of the plot. The assessee has made investment of Rs. 21,14,986. The investment was of Rs. 16.74 lacs till the date of filing of the return. This investment exceeded the sale consideration and therefore, the deduction under s. 54F was available. Alternatively, it was argued that if total sale consideration is adopted at Rs. 19,24,987 on the basis of full value of consideration as per Stamps Duty Act then the capital gains which can be taxable after considering the investment to the extent of Rs. 16.74 lacs till the date of return will come to Rs. 1,39,377. The assessee in the balance sheet has shown an amount of Rs. 12.74 lacs as advance for flat and therefore, the AO was duty-bound to allow deduction in case ' the AO was enhancing the capital gains.
4.1 The learned CIT(A) after considering the submissions held as under that the assessee is not entitled to get deduction under s. 54F :
"I have considered facts of the case and arguments taken by Shri Sogani quite carefully. It is a fact that the appellant has not raised the claim under s. 54F either at the time of filing of return of income or during the course of assessment proceedings. Further, time and again, the AO has given opportunities before adopting the long-term capital gains to make any further submission/claim but the appellant preferred not to make the said claim even in the assessment proceedings. The availability of deduction under s. 54F is subject to fulfilment of various conditions and those conditions were not fulfilled during the course of assessment proceedings. Further, in any case the deduction under s. 54F is available only when within a period of 3 years after the date of sale the assessee has constructed a residential house. However, in the present case, it is not a construction of residential house by the assessee but it was a case of purchase of flat constructed by M/s Salasar Balaji Housing (P.) Ltd. Under these circumstances, in my considered view, the appellant is not entitled for any deduction in the present facts of the case under s. 54F of IT Act and accordingly the relevant ground of appeal is hereby rejected."
5. During the course of proceedings before us, the learned Authorised Representative has submitted that assessee sold an asset for Rs. 10.81 lacs. The assessee paid a part sum of Rs. 12,74,000 for purchase of flat at Sector-2, Vidhyadhar Nagar, Jaipur. A sum of Rs. 4,00,000 was paid before due date of filing of return for the asst. yr. 2006-07. The plot was got registered on 11th Jan., 2007 for Rs. 21,14,896. A sum of Rs. 4,40,896 was invested before the due date of filing of return till the registration of flat. The investment of actual sale consideration entitles the assessee for benefit under s. 54F. The investment in new residential house exceeds even the notional sale consideration of s. 50C. The lapse of not depositing Rs. 2,50,987 i.e. the difference of Rs. 19,24,987 minus Rs. 16,74,000 before due date of filing of return in capital gains account is procedural in nature. The assessee has complied with substantive requirement of s. 54F as the total investment in flat exceeds the full value adopted for stamp duty. The assessee has purchased a new residential house and such house has been purchased within a period of two years. The assessee is not having more than one residential house on the date of transfer of original asset. Hence it was submitted that benefit under s. 54F cannot be denied. Alternatively, learned Authorised Representative submitted that capital gains which is required to be taxed will be Rs. 1,39,377 on account of not depositing Rs. 2,50,987 in the capital gain account before due date of return. The learned Authorised Representative submitted that even if the claim is not made in the return, the AO should have considered the claim.
6. On the other hand, the learned Departmental Representative supported the orders of the authorities below.
7. We have heard both the parties. Sec. 48 of IT Act states that capital gain is to be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the expenditure incurred in connection with transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Hence, we will have to first ascertain the full value of the consideration. In respect of transfer of capital asset being land or building, full value of the consideration to be adopted for the purpose of s. 48 is defined in s. 50C of the IT Act. It will be useful to reproduce s. 50C(1) of the IT Act :
"50C(1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the 'stamp valuation authority') for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purpose of s. 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer."
7.1 From the above sub-section, it is clear that in case the consideration received is less than the value adopted by stamp valuation authority then the value so adopted is to be taken as full value of the consideration for the purposes of s. 48 of the Act. Sec. 50C provides a deeming provision for considering the full value of consideration as the value adopted for stamp duty. In modern statutes, the expression 'deem' is used a great deal and for many purposes. It is at times used to introduce artificial conceptions which are intended to go beyond legal principles or to give an artificial construction of a word for phrase. Thus the artificial meaning of full value of the consideration has been given in s. 50C of the IT Act for the purpose of s. 48 of the IT Act. One is entitled to ascertain the purpose for creating a statutory fiction. After ascertaining the purpose, full effect must be given to the statutory fiction and it should be carried to its logical conclusion and to that end, it would be proper and even necessary to assume all those facts on which alone fiction can operate. The legislature in its wisdom has referred to s. 48 of IT Act in s. 50C for adopting the same 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 for s. 48 of the IT Act: The words 'full value of consideration' as mentioned in other provisions of the Act are not governed by the meaning of full value of consideration as contained in s. 50C of the IT Act. The natural meaning of full value of consideration refers to consideration specified in the sale deed. The Hon'ble Delhi High Court in the case Commissioner Of Income-Tax v. Smt. Nilofer I. Singh [2009] 221 CTR (Delhi) 277 : [2008] 14 DTR (Delhi) 108 : [2009] 309 ITR 233 (Delhi) 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 p. 237 as under :
"This controversy has already been settled by the Supreme Court in the case of CIT v. 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 pari materia to s. 45(1) of the present Act and sub-s. (2) of s. 12B of the 1922 Act was in pari materia 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 capital asset which is the subject-matter of the transfer."
Hence, for the meaning of full value of consideration as mentioned in different provisions of the Act except in s. 48, one will have to consider the full value of consideration as specified in sale deed.
7.2 Before ascertaining as to how the deduction under s. 54F is to be given, it will be useful to reproduce s. 54F(1) :
"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 :
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 consideration', in relation to the transfer of a capital asset, means 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."
7.3 In Explanation to s. 54F(1), it is mentioned that net consideration means the full value of 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. The meaning of full value of consideration in Explanation to s. 54F(1) will not be governed by meaning of words 'full value of consideration' as mentioned in s. 50C. The value adopted for stamp duty is to be considered as full value of consideration for the purpose of computing the capital gains under s. 48. Sec. 54F(1) says that capital gains is to be dealt with in accordance with the provisions of sub-ss. (a) and (b) of s. 54F(1) of the Act. In the instant case, the cost of new asset is not less than the net consideration thus the whole of the capital gains will not be charged even if the capital gains has been computed by adopting the value adopted by stamp registration authority. It is clearly mentioned in s. 54F(4) also that net consideration which is not appropriated towards the purchase of new asset then the same, is to be taxed in case such net consideration not appropriated is not deposited in the capital gain account. It is not necessary that 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.
7.4 We have also considered the decision of Hon'ble Bombay High Court in the case of Commissioner Of Income-Tax v. Ace Builders Pvt. Ltd. (supra). Sec. 50 of the IT Act provides that capital gains oh sale of depreciable asset is to be deemed as short-term capital gains. The Hon'ble Bombay High Court has held that fiction limited to s. 50 will apply to computation of capital gains and not to exemption provisions. For allowing deduction under s. 54E, one will have no distinction between depreciable asset and non-depreciable asset. Hence, it is clear that deeming fiction mentioned in one section will not automatically apply to all the provisions. In case deeming fiction has been created in specific provision of the Act then Hon'ble Gauhati High Court in the case of CIT v. Assam Petroleum Industries (P.) Ltd. (supra) also held that s. 54E is not controlled by s. 50. Hence deeming provisions as mentioned in s. 50C will not be applicable to s. 54F so far as the meaning of full value of consideration is concerned as deeming provision mentioned in s. 50C is for specific asset and for the purpose of s. 48 of IT Act, 1961.
7.5 We are aware that Hon'ble apex Court in the case of Goetze (India) Ltd. v. CIT [2006] 204 CTR (SC) 182 : [2006] 284 ITR 323 (SC) has held that the AO has no power to entertain a claim made otherwise than by way of revised return . It was made clear that the decision is restricted to the. power of the AO to entertain the claim for deduction otherwise than by revised return and did not impinge on the power of the Tribunal under s. 254 of the Act. Reference has been made to the decision of National Thermal Power Co. Ltd. v. Commissioner Of Income Tax [1999] 157 CTR (SC) 249 : [1998] 229 ITR 383 (SC). In the instant case, the assessee has claimed the deduction under s. 54F before the learned CIT(A) and the learned CIT(A) has entertained such claim. Therefore, the issue of claim can be considered. Hence we hold that the assessee is entitled for deduction under s. 54F of the Act. Alternatively, the claim of the assessee in restricting the capital gains to the extent of Rs. 1,39,377 is correct. Since we are holding that the assessee is entitled to get deduction for the entire capital gains under s. 54F, therefore, the alternative claim is not considered.
8. In the result, the appeal of the assessee is allowed.