Nand Lal Sharma , Kota vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 413/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2008-09

Sh. Nand Lal Sharma cuke The ITO L/h Shri Mahavir Prasad Vs. Bundi Gram: Suwasa Distt. Bundi

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AEOPL 4406 R vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri B.L. Bhojwani, CA jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph, JCIT

lquokbZ dh rkjh[k@ Date of Hearing : 18/03/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 15/05/2015

vkns'k@ ORDER

PER R.P. TOLANI, JM

This is an appeal filed by the assessee against the order of the ld.

CIT(A), Kota dated 29-02-2012 for the assessment year 2008-09 raising

following grounds of appeal:

''1. That the ld. CIT(A) has erred in confirming the denial of exemption of Rs. 29.10 lacs by the ld. AO u/s 54 of the I.T. Act, 1961.

2 ITA No. 413/JP/2012

Shri Nand Lal Sharma vs. ITO , Bundi

2. (a) The ld. CIT(A) has erred in confirming the Long term capital gain of Rs. 45,65,220/- computed by the ld. AO on the basis of value of Rs. 49.95 lacs adopted by the stamp valuation authority, in terms of Section 50C of the I.T. Act, 1961, as against the Long term capital gain of Rs. 1,05,200/- computed by the assessee, on the basis of actual sale consideration of Rs. 35.00 lacs.

(b) Without prejudice to Ground No. 2 (a) above and as per the judgment of Hon'ble Jaipur Tribunal in the case of Gyan Chand Batra vs. ITO (2010) 133 TTJ 482, for the purpose of exemption u/s 54 of the I.T. Act, 1961 the capital gain is to be determined by taking the actual sale consideration and not the deemed full value of consideration adopted u/s 50C of the I.T. Act, 1961.

3. The ld. CIT(A) has erred in confirming the cost of construction of Rs. 20,000/- taken by the ld. AO as against Rs. 30,000/- taken by the assessee, resulting in a reduction of Rs. 55,100/- in the indexed cost thereof.''

2.1 At the outset, the ld. Counsel for the assessee did not press Ground

No. 2 (a) which is accordingly dismissed as withdrawn.

3.1 Brief facts of the case are that deceased assessee owned a house

situate at Plot No. 360C, Talwandi, Kota which was purchased by him in

the year 1971. During the impugned year it was sold for a consideration

of Rs. 35.00 lacs on 16-01-2008. For stamp value purposes, the value of

the said property was taken at Rs. 49.95 lacs in terms of Sec. 50C.

Assessee field his return of income by working out Long term capital

gain of Rs. 30,15,200/- on the basis of actual consideration and further 3 ITA No. 413/JP/2012 Shri Nand Lal Sharma vs. ITO , Bundi

claimed exemption u/s 54 for investment of Rs. 29.10 lacs in purchasing a

residential house in March 2009. Ld. AO raised queries regarding the

queries in respect of eligibility of claim u/s 54 as the residential new

house was purchased beyond the due date of return u/s 139(1) i.e. 31-07-

2008. Assessee filed its reply on 6-1-2010 making various submissions

and relying on case laws in support thereof. Ld. AO however rejected the

explanation and adopted the stamp value as sale value as prescribed u/s

50C and worked out taxable LTC gains at Rs. 46,13,220/-.

3.2 Aggrieved, the assessee preferred first appeal which was dismissed

by the ld. CIT(A).

3.3 Now the assessee is before us; ld. Counsel for the assessee Shri

B.L. Bhojwani, C.A. contends that the provisions of Section 54 are

benevolent provisions whereby the persons who sells his house is given

eligibility of exemption from capital gains if the consideration is invested

in the purchase of new house. For the purpose of purchase of new house

or for depositing the amount in capital gain account scheme, Section

54(2) refers only to time limit for return u/s 139 which includes the return

filed u/s 139(1) of the Act as well as a belated return u/s 139(4) of the

Act. Therefore, the purchase of new house or deposit in the capital gain

account scheme can be made on or before due date of Section 139(4) to 4 ITA No. 413/JP/2012 Shri Nand Lal Sharma vs. ITO , Bundi

be eligible for exemption u/s 54 of the Act. In assessee's case new

residential house is purchased in the month of March 2009 whereas the

time limit u/s 139(4) expires on 31-3-2010, thus the purchase of new

eligible asset i.e. residential house is before the due date prescribed u/s

139(4); therefore, assessee is eligible for exemption u/s 54. Reliance is

placed on following cases laws.

(i) CIT vs. Jagriti Agarwal (2011) 339 ITR 610 (P&H)

(ii) CIT vs. Rajesh Kumar Jain (2006) 286 ITR 274 (Gau.)

(iii) Fathima Bai vs. ITO, 32 DTR 243 (Karn.)

(iv) CIT vs. Vrinder P. Issac (Smt.( (2011) 64 DTR 376 (Karn.)

All these judgments have categorically held that Section specific

reference to sec. 139 cannot be construed only to sec. 139(1) alone but it

includes all the sub-section of 139 including 139(4). Therefore, if the sale

consideration is utilized for the construction or purchase of a new

residential house before due date of filing of return u/s 139(4) i.e. 31-3-

2010 in this case, the same will be eligible for exemption u/s 54.

Respectfully following above judgments, the assessee's claim for

exemption is eligible u/s 54 of the Act. This ground of the assessee be

allowed.

5 ITA No. 413/JP/2012

Shri Nand Lal Sharma vs. ITO , Bundi

3.4 Apropos Ground No. 2 (b), the ld. Counsel for the assessee

contends that Section 48 prescribes the mode of computation of capital

gain as under:-

Mode of computation.

48. The income chargeable under the head 'Capital gains' shall 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 following amounts, namely :-

(a) expenditure incurred wholly and exclusively in connection with such transfer;

(b) the cost of acquisition of the asset and the cost of any improvement thereto;

For computation of long term capital gains, Section 48 statutorily

provides that what is taxable as capital gain is full value of the

consideration received. It does not refer the consideration as deemed u/s

50C or fair market value, the amount of capital gain being defined u/s 48

has to be given the literal meaning. The wording being unambiguous

Section 48 referring only to the sale consideration actually received,

Section 50C being deeming fiction it cannot be applied to sec. 48 in the

absence of any enabling provision. It is a trite law that a deeming fiction

should be given limited meaning restricted to provision for which the

fiction is enacted. Therefore, the deeming provisions of Section 50C 6 ITA No. 413/JP/2012 Shri Nand Lal Sharma vs. ITO , Bundi

cannot travel beyond limited applicability as prescribed therein. This

aspect came under the judicial scrutiny and Hon'ble Delhi High Court in

the case of Smt. Nilofer I Singh (2009) 309 ITR 233, 238 has held as

under:-

''These decisions makes it more than clear that the expression ''full value of consideration'' that is used in Section 48 of the present Act does not have any reference to the market value but only to the consideration referred to the sale deeds as the sale price of the assets which have been transferred.'' It is pleaded that ITAT Jaipur judgment in the case of Gyan Chand Batra

vs. ITO (2010) 233 TTJ 482 adopted the similar view and held that for

working out exemption u/s 54 the capital gain is to be determined by

referring to sec. 48 i.e. by taking actual sales consideration and not

deemed sale consideration i.e. stamp duty value u/s 50C. It is contended

that Hon'ble Delhi High Court has in turn relied on the judgment of

Hon'ble Supreme Court in the case of CIT vs. George Henderson & Co.

Ltd. (1967) 66 ITR 622. It is pleaded that assessee's case is squarely

covered by these and sec 54 exemption should be directed to be allowed

by taking the actual value of consideration, as offered by the assesee in

return of income.

3.5 Apropos Ground No. 3, the ld. Counsel for the assessee contends

that towards cost of construction of a room and boundary wall, the 7 ITA No. 413/JP/2012 Shri Nand Lal Sharma vs. ITO , Bundi

assessee had claimed an improvement cost of Rs. 30,000/-. The AO held

that there was no mention of boundary wall in sale deed and adopted the

value of Rs. 20,000/- for indexation purposes. It is pleaded that the

assessee was an old man and to protect the property constructed a

boundary wall for the security of its house. The cost of improvement as

claimed may be allowed.

3.6 The ld. DR supported the orders of the lower authorities.

3.7 We have heard the rival contentions and perused the materials

available on record. Apropos Ground No. 1 i.e. deposit of net

consideration into capital gain account scheme on 31-032009, we find

merit in the arguments of the ld. AR that Section 54 refers to Section 139

for the time limit to acquire eligible new asset, which includes return u/s

139(4) also i.e. time limit of one year from the end of assessment year.

Various judicial precedents cited above have taken this view; respectfully

following them we hold that assessee purchase of new residential house is

eligible for claim of exemption u/s 54. Thus Ground No. 1 of the assessee

is allowed.

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 8 ITA No. 413/JP/2012 Shri Nand Lal Sharma vs. ITO , Bundi

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 50C 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 squarely 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.

3.9 Apropos Ground No. 3, we do not find any infirmity in the orders

of lower authorities as there is no mention of boundary wall in the sale

deed. Besides, no evidence was furnished by the assessee before the AO

to substantiate its claim of having constructed the boundary wall. Thus in

view thereof, Ground No. 3 of the assessee is dismissed. 9 ITA No. 413/JP/2012

Shri Nand Lal Sharma vs. ITO , Bundi

4.0 In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 15/05/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 15/05/ 2015 *Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Nand Lal Sharma,L/h Shri Mahavir Prasad, Bundi

2. izR;FkhZ@ The Respondent- The ITO, Bundi

3. vk;dj vk;qDr¼vihy ) @ CIT(A), Kota

4. vk;dj vk;qDr@ CIT, Kota

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.413/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar