The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the sale consideration enhanced by invoking section 50C of the Income Tax Act, 1961 cannot be extended to computation under section 54F of the Act.
The Assessing Officer, while allowing the exemption under section 54F of the Act, observed that the sales consideration was subject to the application of section 50C whereby it was increased. He determined the amount of exemption on the basis of the enhanced amount. On the first appeal, the CIT(A) confirmed the order.
The assessee objected to the assessment and contended that Section 50C will be applicable to determine sale consideration for the purpose of computation of capital gain and not for the purpose of the exemption.
While concluding the matter in favour of the assessee, the ITAT held that the Assessing Officer admitted the claim of the assessee for exemption under section 54F(1)(b) in respect of investment on long term Capital Gain Exemption but instead of taking actual sale consideration received, has adopted the figure of sale consideration by invoking Section 50C.
“This is not in accordance with the provision of Section 50C which has created a deeming fiction. Section 54F is an exemption provision and it has given its applicability in itself, therefore, Section 50C will not come under the picture. The Long Term Capital Gain exemption is admissible u/s 54F(1)(b) of the Income Tax Act, 1961 wherein total taxable gain comes to Rs.2,68,830/- only as the investment made by the assessee adopting the figure of the actual sale consideration received in consequence with Section 54F of the Income Tax Act. Therefore, the CIT(A) while enhancing the addition has ignored the very effect of the provisions of Section 54F. Besides this, the CIT(A) while enhancement has not given any reasons as to why the enhancement is necessary and why the assessee is not justified in adopting the figure of the actual sale consideration received. Thus the Assessing Officer, as well as CIT(A), failed to justify the stand by making the addition of Rs.30,17,456/- in respect of long term capital gain without granting exemption u/s 54F of the Income Tax Act,” the ITAT said.
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