ITAT directs to Compute Capital gain and Exemption u/s 54 F based on Details of Expenses incurred on Construction of House [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) directed to Compute Capital gain and Exemption u/s 54 F based on Details of expenses incurred on the construction of house.

Shri Baldevji Motiji Thakore, the assessee along with other eight co-owners entered into a sale agreement (banakhat) on 31.12.2010 for a consideration of Rs.1,70,64,489/- which was based on the prevailing stamp duty value of Rs.7000/- per sq. meter at the relevant time i.e. on the date of agreeing onthe sale. on entering into an Agreement of Sale on 31.12.2010 the assessee and other co-owners; each received a sum of Rs.11,334/- (Rs.1,02,000/- in all) by way of cash as a token advance amount. 

The assessee filed a return of income on 14.3.2015 declaring total income at Rs.1,96,830/-.  The assessee claimed his share of income on the sale of the property at Rs.18,96,054/-.  After claiming indexed cost, and improvement cost, the assessee has claimed long-term capital gain at Rs.NIL and also claimed exemption under section 54F of the Act.

The AO reopened the assessment on the ground that the 50C valuation of the above property was Rs.44,51,333/- was not Rs.18,96,054/- as declared by the assessee. the AO made an addition of Rs.25,55,279/- being the difference of Rs.18,96,054/- declared by the assessee and sale consideration under section 50C taken by the AO at Rs.44,51,333/- being the valuation made by valuation authority.  The AO has also disallowed the claim of deduction under section 54F of the Act at Rs.6,60,282/- and an improved cost of Rs.4,04,002/- and demanded tax thereon. 

Shri Manish J. Shah with Shri Rushin Patel appeared for the assessee and alleged against the action of AO and CIT(A) in rejecting the claim. Per contra, Shri Alpesh Parmar, counsel appeared for the Revenue strongly supported orders of the lower authorities.

It was viewed that the provisions of section 52(2) that was existing at the relevant point of time did not apply to an honest and bona fide transaction where the consideration received by the assessee was correctly declared or disclosed by him and there was no concealment or suppression of the consideration.

A Coram of Smt Annapurna Gupta, accountant member and T R Senthil Kumar, judicial member set aside the matter back to the file of the AO with direction to compute capital gain on sale of the property by applying amended proviso to section 50C of the Act and recompute the capital gain.  

“As the assessee has produced details of expenses incurred in the construction of the house for availing benefit under section 54F of the Act, the AO was directed to consider supporting evidence filed by the assessee for claiming improvement expenses while computing capital gains and granting exemption u/s. 54F of the Act” directed the Tribunal. The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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