Income Tax Officer vs. Kondal Reddy Mandal Reddy ITAT ‘B’ Bench, Hyderabad Before P. Madhavi Devi (JM) and B. Ramakotaiah (AM) ITA No. 848/Hyd/2015 A.Y.: 2010-11. Date of Order: 13th May, 2016 Counsel for Revenue / Assessee: B.R. Ramesh / K.C. Devdas

The issue before the Tribunal was whether the actual sale consideration mentioned in the sale deed or the deemed sale consideration u/s. 50C is to be adopted for allowing the deduction u/s. 54F.

During the assessment proceedings under section 143(3) of the Act, the A.O. observed that the assessee had sold a plot of land for a consideration of Rs.20 lakh as per sale deed while vendees had paid the stamp duty, registration charges etc., on the value of Rs.89.6 lakh. Therefore, he invoked the provisions of section 50C and brought the difference of Rs.69.6 lakh to tax as the capital gains. Against the same, the assessee claimed deduction u/s. 54F qua the investment of Rs.1.37 crore made by him for construction of a residential house. The A.O. however, held that the sale consideration of Rs.20 lakh mentioned in the sale deed alone was eligible for exemption under section 54F and not deemed consideration arrived at by invoking the provisions of section 50C. On appeal, the CIT(A) agreed with the assessee.

Being aggrieved, the revenue appealed before the Tribunal and placed reliance upon two court decisions in support of its contention that the “full value of the sale consideration” as mentioned in Section 54F refers to the “consideration” actually received by the assessee and not the deemed consideration received under section 50C. The cases relied upon were as under
• CIT vs. George Henderson & Co. Ltd. 66 ITR 622 (SC);
• CIT vs. Smt. Nilofer L Singh 309 ITR 233 (Del.)

Held

The Tribunal relied on the decision of the Mumbai tribunal in the case of Raj Babbar vs. ITO (56 SOT 1) and of the Karnataka High Court in the case of Gouli Mahadevappa vs. ITO (356 ITR 90). As held in the said decisions, the Tribunal observed that when the capital gain is assessed on notional basis, the entire amount invested, should get benefit of deduction irrespective of the fact that the funds from other sources were utilised for new residential house. Thus, in the case of the assessee, the sum of Rs. 1.37 crore invested was eligible for benefit u/s 54F and not the sum of Rs. 20 lakh as contended by the revenue. According to the Tribunal, the decision relied upon by the revenue in the case of George Henderson & Co. Ltd. and Nilofer L Singh were distinguishable on facts. Accordingly, the appeal filed by the revenue was dismissed and the order of the CIT(A) was upheld.