Section 54F Exemption Governed by Actual Sale Consideration, Not Stamp Duty Deemed Value Under Section 50C — ITAT Chennai Rules in Favour of HUF Assessee
Case Overview
Case Name: R. Srinivasan (HUF) Vs ITO (ITAT Chennai)
Assessment Year: 2008-09
Relevant Provisions: Section 54F, Section 50C, Section 143(3), Section 250 of the Income Tax Act, 1961
The Chennai Bench of the Income Tax Appellate Tribunal delivered a significant ruling affirming that for the purpose of computing exemption under Section 54F of the Income Tax Act, 1961, it is the actual sale consideration as recorded in the registered sale deed — and not the stamp duty valuation adopted under Section 50C — that must serve as the basis, particularly where there is no evidence of any consideration received beyond what is disclosed in the document.
Background and Facts of the Case
The assessee, a Hindu Undivided Family (HUF) engaged in finance business, filed its return of income for Assessment Year 2008-09 declaring a total income of ₹1,23,100. The return was initially processed under Section 143(1) of the Income Tax Act, 1961, and was subsequently selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) system. Notices under Section 143(2) were duly issued and complied with.
The Property Transaction
During the course of assessment proceedings, the Assessing Officer noticed that the assessee had sold a piece of land located at Abishekapuram Village, Trichy, on 03.12.2007 for a consideration of ₹15,67,125. However, the guideline value applicable for stamp duty purposes for the said property stood at ₹33,22,305 — significantly higher than the actual recorded consideration.
DVO Reference and Valuation
Upon the assessee's own request, the Assessing Officer referred the property to the Departmental Valuation Officer (DVO) for an independent valuation. The DVO, exercising authority under Section 16A(5) of the Wealth Tax Act read with Section 50C(2) of the Income Tax Act, 1961, determined the fair market value of the property at ₹24,45,000.
Relying on the DVO's determination, the Assessing Officer proceeded to compute Long Term Capital Gains (LTCG) at ₹7,21,294, adopting the DVO value as the deemed full value of consideration under Section 50C.
Investment in New Residential Property
The assessee, along with two co-purchasers, entered into a construction agreement on 06.11.2009 for the purchase of a residential flat in Bangalore. The sale deed for this flat was registered on 29.03.2010 for a total consideration of ₹51,95,926. The assessee's one-third share in this investment amounted to ₹17,31,975.
The assessee deposited the entire sale proceeds from the Trichy land into the Capital Gains Account Scheme with State Bank of Travancore as required under Section 54F(4) of the Income Tax Act, 1961, and subsequently claimed exemption under Section 54F on the basis of this investment.