Question And Answer
Subject: Capital Gain Exemption 54F
Querist: CA Ashok Kumar goyal
Answered by:
Tags: , , ,
Date: October 2, 2021
Query asked by CA Ashok Kumar goyal

In calculation of deduction under section 54F whether actual sale consideration will be considered for net sale consideration or 50 C will you will be considered

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Reliance is placed on the Hon’ble Bombay in the case of Jagdish C. Dhabalia v. ITO [2019] 262 Taxman 453 (Bom) (HC) held that computation of capital gain and consequently computation of exemption under section 54EC Income-tax Act, 1961 (Act), shall have to be worked out on basis of substituted deemed sale consideration of transfer of capital asset in terms of section 50C of the Act; even if for purpose of section 48 of the Act, in terms of section 50C of the Act, sale consideration deemed to have been received by assessee (being stamp duty valuation) was much higher than sale consideration declared in sale deed, assessee could not claim further capital gain tax exemption over and above investment made in specified asset by simply claiming to have made investment of full declared sale consideration.

Further, the Hon’ble Karnataka High Court in the case of Gouli Mahadevappa v. ITO [2013] 356 ITR 90 (Karn) (HC) held that where capital gain is assessed on notional basis under section 50C of the Act, whatever amount is invested in new residential house within prescribed period under section 54F of the Act, entire amount so invested would get benefit of deduction irrespective of fact that funds from other sources are also utilized for new residential house.

Therefore, the value as adopted by the deeming provision of section 50C of the will be the full value of consideration for the purpose of computation of Capital Gain so as to not render section 50C of the Act, redundant.

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