Section 50C, 54F of Income Tax Act, 1961—Exemption u/s 54F—In the instant case, appeal is preferred by assessee against the order of CIT. All grounds of appeal are related deduction u/s 54F and taxability of capital gains on sale of capital asset.

The AO computed the capital gains u/s 50C and allowed the deduction as claimed by the assessee and taxed the balance amount. The moot question in this case is whether the capital gains required to be computed by applying section 50C or not?

Held that—when the assessee has invested the entire net consideration in acquiring the new house. As per section 54F of the Act, the conditions required to be satisfied for allowing the deduction u/s 54F is firstly, the asset transferred must be long term capital asset not being a residential house. Secondly, the assessee should acquire the new house within one year before the transfer or within 2 years from the date of transfer or the assessee required to construct one residential house before one year or within 3 years from the date of transfer. In the above event, the quantum of allowable deduction is, if the cost of the new asset is not less than the net consideration in respect of the original house, the whole of such capital gains should not be charged u/s 54 of the Act.

On identical facts this Tribunal in the case of DCIT, Circle-2(1), Vijayawada Vs. Dr.Chalasani Mallikarjuna Rao vide I.T.A No.206/Viz/2013 dated 21.10.2016 held that section 50C has no application in case the entire net sale consideration has been applied for acquiring the new house.[SMT. KALVA UMA DEVI VERSUS INCOME TAX OFFICER WARD-1 (4) VISAKHAPATNAM] [2018] 8 ITCD Online[26] [ITAT VISAKHAPATNAM]