Lower Cost Of Acquisition Without Justification Not Warranted: ITAT Ahmedabad

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) on 27 February held that adopting a lower deemed cost of acquisition than that accepted for co-owners, without justification, was not warranted.

A Tribunal Bench comprising Vice-President Dr. B.R.R. Kumar and Judicial Member Suchitra Kamble allowed the appeal of Nirmalaben Kamleshbhai Contractor and allowed deduction under Section 54EC, finding the investment was made within the prescribed period.

The Tribunal held that, “adopting lesser amount in assessee's case without any cogent reason was not justified.”

The case involved two main disputes for Assessment Year 2016-17.

First, Nirmalaben Kamleshbhai Contractor sold her one-third share of an immovable property on 13 July 2015 for a total consideration of Rs. 5,55,00,000. She adopted a deemed cost of acquisition of Rs. 37,84,000 based on a registered valuer's report, while the Departmental Valuation Officer (DVO) used a lower value of Rs. 18,07,032, resulting in a higher computed capital gain of Rs. 1,20,30,661.

The Tribunal accepted the cost of acquisition at Rs. 37,84,000 and computed long-term capital gains at Rs. 49,06,990.

The second dispute concerned deduction under Section 54EC. Although the property transfer occurred in 2015, the last instalment of sale consideration was received on 13 March 2018. Nirmalaben Kamleshbhai Contractor invested Rs. 50,00,000 in Rural Electrification Corporation (REC) bonds on 11 April 2018, within 47 days of receiving the final payment.

The Tribunal held that the investment was made within the prescribed period and allowed the deduction.

Accordingly, the ITAT allowed the appeal in favor of Nirmalaben Kamleshbhai Contractor on both grounds.