INCOME TAX ACT, 1961

Section 54B Section 49(4)

Capital asset - Deduction under section 54B - Allowability as regards cost step up under section 56(2)(viib) -

Assessee has purchased certain land parcels below stamp duty valuation rate. AO accordingly replaced stamp duty valuation rate for the purposes of determination of purchase consideration by applying section 5(vii)(b). Assessee contended that addition under section 56(2)(vii) would have direct linkage with cost of asset and, therefore, exemption claim under section 54B against land sold would be increased to that extent as per section 49(4) read with section 54B as section 49(4) does not require transfer of the same property for claim of deduction under section 54B.Held: Section 49(4) clearly provides that benefit of inflated cost of acquisition in view of deeming provisions under section 56(2)(vii)(b)(ii) would be available at the time of sale of asset and capital gains would be accordingly reduced to the extent of such increase in deemed consideration. Accordingly, cost step up would be available only for the purpose of calculating capital gain when property is transferred at a later date as capital asset. In view of this deduction on enhanced value could not be made available for the deduction under section 54B during the year under consideration.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2014-15

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