Case Digest: Capital gain on Property (Part 1)

Profits or gains arising from the transfer of an immovable property, held as a capital asset, are taxed under the head "Capital Gains”. The incidence of tax on Capital Gains depends upon the period for which the capital asset under consideration was held before the transfer. Ashok Kumar Agarwal vs. ITO 2023 TAXSCAN (ITAT) 575 The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed re-assessment proceedings and noted that “Mere putting of seal as approving statement is not sufficient”. The Bench consisting of Chandra Mohan Garg, Judicial Member observed that “Merely putting a seal as approving statement is not sufficient and make it clear that the approving authority has granted approval in a mechanical manner without application of mind to the relevant material and reasons recorded by the AO. Therefore, the initiation of reassessment proceedings fails on this count.” Raghav Mahesh Chandra Trivedi vs. TheCIT 2023 TAXSCAN (ITAT) 580 The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) held that no income tax is to be levied on compensation from builders in lieu of a consumer court order as the same is in the nature of capital receipt. The Coram comprising the account member Waseem Ahmed and the judicial member T.R Senthilnkumar observed that the assessment order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue. The coordinate benches of the tribunal held that the compensation received by the assessee from the proposed building by way of allotment is actually the extinguishment of a right in relation to a capital asset, in view of the provisions of section 2(47)(vi) of the Income Tax Act,1961. This clearly falls within the definition of transfer and hence provisions of section 45 are applicable. Therefore the revision proceedings initiated by the commissioner of income tax (CIT (IT & TP)) is liable to be quashed. Justice N. Kannadasan, Vs. The Asst. Commissioner of Income Tax 2023 TAXSCAN (ITAT) 569 The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under Section 54F was allowable to the purchase of undivided share of land. The division Bench of Mahavir Singh, (Vice President) and Manoj Kumar Aggarwal, (Accountant Member) upheld the decision of Commissioner of Income Tax Appeal (CIT(A)) and dismissed the appeal filed by the revenue holding that “ The CIT(A) has allowed exemption u/s.54F by noting that the exemption is not hit because the assessee has actually purchased undivided share of land on 22.12.2011.” Ramdoss Ramvijay Kumar vs Income Tax Office 2023 TAXSCAN (ITAT) 559 The Chennai Bench of Income Tax Appellate Tribunal (ITAT) recently held that the valid satisfaction is required to initiate reopening of assessment under section148 of Income Tax Act. The Coram comprising the judicial member V. Durga Rao and the account member G. Manjunatha observed that on the basis of reasons submitted by the assessing officer, ‘the said satisfaction’ constitutes a valid satisfaction as required under law. Therefore we reject the argument of the assessee. The bench further added that ‘’ in our considered view, once the assessee objects for adopting full value of consideration and requests for reference to DVO, it is the duty of the assessing officer to refer the matter to the DVO and find out correct fair market value of the property as on the date of sale. Smt. Amarnath Sarala vs ITO 2023 TAXSCAN (ITAT) 550 The Bangalore Income Tax Appellate Tribunal (ITAT) has recently held that assessee could not claim capital gain exemption under section 54F of Income Tax Act 1961 if there was no proof for completion of construction within three years. The bench determined that assessee has not produced any license/permission for construction of building in the scheduled property from any authorities said to be constructed and there was no evidence in support of the fact that there was actually any construction within the stipulated time as per section 54F of the Income Tax Act 1961. Mohamed Ibrahim, Vs Income Tax Officer 2023 TAXSCAN (ITAT) 534 The Chennai bench of Income Tax Appellate Tribunal (ITAT) has recently held that capital gain exemption under section 54 of Income Tax Act 1961 should not be allowed in respect of two independent residential units. “The Assessing Officer restricted the deduction under section 54 of the Income Tax Act, 1961 to the investment in 3rd floor keeping in view of the amendment to section 54 of the Act eligible for one residential house. Admittedly, the assessee has not been able to establish that 3rd and 4th floor are not independent and thus, the Assessing Officer has correctly allowed the claim of deduction under section 54 of the Act for 3rd floor”. Shri Lal Singh Naderia vs ITO 2023 TAXSCAN (ITAT) 522 The Jaipur Bench of Income Tax Appellate Tribunal (ITAT) has held that the amount paid for acquiring the title of the property under dispute would be treated as expenditure for transfer of property. The Division Bench Of Sandeep Gosain, (Judicial Member) And Rathod Kamlesh Jayantbhai, (Accountant Member) following the decision that any amount, the payment of which was absolutely necessary to affect the transfer would be an expenditure covered under section 48(1)(i) held that , The payment of the said amount to settle the property dispute would be considered as the payment which was absolutely necessary to affect the transfer made by the assessee and would be considered as expenditure. Late Sh. Ravinder Mohan Kalia vs The Dy. CIT International Taxation 2023 TAXSCAN (ITAT) 513 The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT) has re-adjudication observing that the sanction by Principal Commissioner of Income Tax (PCIT) for the reassessment under Section 147 of the Income Tax Act 1961 was mechanical approval without application of mind. The Division Bench of Diva Singh, Judicial Member and Vikram Singh Yadav, Accountant Member allowed the appeal and observed that “Both the parties have fairly submitted that even though the assessee has raised this ground of appeal before the CIT(A), there is no adjudication and finding recorded by the CIT(A). In view of the same and also given that on other grounds of appeal, we have set-aside the matter to the file of CIT(A), we deem it appropriate to set-aside this ground of appeal as well as to the file of the CIT(A) to decide the same as per law after providing reasonable opportunity to the assessee.” JOHNSON MATTHEY INDIA PVT LTD. vs UNION OF INDIA & ORS 2023 TAXSCAN (SC) 128 In Chief Commissioner of CGST vs M/s Safari Retreats Pvt Ltd, likely to be listed on March 22, 2023, the Supreme Court is set to decide the constitutional validity of Goods and Services Tax ( GST ) Input Tax Credit ( ITC ) restrictions on immovable property. The petitioner, in the High Court case, had then contrasted an immovable property intending to let out the same for rent and claimed that input tax credit can be availed on the same since they are mainly carrying on the business activity of constructing shopping malls for the purpose of letting out the same to numerous tenants and lessees. Akshay Janak Shah, Vs CIT (Appeal), Income Tax Department 2023 TAXSCAN (ITAT) 411 The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held purchase of property within a specified period of one year before sale of capital asset allowable as capital gain exemption under section 54F of the Income Tax Act 1961. The bench observed that “in terms of Section 2(47(v) of the Act, the transfer of Capital Asset took place on 30.09.2012, which fell within the previous year relevant to the Assessment Year 2013-14. The Appellant had purchased residential property on 17.08.2012 which fell within the specified period of one year before the sale of the Capital Asset. The Appellant was, therefore, entitled to claim exemption under Section 54F of the Income Tax Act 1961.” Shri Navghanbhai LaxmanRabar vs ITO CITATION: 2023 TAXSCAN (ITAT) 396 The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, while disallowing capital gain exemption u/s 54 F, held that non- registered banakhat is not a valid document for property transfer. The Ahmedabad ITAT, finally held: “Even in the sale deed there is no mention of Banakhat. The issue of invoking the exemption under sec 54F was also held invalid by the lower authorities. The onus to prove the findings of the authorities below as not justified lies upon the assessee. However, the assessee has not brought anything contrary to the findings of the authorities below. As such, it seems that the assessee is not interested in pursuing his claims as he failed to appear despite giving so many opportunities by the Tribunal. Therefore, we are not inclined to interfere in the finding given by the Ld. CIT(A). Hence, the ground of appeal raised by the assessee is dismissed.” Sidharth Chaudhary vs Income-tax Officer 2023 TAXSCAN (ITAT) 392 The Income Tax Appellate Tribunal (ITAT) Delhi bench (“SMC” New Delhi) held that PoA Holder is not ‘owner’ of the property and not considered as Capital Gain Tax. The single bench of Shri Kul Bharat observed that there is no ambiguity under the law for chargeability of capital gain in respect of transfer of any capital asset. It is the owner of capital assets who would be liable for capital gain. In case the sale consideration is credited into the account of a third party or the attorney of such owner, in that event also the money which has been credited in the account of the third party or the power of attorney cannot be subjected to tax under the head ‘capital gains’. Mrs. Mumtaz Naseem Syed vs Income Tax Officer 2023 TAXSCAN (ITAT) 375 The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) recently allowed 50 percent as capital gain exemption under section 54 of the Income Tax Act 1961 to joint owners of property. The division bench of ITAT comprising Dr. B. R. R. Kumar (Accountant Member) and Yogesh Kumar U.S (Judicial Member) confirmed the addition made the assessing officer and observed that “Since the assessee and her son have jointly invested the house property and are the joint owners of the house property having 50% right, title and interest over the property, the Assessing Officer is, therefore, correct in restricting the claim of the assessee under section 54 of the Income Tax Act 1961 to Rs. 1,79,23,884/- by making an addition of Rs. 74,49,302/- to the total income of the assessee.” Dilshad Ahmed Rangrej vs CIT, National Faceless Appeal Centre 2023 TAXSCAN (ITAT) 256 A single Bench of Mumbai Income Tax Appellate Tribunal (ITAT), in a recent ruling has directed to allow capital gain exemption considering the date of acquisition of property as per the allotment letter issued. The Single Bench of Prashant Maharishi (Accountant Member) allowed the appeal relying upon principal Commissioner of income tax vs Vembu Vedhyanathan in which the High Court after considering the circular issued by the central board of direct taxes held that the allotment letter by the builder would be the date of acquisition of the property as the period of holding for the purpose of determining whether the asset was a long-term capital asset or a short-term capital asset, was to be taken therefrom. Anik Chatterjee vs ITO 2023 TAXSCAN (ITAT) 229 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under Section 54 of the Income Tax Act 1961 would be allowed even if the sale was completed after purchase of new property. The Delhi Bench of B. R. R. Kumar, (Accountant Member) and Yogesh Kumar US (Judicial Member) observed that the agreement for sale was signed on 08.08.2014 and the payments were completed by 08.10.2014 and the amount equivalent to the capital gains had been utilized for acquisition of a new house. The Bench allowed the appeal and permitted the assessee to avail the benefit under Section 54 of the Act. Jay Atulbhai Mody, Vs I.T.O 2022 TAXSCAN (ITAT) 1902 The Income Tax Appellate Tribunal (ITAT), Rajkot bench has held that the property transferred in the name of mother for a nominal consideration of Rs. 5 lakhs cannot be treated as a “gift” as the same is taxable as “capital gain” under section 45 of the Income Tax Act, 1961. Concluding the order, the ITAT referring the matter to the DVO, held that “From the above, there remain no ambiguity that the impugned property transferred by the assessee to his mother for consideration of Rs. 5 Lakh is liable to be brought under the ambit of capital gain. However, the question arises for determination of sales consideration. As the AO has taken consideration as per section 50C of the Act whereas the AR before us has challenged the value adopted by the AO and subsequently sustained by the learned CIT(A). In the interest of justice and fair play, we set aside the issue to the file of the AO to refer the matter to the DVO to determine the value of the property in pursuance to the provisions of section 50C of the Act. Hence the ground of appeal of the assessee is partly allowed.” Gem Spinners India Limited vs The Assistant Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1871 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has upheld the disallowance of loss on account of write-off inventory of cotton when the capital gains derived from sale of property set off under current year business loss. A Coram consisting of Shri V Durga Rao, Judicial Member and Shri G Manjunatha, Accountant Member observed that the assessee could not satisfactorily explain with necessary evidence the loss claimed on account of write-off inventory but is only to offset capital gain derived from the sale of property as brought out by the AO and CIT(A). RaviKumar Tirupati Parthasarathy vs The Deputy Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1840 The Bangalore bench of the Income Tax Appellate Tribunal(ITAT) has held that the Actual flow towards property acquisition while computing capital gain can't ignore merely the fact that the assignment agreement was not registered. A Coram comprising Shri N.V. Vasudevan, Vice President and Ms Padmavathy S, Accountant Member observed that “merely for the reason that the assignment agreement is not registered, the actual outflow from the hands of the assessee towards the acquisition of the property cannot be ignored for computing the capital gains.” K.Gopalakrishnan Vs Income Tax Officer 2022 TAXSCAIT 1835 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has recently held that more than one property under the heads of capital gain would get a deduction Under Section 54 of Income Tax Act 1961. V. Sreenivasan, Counsel for Revenue, pleaded that deduction under section 54 of Income Tax Act was not to be granted for more than one property. T.V.Muthu Abirami counsel for assessee contented that assessee received sale consideration of Rs.75 Lakhs which was offered to tax. As per the terms of Joint Development Agreement the flat was shared by other co-owners only.He also produced the assessment orders and Income tax Returns of the other co-owners. Dr. Dharmista Mehta 22/5 vs ITO-34(1) (3) 2022 TAXSCAN (ITAT) 1743 The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), allowed capital gain exemption claim under Section 54 of the Income Tax Act on purchase of new residential property up to date of filing of belated Income Tax Return. A Bench consisting of Aby T Varkey, Judicial Member and Gagan Goyal, Accountant Member held that “It can be safely be concluded that the assessee in the case before us is entitled to claim exemption under section 54 to the extent she had invested towards the purchase of new residential property under consideration up to the date of filing of belated return under section 139(4) of the Income Tax Act.” Shri Gangahanumaiah Lakshminarayana vs ITO Ward 2022 TAXSCAN (ITAT) 1583 The Banglore Bench of the Income Tax Appellate Tribunal (ITAT) comprising Judicial Member Beena Pillai and Accountant Member Chandra Poojari has recently held that the consideration received by the assessee on relinquishment of property rights to his father is taxable as Long Term Capital Gain under Section 45 of the Income Tax Act. The bench observed that “It cannot be said that AO precluded in bringing the said amount into taxation on the simple reason that cash deposit was from the sale of property and assessee received his share on the relinquishment in favor of his father and the same has to be brought into tax” and held that, “that lower authorities is justified in bringing to tax the capital gain in the hands of the assessee”, denying the relief to assessee. Shri Kanhaiya Lal Lalwani vs ITO 2022 TAXSCAN (ITAT) 1488 The Income Tax Appellate Tribunal (ITAT), Jaipur Bench deleted the penalty as the Capital gain from sale of immovable property below taxable limit. A Single Bench of the Tribunal consisting of Sandeep Gosain, Judicial Member held that “ It is also noted from the record that the assessee is not having any taxable income and the AO has not given the benefit of indexed cost of acquisition and indexed cost of improvement on the immovable property in question and thus in that eventuality the capital gain arose on the sale of immovable property would have been below taxable limit. While giving benefit of the same, the Bench deletes the penalty levied by the AO of Rs.5,000/-u/s 271F of the Act.” Vikas Narayan Baddi 2 vs ACIT 2022 TAXSCAN (ITAT) 1411 The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT)has held that capital gain exemption cannot be denied on the ground of Delay in the registration of new property for reasons beyond the control. A Coram of Smt Annapurna Gupta, AM and Smt. Suchitra Kamble, JM observed that the delay in registration of the new property was for reasons beyond his control and the denial of exemption u/s 54 F in the present case is for a mere technical default in not getting the new property registered in his name within the stipulated period of two years, as specified under section 54F of the Act, the consequent delay being a minor delay of 5 months that too for reasons beyond the control of the assessee. KAMLESH KESWANI vs ASSISTANT COMMISSIONER OF INCOME TAX 2022 TAXSCAN (HC) 723 In a significant ruling, a division bench of the Delhi High Court has held that the statutory benefit under section 54 of the Income Tax Act, 1961 cannot be denied to the assessee merely for the reason that the name of the wife was included in the property newly purchased. A division bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that the judgment of this Court in Ravinder Kumar Arora relied upon by the petitioner as regards his entitlement to claim LTCG is squarely applicable to the facts of the case. “We also find merit in the submission of the learned counsel for petitioner that the re-assessment has been initiated on the basis of change of opinion, which is not permissible. There is no new information available with the respondent to re-assess the LTCG claim. The AO had considered the same documents during the earlier assessment proceedings and was satisfied with the claim of LTCG made under Section 54 of the Act,” the Court said. Shri Sudhakar vs Deputy Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1347 The Income Tax Appellate Tribunal ‘B’ Bench, Chennai, has while allowing an appeal filed by the Revenue, held that capital gain exemption u/s 54F is allowable only if the property in question is found to be of commercial nature. The bench observed that we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to cause necessary inquiries on the additional evidence filed by the assessee to ascertain the nature of the property. And in case, the Assessing Officer finds that the property is accounted for in the books of firm M/s. S.P. Hospital as a commercial property and that the same is being used for the purpose of the aforesaid hospital, then the Assessing Officer is directed to allow deduction under section 54F of the Act. Mr. Mahesh D. Saini vs ITO 2022 TAXSCAN (ITAT) 1294 The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that capital gain can’t be taxed when actual possession of the property is not transferred as per the agreement In the light of the facts, while allowing the appeal, Shri Pramod Kumar, VP, and Shri Aby T Varkey, JM held that “there was no transfer of immovable property, so no capital gain could have been taxed in the hands of the assessee in this assessment year, therefore, the assessee succeeds.” Kulvinder Singh Kohli vs ACIT CITATION: 2022 TAXSCAN (ITAT) 1266 Original cost and period of acquisition of property by previous owner is relevant for claim of capital gain, so was held by the Income Tax Appellate Tribunal (ITAT), New Delhi. The Bench consisting of N K Billaiya, Accountant Member and N K Choudhry, Judicial Member held that “As per section 49 of the Act, where the capital asset became the property of the Assessee on any distribution of assets on the total or partial partition of a Hindu undivided family, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the Assessee, as the case may be. Smt. Vani Shree vs The Income-tax Officer 2022 TAXSCAN (ITAT) 1212 The Income Tax Appellate Tribunal (ITAT), Bangalore Bench consisting of Beena Pillai, Judicial Member, and Laxmi Prasad Sahu, Accountant Member held that Capital Gain does not attract in case of permissive possession in immovable property and hence not taxable. The Tribunal observed that “The assessee only permitted the developer to develop the project in their land. Therefore, it cannot be construed that the possession of the immovable property of the assessee is vested with the joint developer as per the provisions of the Act. In the instant case, it is noted that the assessee has given permissive possession and not ‘legal possession’, as contemplated within the meaning of section 53A of the Transfer of Property Act. Hence, it is held that the provisions of section 53A of the Transfer of Property Act, are not applicable to the impugned Joint Development Agreement. Based on the above facts, the conditions laid down in section 2(47)(v) of the Act, cannot be invoked, so as to bring the capital gains into tax.” Mrs. Bharati Narendra Oswal vs Income Tax Officer 2022 TAXSCAN (ITAT) 1139 The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain in respect of consideration received from sale of property cannot be taxed from the owner of the property as the same is already taxed from the Power of Attorney holder. The point for consideration before the bench comprising Shri Inturi Rama Rao, Accountant Member and Shri S.S. Viswanethra Ravi, Judicial Member was wondering whether the assessee can be taxed on account of capital gain in the absence of receipt of sale consideration. Allowing the contentions of the assessee, the Tribunal held that “we find force in the arguments of ld. AR that it is not correct to be taxed in the hands of assessee when the same was taxed in the hands of Jayantilal Oswal. Therefore, when the assessee not received the said sale consideration of Rs.2,00,00,000/- vide registered Deed of Assignment dated 13-01-2013 and the same was received by the said Jayantilal Oswal as a consenting party which was disclosed by him under the head capital gain by Schedule 18 of his return of income, again, taxing the same in the hands of assessee is not justified. Thus, the order of CIT(A) in confirming the order of AO in taxing the assessee on account of capital gain of Rs.1,26,80,413/- is not justified and it is set aside. Thus, ground Nos. 2 to 5 raised by the assessee are allowed.” Shri Komal Gurumukh Sangtani vs ITO 2022 TAXSCAN (ITAT) 1055 The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that cost of improvement and due indexation benefit on house property is deductible while computing capital gain. The Coram of Mr. Vikas Awasthy, Judicial Member,and Mr. M.Balaganesh, Accountant Member has held that “we hold that assessee would be eligible for deduction along with her husband totaling to Rs.9,68,575/- towards the cost of an improvement made in the house which has to be reduced while computing capital gains in the hands of the assessee as well as in the hands of her husband. The assessee along with her husband would also be eligible for due indexation benefit on the same”. Mr. Adabala Manmohan vs Income Tax Officer 2022 TAXSCAN (ITAT) 1048 The Visakhapatnam bench of the Income Tax Appellate Tribunal (ITAT), has quashed an order for non-deduction of TDS while making payment towards the purchase of a property, under section 201(3) of the Income Tax Act, 1962 by considering that the NRI seller has already offered the amount of capital gain received. A bench of Shri Duvvuru Rl Reddy (Judicial Member) & Shri S Balakrishnan, (Accountant Member) has observed that the assessee has purchased a property during the FY 2010-11 relevant to the AY 2011-12 on 7/3/2011. The assessee has paid a sum of Rs. 54,22,000/- out of which Rs. 50,39,500/- was paid to the NRI. As per the provisions of section 195 of the Act, the assessee is required to deduct tax at source on payments made to non-residents. In the instant case, the assessee is required to deduct the tax at source on the sums chargeable to capital gains. Sumeet Dhiman vs ACIT 2022 TAXSCAN (ITAT) 995 The Delhi bench of the Income Tax Appellate Tribunal (ITAT), while considering an appeal regarding claim of capital gain exemption under section 54 of the Income Tax Act, 1961 wherein the assessee invested in two properties, held that the second property, being in a different location, the amount of repayment of loan borrowed for acquisition is not eligible under the provision. “The assessee can take shelter and claim deduction u/s 54 only when the assessee invests the long term capital gain in purchase or construction of a single residential house. The words ‘a one residential’ mentioned in Section 54 of the Income Tax Act refers to only a house which can be purchased or constructed to the amount of capital gain. The word ‘a residential house’ cannot be read or interpreted as ‘more than one house’ in the present case, wherein both the houses are situated in separate buildings and in different places,” the Tribunal said. S.K. Agarwal (HUF) vs ITO 2022 TAXSCAN (ITAT) 945 The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the Hindu Undivided Family (HUF) is eligible to claim capital gain exemption under section 54F of the Income Tax Act, 1961 for the property purchased in the joint-name of the members. A bench of G.S. Pannu, President and Ms. Astha Chandra, Judicial Member observed that this is unjustified on the face of the facts brought on record that the entire consideration towards purchase was financed by the funds of the HUF alone and there was no contribution by the two other members of HUF. The Deputy Commissioner of Income Tax vs Mr. Keezhayur Sowrirajan Sreenivasan 2022 TAXSCAN (ITAT) 825 The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) presided by Mr. I G. Manjunatha, Accountant Member, and Mr. Anikesh Banerjee, Judicial Member has held that compensation received for relinquishment of right in a property is assessable under ‘income from capital gains’ and eligible for deduction u/s 54F. The Tribunal observed that extinguishment of any rights in a property would cover under the definition of transfer under section 2(47), then consequential consideration received for transfer of property would come under the provisions of section 45 of the Income Tax Act, 1961, and thus, the assessee has rightly computed capital gains towards consideration received for extinguishment of his right in the property. Asha BhausahebThube vs Income Tax Officer 2022 TAXSCAN (ITAT) 476 The Pune Bench Income Tax Appellate Tribunal ( ITAT ) has held that capital gain exemption cannot be allowed as no property purchased or constructed within the stipulated period U/S 54F. The Coram of Mr. Partha Sarathi Chaudhury, JM, and Dr. Dipak P. Ripote, Hon’ble AM has further observed that on the date of sale when the assessee received the sale consideration, the assessee was free to utilize it as per his own free will. As per Section 54F of the Act, it was mandatory for the assessee either to purchase or construct the new residential house within the stipulated period. The assessee failed to do so. Y. Manjula Reddy vs ITO 2022 TAXSCAN (ITAT) 433 The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the wife is eligible for capital gain exemption in respect of money given for the acquisition of the property either directly to the builder or as reimbursement to her husband. The Tribunal bench comprising Shri N.V. Vasudevan, Vice President and Shri B.R. Baskaran, Accountant Member has observed that the Karnataka High Court has held in the case of Mrs. Jennifer Bhide that the deduction under section 54 of the Act should not be denied merely because the name of assessee’s husband is mentioned in the purchase document, when the entire purchase consideration has flown from the assessee. Smt. Nalini Anilbhai Amin vs D.C.I.T 2022 TAXSCAN (ITAT) 427 The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the undisclosed sale consideration of the property can be subject to tax as “capital gain”under the provisions of section 48 of the Income Tax Act, 1961. The Tribunal bench comprising Shri Waseem Ahmed, Accountant Member and Ms. Madhumita Roy, Judicial Member observed that the amount which has not been disclosed by the assessee represents the sale consideration of the property which can be subject to tax under the provisions of section 48 of the Act. ITO,Ward-3(4) New Delhi vs Sh. Subhash ChandraNarang 2022 TAXSCAN (ITAT) 199 The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption shall be allowed since it was found on physical inquiry that the new asset purchased is a residential property under section 54 of the Income Tax Act, 1961. A two-Member bench of the Tribunal comprising of Mr. Saktijit Dey (Judicial Member) and Mr. B R R Kumar (Accountant Member) held that in course of proceeding before the first appellate authority, the assessee has furnished the sale-deed of the property purchased by him indicating that it is a residential house. The evidence furnished by assessee was forwarded to the Assessing Officer for verification. After receiving the additional evidence furnished by the assessee, the Assessing Office made a field inquiry through the Ward Inspector to ascertain the assessee's claim of existence of residential house. Dr.E.S.Krishnamoorthy vs The Income Tax Officer, Non-Corporate Ward-I(4),Chennai CITATION: 2022 TAXSCAN (ITAT) 207 The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the capital gains shall be determined according to the respective share of the parties in residential property and not according to any internal family arrangement under the provisions of the Income Tax Act, 1961. The ITAT held that the receipt of the entire nonrefundable deposit by the Assessee’s father and one flat each by the Assessee and his wife was an internal arrangement which had nothing to do with the computation of capital gains under the law. The ITAT ruled that as per law, when a property was transferred, the consideration received as a result of the transfer should be taken into account according to the share of the parties in the property and not as per the internal arrangement between the parties. Sri Joseph K. Zachariah vs ACIT 2020 TAXSCAN (ITAT) 122 The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that the capital deduction is allowable for purchase of house property abroad. The Coram headed by the Vice President, N.V. Vasudevan directed that the assessee shall furnish necessary evidence of construction or purchase of new residential property in Chicago, USA and also directed the AO has to examine the same and decide the issue in the parameters of section 54F of the Act. Shri Naresh Jain vs The ACIT 2020 TAXSCAN (ITAT) 123 In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Jaipur bench has held that the income tax law does not permit the assessee to set off the amount of loss from the sale of share transactions from the capital gain received from the sale of commercial property. The Tribunal, after perusing the relevant provisions, observed that as per provisions of section 54F (1) on fulfillment of certain conditions the capital gain arising on sales of such assets will not be chargeable to capital gain under the section 45 of the Act. “The scheme of Sections 45 to 55A provides for the computation of capital gains, and the effect has to be given first to the provision of capital gains as given under the above scheme and then apply the provisions of Section 70. Section 70 would come into play only when the capital gains have been computed in accordance with the provisions contained in Sections 45 to 55A. Thus, if, after work out of deduction u/s 54F if the capital gain arising on sale of certain assets is not chargeable to capital gain then the loss arising to the assessee on sales of other assets cannot set off from gain of such assets. It is not necessary that one should first apply Section 70(3) and thereafter only, the assessee could invest the capital gain arising from the long term capital asset.” Mr. Rajiv Madhok vs ACIT 2020 TAXSCAN (ITAT) 124 The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the capital gain deduction under section 54F of the Income Tax Act, 1961 is available if the new residential property was purchased by the assessee within two years from two years of the date of transfer of old shares. The Tribunal noted that availing the benefit of the said provision is subject to fulfill the following requirements, i.e., (i) Purchase of residential house within a period of one year before or two years after the date on which the transfer of the original asset took place, or (ii) Construction of residential house within a period of three years from the date on which the transfer of the original assessee took place. Bhagwan Swroop Pathak vs ITO 2020 TAXSCAN (ITAT) 125 In an assessee-friendly ruling, the Income Tax Appellate Tribunal (ITAT), Delhi bench has recently allowed capital gain exemption under section 54 of the Income Tax Act, 1961 to the assessee for the purchase of new property in the name of his son’s name. The Tribunal, while delivering the order, observed that the exemption is allowable since the capital gain from the sale of the old asset was used for investing in the name of a person who has a direct relationship with the assessee. The Tribunal observed that the benefit of the income tax act and its provisions related to exemption and deduction has to be taken into account while computing the income of the assessee and it is the proper procedure on the part of the Assessing Officer to follow all the aspect of taxation within the corners of Income Tax Act. Ravi Jain vs ACIT 2019 TAXSCAN (ITAT) 109 The Income Tax Appellate Tribunal (ITAT) Delhi bench has held that the capital gain exemption under section 54 of the Income Tax Act, 1961 should be given to more than one house when the property of an HUF is sold. The Tribunal noted the decision of the Karnataka High Court wherein it was held that the contention of the Revenue is that the phrase “a” residential house would mean one residential house and it does not appear to be the correct understanding. Asst. Commissioner of Income Tax vs Ashwin. S. Bhalekar 2019 TAXSCAN (ITAT) 110 The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the extinguishment of any rights in the property would result in the capital gain under the Income Tax Act, 1961. The Tribunal noted that the above-narrated facts are undisputed. The facts clearly show that the extinguishment of assessee’s right in Flat No. 1703, 1704 and 1705 proposed building known as “shubh Residency” allotted vide allotment letter dated 20.06.2008 is actually extinguishment of any right in relation to capital asset in view of the provisions of section 47 of the Act and falls in the definition of transfer and hence, result in capital gain chargeable under section 45 of the Act. Principal Commissioner of Income Tax23 vs Shri Rahul Uday Tuljapurkar 2019 TAXSCAN (HC) 111 The Bombay High Court has held that in order to avail the benefit of capital gain exemption under Section 54 of the Income Tax Act transfer of land is not necessary along with the transfer of residential property. Considering the departmental appeal, Justices Akil Kureshi and Sarang V Kotwal observed that in terms of this provision, therefore, where in case of an Assessee who is an individual or Hindu Undivided Family, the capital gain arises from transfer of a long term capital asset being buildings or lands appurtenant thereto and being a residential house, the Assessee could claim exemption under the said provision by either constructing or acquiring a residential unit within prescribed time. Venkatesan vs Income Tax Officer CITATION: 2019 TAXSCAN (ITAT) 111 The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that an individual coparcener who is shown as owner in the sale deed cannot be taxed for Property belonging to the Hindu Undivided Family ( HUF ). The Tribunal noted that the property in question was mortgaged for borrowing loan for the family business and therefore, the property in question belongs to Hindu Undivided Family of Shri Sambanda Mudaliar. Under the Income-tax Act, Hindu Undivided Family is a separate and independent assessable unit. Since the property belongs to Hindu Undivided Family and the Hindu Undivided Family is an independent and separate assessable unit under the Income-tax Act, this Tribunal is of the considered opinion that the gain arising out of sale of property has to be assessed only in the hands of Hindu Undivided Family and definitely not in the hands of individual coparcener. The assessee and his brother are individual coparceners. Therefore, there cannot be any capital gain assessment in respect of the property belonging to the Hindu Undivided Family in the hands of the assessee,” the Tribunal said. Smt. Lakshmi Swarupa vs Income Tax Officer CITATION: 2018 TAXSCAN (ITAT) 123 The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the mere license to enter the property for carrying out development is not ‘Transfer’ for imposing capital gain liability under the provisions of the Income Tax Act, 1961. The bench observed that “the clause in the JDA regarding possession clearly states that what is given is not possession contemplated u/s.53A of the Transfer of Property Act and that it is merely a license to enter the property for the purpose of carrying out development.” Based on the above findings, the bench held that capital gain on transfer of property cannot be done since no transfer was undertaken. Income Tax officer vs Arshia Basith CITATION: 2018 TAXSCAN (ITAT) 124 The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) held that the assessee is entitled for capital gain exemption under section 54F of the Income Tax Act in respect of the properties acquired outside India. While upholding the findings of the first appellate authority, the Tribunal bench found that the assessment year in this appeal is 2014-15 and the provision in section 54F comes w.e.f. 01.04.2015 according to which it was clarified that the residential house is to be acquired only in India meaning thereby before this amendment it was not clear as to whether the benefit of section 54F can be given to residential house acquired in India or abroad. Mrs. Madhu Sarda vs Income Tax Officer CITATION: 2018 TAXSCAN (ITAT) 125 Recently, a two-member bench of Income Tax Appellate Tribunal ( ITAT ) at Mumbai in Madhu Sarda vs. Income Tax Officer held that merely because the assessee has claimed a set off of loss on account of long-term capital loss suffered on sale of shares to his/her son, against the capital gain earned on sale of immovable asset cannot be treated as a sham transaction. The bench is composed of Judicial Member Pawan Singh & Accountant Member B. R. Bhaskaran relied on the case of Union of India vs. Azadi Bachao Andolan in which the Supreme Court had held that an act which is otherwise valid in law cannot be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the notional interest as perceived by the revenue. Smt. Boda Sarada Reddy vs Asst. Commissioner of Wealth Tax CITATION: 2018 TAXSCAN (ITAT) 126 In Smt. Boda Sarada Reddy vs. Asst. Commissioner of Wealth Tax, the Hyderabad Bench of Income Tax Appellate Tribunal ( ITAT ) held that no wealth tax arises on the sale consideration of a property already computed as Long Term Capital Gain. The bench, composed of Judicial Member P. Madhavi & Accountant Member B. Ramakotaiah observed “we are of the opinion that the order of AO and CIT(A) cannot be sustained. It was the contention of the AO in Income Tax proceedings that the assessee had indeed handed over the possession of the property as on 01-04-2006, which led to assessing the capital gains arising on the transfer of that property in AY. 2007-08. Therefore, as on 31-03-2007, the property was no longer in the possession or ownership of assessee. Moreover, if the property is deemed to be in assessee’s ownership, then, the money received towards sale would have to be considered as the liability on the date of valuation. Accordingly, there cannot be a Wealth Tax arising in this transaction. The orders of AO and CIT(A) are against the principles of law and facts of the case. Accordingly, we have no hesitation in setting aside the orders by allowing the grounds of the assessee.” Mangilall Estates (P) Ltd. vs DCIT CITATION: 2018 TAXSCAN (ITAT) 127 In the case of M/s Mangilall Estates (P) Ltd, Kolkata bench of Income Tax Appellate Tribunal (ITA), recently held that part performance of the agreement would be considered as transfer for attracting Capital Gain and the same is taxable in that financial year in which such transactions were entered into by the Assessee. The division bench further observed that “therefore capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete by way of registration under the general law. Income Tax Officer vs Late Smt. Seema Mukharjee CITATION: 2018 TAXSCAN (ITAT) 122 The Jaipur bench of ITAT recently ruled that the addition in respect of Capital Gain Income can’t be made when Assessee did not sell the property and just signed as a confirming party. The bench upheld the findings of the first appellate authority that the capital gain income has been declared in the return of income of Smt. Gyanwati Dhakar, who has actually sold this property. The assessee has just signed as a confirming party. Commissioner of Income Tax111 vs Dr. Arvind S. Phake CITATION: 2018 TAXSCAN (HC) 118 A two judge bench of Bombay High Court in Commissioner of Income Tax vs. Dr. Arvind S. Phake held that the date of transfer of property can be taken as the date of handing over the physical possession of the property for granting the Capital gain exemption under the Income Tax Act. The bench comprising Justice A. S. Oka and Justice A. K. Menon observed “Admittedly, on the date of execution of the development agreement, the entire consideration was not received by the respondent-assessee. The physical possession of the property subject matter of development agreement was parted with by the respondent-assessee on 1st March 2008. It was held that on that day, complete control over the property was passed on to the developer. After having perused the various clauses in the agreement and the aforesaid factual aspects, the Tribunal has taken 1st March 2008 as the date of transfer. This finding is fully consistent with the law laid down by the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia (supra). Therefore, no fault can be found with the impugned judgment of the Tribunal when it was held that the investment made in the sum of `.50, 00, 000/- by the respondent-assessee on 22nd August. 2008 was within the period specified under Section 54EC of the said Act.” Dr. Jasvir Singh Rana vs Income Tax Officer CITATION: 2017 TAXSCAN (ITAT) 117 The Delhi ITAT, in a significant ruling, held that assessee can avail the benefit of capital gain exemption if provisional possession of the new property was transferred within two years of disposal of the old property. The division bench ruled that “When it is not in dispute that the assessee has paid an amount of Rs. 75,85,818/- which is 95% of the total sale consideration for purchase of the property to M/s. Unitech High-Tech Developer (Rs. 7,41,250/- on 20.1.2011 and Rs. 68,44,298/- on 23.3.2011) through banking channel and also deposited Rs. 25,00,000/- under capital gain the right in personam was created in favor of the assessee from the date of entering into an agreement dated 11.1.2011 in favor of the assessee. It does not matter if the registration of the sale deed has not been made in favor of the assessee because transfer of the property is to be taken from the date of agreement in favor of the assessee. Moreover the assessee has made frantic efforts to take the possession of the property from the developer by approaching High Court of Allahabad as well as National Consumer Disputes Redressal Commission.” The Director of Income-tax vs M/s. Vanenberg Facilities BV CITATION: 2017 TAXSCAN (HC) 109 In Director of Income Tax v. Vanenburg Facilities BV, Andhra Pradesh High Court has held that gains arising from a Dutch company’s sale of shares of an Indian immovable property company to a Singapore company do not amount to a sale of immovable property situated in India since India-Netherlands tax treaty exempts such transaction. The bench rejected the contention of the department that the definition of immovable property under India’s domestic tax law should be regarded as “law of the State” under Article 6 of the India-Netherlands tax treaty, favoring a more traditional definition of immovable property (such as that under India’s Transfer of Property Act). It further clarified that Article 13(4) of the Dutch tax treaty cannot be applied to the transaction by raising a new argument that the immovable property of VITPL was not actually immovable property in which the business of VITPL was carried on since the tax authorities had failed to raise these arguments either before the CIT(A) or the Tribunal. 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Case Digest: Capital gain on Property (Part 1)

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