Case Digest: Capital gain on Property (Part -2)

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. Shri Nusli N. Wadia vs The Commissioner of Income Tax CITATION: 2017 TAXSCAN (HC) 110 In a recent ruling, the division bench of the Bombay High Court, while allowing tax relief to Mr. Nusli Wadia, held that the sale of his life interest in the income from the Trust property would not attract Capital gains Tax if the previous transaction through which he got the title over the property was held as not a “transfer” or “Gift” under the Income Tax Act. The bench rejected the contention of the Revenue for two reasons. Firstly, Neville Wadia the releasor was not absolutely entitled to the property nor has he caused the same to be vested in himself jointly with any other person. He has also not caused any appropriation to be made from and within the said property. Moreover, the effect of clause 4(1)(d) of the Gift Tax Act will be deemed to be a gift made in favor of the other person by the person who caused the property to be so vested upon appropriation. ACIT vs Mrs. Sheela Chopra CITATION: 2017 TAXSCAN (ITAT) 118 In ACIT v. Mrs. Sheela Chopra, the Kolkata bench of the ITAT ruled that the amount of interest paid on loan taken for purchasing the property is an expenditure under section 48 of the Income Tax Act. The bench found that the interest in question is indeed an expenditure in acquiring the asset and therefore, the assessee is entitled to include the interest amount at the time of computing capital gains u/s 48 of the Income Tax Act. Commissioner of Income Tax CentralII vs M/s. Greenfield Hotels & Estates Pvt. Ltd. CITATION: 2016 TAXSCAN (HC) 101 In a recent decision, the Bombay High Court observed that Section 52C of the Income Tax Act is not applicable in case of Capital Gains arising out of the transfer of leasehold property under the relevant provisions of the Income Tax Act. While dismissing the appeal the division bench comprising of Justice M.S Sanklecha and Justice S.C Gupte observed that “Our Court in DIT vs. Credit Agricole Indosuez 377 ITR 102 (dealing with Tribunal order) and the Apex Court in UOI vs. Satish P. Shah 249 ITR 221 (dealing with High Court order) has laid down the salutary principle that where the Revenue has accepted the decision of the Court/Tribunal on an issue of law and not challenged it in appeal, then a subsequent decision following the earlier decision cannot be challenged. Further, it is not the Revenue’s case before us that there are any distinguishing features either in facts or in law in the present appeal from that arising in the case of Atul Puranik(supra).” Mohamed Ibrahim, Vs Income Tax Officer, 2023 TAXSCAN (ITAT) 534 TheChennai 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. After considering the contentions of the both side the division bench of the ITAT comprising V. Durga Rao, Judicial (Member) and G. Manjunatha, (Accountant Member) confirmed the decision of the lower authority and observed that, “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”. Mr. Lakshminarayana Gupta 64 vs The CIT(A)-12: 2023 TAXSCAN (ITAT) 470 The Bangalore bench of Income Tax Appellate Authority (ITAT) has recently while confirming the addition made by the assessing officer observed that the assessee did not produce any proof of payment of brokerage on sale of property. After considering the submission made by the revenue division bench of the ITAT comprising George George K, (Judicial member) and Padmavathy S, (Accountant Member) dismiss the appeal filed by the assessee and observed that the assessee has not produced any proof/evidences to substantiate that he had paid brokerage on the sale of property Shri Sanjay Vasant Jumde vs I.T.O 2023 TAXSCAN (ITAT) 477 The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that the date of possession of flat would be the date of actual purchase for the purpose of claiming capital gain exemption under Section 54 of the Income Tax Act 1961. The Division Bench of R.S. Syal (Vice President) and Partha Sarathi Chaudhury (Judicial Member) allowed the appeal. The bench referred to the judgment of the Hon‟ble Bombay High court in the case of CIT Vs. Smt. Beena K. Jain in which it was observed that, it was right in allowing the exemption under the said provision considering the date of possession of the new residential premises instead of date of sale of agreement and the date of registration. Mr. Muthu Daniel Rajan vs Asst. Commissioner of Income Tax 2023 TAXSCAN (ITAT) 461 The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the capital gain deduction under Section 54F of the Income Tax Act 1961 could not be denied if the assessee had entered into agreement to sell within one year of sale of original asset. The Division Bench of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member) dismissed the appeal filed by the revenue holding that the authorities had erred in not considering the agreement to sale between the parties to allow the benefit of deduction under section 54F of the Income Tax Act. Vaijanti Jain, Vs ITO, Ward-40(3) 2023 TAXSCAN (ITAT) 428 The Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that transactions could not be treated as real estate if property was held for a long time. After considering the contentions of the both parties the single bench of the ITAT Kul Bharat, (Judicial Member) allowed the appeal filed by the assessee and observed that the assessee claimed it as gain arising out of transfer of capital asset but AO treated it as business receipts arising from real estate business. Assessee did not engage into any systematic real estate business activity. ACIT vs Sh. Sanjay Choudhary Rajesh Pilot Chowk 2023 TAXSCAN (ITAT) 424 The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that no purchase can be said to be made, if sale deed is executed in favor of the assessee to claim capital gain exemption under section 54/ 54F. Thus, dismissing the Revenue’s appeal, the Delhi ITAT held: “The bench is of considered opinion that the nature and extent of construction or nomenclature like house, plot, cottage, farm house or villa, are only indicative of the fact that property purchased is not a commercial property and is not an agricultural property. They all convey residential house property. How it is inhabited should not interest the revenue. The AR has also impressed this by citing a judgment of Jaipur bench in ACIT V. Om Prakash Gyal, where it has been held that only requirement for claiming exemption under Section 54F is construction of residential house and it does not matter that house constructed is on agricultural land. Thus Ld. CIT(A) has rightly taken into consideration all the aspects of the matter while partly allowing the appeal of assessee and no interference is called for in the same.” Bollineni Krishna Kumari vs ITO 2023 TAXSCAN (ITAT) 425 The Income Tax Appellate Tribunal ( ITAT ), Hyderabad Bench, has recently, in an appeal filed before it, held that capital gain exemption under section 54F cannot be allowed for sale and purchase of plots. Thus, dismissing the assessee’s appeal, the Hyderabad ITAT held: “Though, we have mentioned hereinabove, the appeal of the assessee is time barred, however, we have also examined the order passed by the ld. CIT(A). The perusal of the order clearly shows that the assessee had sold and purchased the plots only and has not acquired any residential house within the meaning of law. Further, as mentioned by the ld. CIT(A), the assessee is having more than two houses, therefore, the assessee is not entitled to any claim u/s. 54F of the Income Tax Act In the light of the above, the assessee has no case of merit, which is duly mentioned by the ld. CIT(A) in the order passed by him. Accordingly, this appeal is dismissed.” Kishori Dwarakanath Pandey vs Income Tax Officer -32(2)(2) 2023 TAXSCAN (ITAT) 416 The Mumbai Bench of Income Tax Appellate tribunal (ITAT) has allowed capital gain exemption under Section 54F of the Income Tax Act 1961, on finding that the purchase of flats was out of sale proceeds of gold jewelry. The Mumbai Bench of Vikas Awasthy (Judicial Member) and Gagan Goyal (Accountant Member) allowed the appeal observing that “The proximity of the sale of gold jewelry and payments made towards purchase of flat establishes live nexus between sale of gold jewelry and purchase of flat. Therefore, we hold that the assessee is eligible for claiming deduction u/s. 54F of the Act.” Mrs. D. Vijayalakshmi vs ITO 2023 TAXSCAN (ITAT) 395 The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has recently, in an appeal filed before it, held that the provision for capital gain exemption u/s 54F is the beneficial provision, and hence that substantial compliance would entitle an assessee to claim the full deduction. “Undisputedly the investment has been made out of part of the sale consideration. Therefore, simply because the sale deed has been executed subsequently, the deduction of Rs.45 Lacs could not be denied to the assessee. We order so.”, the ITAT further added. So far as the investment in subsequent property is concerned, we find that the assessee has purchased adjacent land and constructed residential property on the same. The assessee made an investment in land for Rs.57.10 Lacs as well as incurred substantial construction expenditure to the extent of Rs.130.56 Lacs Only a small amount of Rs.30.56 Lacs was spent thereafter. The provisions of Sec.54F are beneficial provisions and therefore, the substantial compliance of the same by the assessee, in our considered opinion, would entitle the assessee to claim the full deduction.”, the ITAT Panel composed of Mahavir Singh, the Vice-President, along with Manoj Kumar Aggarwal, the Accountant Member, further observed. Siddha Chetty Natarajan vs Income Tax Officer 2023 TAXSCAN (ITAT) 387 The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) has upheld the penalty under Section 271D of the Income Tax Act 1961 on contravention of Section 269SS for sale of property for Hindu Undivided Family. The Division Bench of Mahavir Singh, (Vice President) and G. Manjunatha, (Accountant Member) dismissed the appeal filed by the assessee observing that, “As regards, the claim of the assessee that property was owned by HUF, if you go by date of generating PAN number for HUF, the assessee HUF has generated PAN number on 03.03.2017 much after the date of sale of asset. Further, the appellant has filed a return for HUF capacity on 30.03.2018. In our considered view, the documents relied upon by the assessee can only be considered as an afterthought to circumvent penalty proceedings initiated in his individual capacity.” Mr.Ramalingam Nagarajan vs The Income Tax Officer 2023 TAXSCAN (ITAT) 378 The Income Tax Appellate Tribunal (ITAT) Chennai Bench has recently, in an appeal filed before it, confirmed the denial of Tax benefit u/s.54 for non-deposit in Capital Gain Account Scheme. A Coram comprising Justice Mahavir Singh and Manjunatha (accountant member) observed that the assessee could not furnish any evidences with regard to completion of construction of house within three years from the date of sale of original asset and also any other evidences to prove that amount has been spent for construction of house property, except filing a statement referring certain payments to M/s.Keshthana Infrastructure Pvt. Ltd., and claimed that said payments are for construction of house property. Sameer Kishore Koticha vs Dy. Commissioner of Income Tax 2023 TAXSCAN (ITAT) 354 The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has allowed the carry forward of loss of rental income against other income as the interest on house loan was deductible. The Bench allowed the appeal as the assessee was entitled to claim the entire interest paid during the year on loan for acquiring the above property, and held that the amount of loss under the head ‘income from house property’, which was not set off against the income under the other head of income be allowed to be carried forward as per provisions of section 71B of the Income Tax Act. The Asst. Commissioner of Income Tax vs Smt. Sarojini B. Nair 2023 TAXSCAN (ITAT) 340 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that relinquishment of right in land earmarked for common utility purposes as per regulatory requirements is not taxable as capital gain or business income. A Coram Shri V Durga Rao, JM and Shri G Manjunatha, AM observed that the reasons given by the AO are not subscribed because, relinquishment of right in land earmarked for common utility purpose, cannot be considered as an extinguishment of any right in property which can be considered as transfer within the definition of Sec.47(iii) of the Income Tax Act, 1961. Ashok Kumr Vs ITO, Ward- 1(1), Ghaziabad 2023 TAXSCAN (ITAT) 307 Delhi Bench of Income Tax Appellate Tribunal (ITAT) allowed the capital gain exemption under section 54B of Income Tax Act, 1961. The tribunal stated that such deduction shall not be denied merely stating that the agricultural land was purchased in the name of the wife of the taxpayer. The single appeal bench of Saktijit Dey (Judicial Member) drew on various High Court rulings in reaching its conclusion that investments in real estate bought in the wife’s name are eligible for a deduction under Section 54B of the Income Tax Act. MUMTAZ ABDUL AZIZ vs ITO 2023 TAXSCAN (ITAT) 292 The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has held that a mere claim of interest on a housing loan in an Income Tax Return (ITR) by the son of the assessee would not absolve capital gain and its tax liability. A Coram comprising Shri Prashant Maharishi, AM observed that there is no evidence that the son of the assessee has declared any capital gain on the above transactions. Further, held that “merely because the interest of housing loan is claimed by the son of the assessee in his computation it does not make him the owner of the property. In this case, the legal owner of the property is the assessee who has transferred the property by registering the sale deed. “The Tribunal upheld the orders of the lower authorities and dismissed the appeal of the assessee. Ms. Renu Ratnakar Bhattacharya vs Commissioner of Income Tax (Appeals) 2023 TAXSCAN (ITAT) 225 The Income Tax Appellate Tribunal (ITAT) recently held that capital gain exemption cannot be denied on alterations to houses as there is no ceiling on the amount of investment. After considering the contention of both sides the single bench of Tribunal of shri. Kuldip Singh (Judicial Member) allowed the Appeal filed by assessee and held that “ it is settled principle of law that when the taxpayer is otherwise allowed to purchase or construct a residential house without any ceiling on the amount of investment, the taxpayer cannot be denied benefits under section 54 of the Income Tax Act 1961.,if he has made some alterations, addition or modifications in the house purchased for taking benefit under section 54 of the Income Tax Act 1961..” Sh. Vijay Sharma vs ACIT, Circle-II 2023 TAXSCAN (ITAT) 205 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that capital gain exemption under Section 54 is not allowable in cases where the builder has not started construction of house. The Income Tax Appellate Tribunal (ITAT) Bench of Judicial Member Anubhav Sharma and Accountant Member Shamim Yahya observed, “There is no evidence of any construction activity or of the fact that assessee has invested the proceeds in statutory deposits and then spent any proceeds of the sales consideration of two properties he had sold, into the construction over this plot”, as no construction had begun. Sri.Thayappa Balakrishna vs The Assistant Commissioner of Income-tax 2022 TAXSCAN (ITAT) 1950 The Bangalore bench of the Income Tax Appellate Tribunal (ITAT), while dismissing a second appeal by the assessee, held that an unfinished building is included within the meaning of “capital asset” under the Income Tax Act, 1961 and the same is subject to income tax on its sale along with the land. A bench of Shri George George K, JM & Ms.Padmavathy S, AM upheld the view of the income tax department holding that the claim of the assessee to include the cost of unfinished building to cost of improvement cannot be accepted for two reasons. Firstly, the assessee had only sold vacant site and the same is evident from the sale deed dated 19.07.2010. Secondly, the assessee himself submitted a receipt on stamp paper showing a receipt of Rs.96,04,899 towards sale of building material and fixtures from demolished building. Income-tax Officer vs Shri. Arun Gupta 2022 TAXSCAN (ITAT) 1943 The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), granted exemption under Section 54 of the Income Tax Act, 1961 (capital gain exemption) on depositing unutilized capital gain in Deposit account scheme. A Coram consisting of Mahavir Singh, Vice President and G Manjunatha, Accountant Member observed that “When the assessee has satisfied all conditions including depositing unutilized portion of capital gain in capital gain deposit account scheme, then for minor technical breach, benefit of deduction under Section 54 of the Income Tax Act cannot be denied.” Dr. Sabesan Parameswaran vs The ACIT 2022 TAXSCAN (ITAT) 1941 The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), confirmed income as Long Term Capital Gain in the case of an owner selling property through General Power of Attorney (GPA). A Coram consisting of Mahavir Singh, Vice President and G Manjunatha, Accountant Member observed that “The GPA nowhere has given possession to the GPA holder and he has only executed this sale deed and as per clear terms of PoA, the principal has to receive monetary consideration from the agent after execution of sale deed. Anik Chatterjee vs ITO, Ward-1(2) 2022 TAXSCAN (ITAT) 1879 The Delhi Income Tax Appellate Tribunal (ITAT) chaired by Yogesh Kumar US (Judicial Member) and Dr. B. R. R. Kumar (Accountant Member) held that the equivalent amount of capital gain utilized for acquisition of new residential house is eligible or allowable for Tax Exemption under Section 54 of the Income Tax Act, 1961. The bench with the clear interpretation of Section 54F of the Income Tax Act ruled that since, the amount equivalent to the capital gains has been utilized for acquisition of new house, the assessee be permitted to avail the benefit allowable under the Section 54 of the Income Tax Act. Shri Tushar Jagmohan Kamthe vs The Income Tax Officer 2022 TAXSCAN (ITAT) 1807 In this case of appeal, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), presided over by Judicial Member S.S. Viswanethra Ravi and the Accountant Member Dr. Dipak P. Ripote decided that the assessee to be eligible for deduction under Section 54B of Income Tax Act, 1961 only for that part of the land used for agricultural purposes. The Appellate tribunal observed that, “to avail the deduction under section 54B of the Act, the assessee has to show that the land was used for agricultural purpose in the immediate two preceding years. In this case only land at Survey No.33, Hissa No.7C was used for cultivation in the two preceding years. Other three lands were not used for cultivation. Therefore, assessee will be eligible for deduction under section 54B only with respect to land cultivated.” Smt. P. Chitra vs Income Tax Officer, 2022 TAXSCAN (ITAT) 1783 The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the nature of capital gain as to whether short term or long term capital gain is to be determined on the basis of agreement or allotment date instead of registration date. The Tribunal of Judicial Member Durga Rao and Accountant Member G Manjunatha observed that the assessee could not complete the construction for various reasons. It was also observed that, “the assessee has spent about Rs. 88,75,400/- towards construction of another residential house which includes purchase of land, payment for labor charges and payment to M/s. Raj Constructions for material supply.” The Deputy Commissioner of Income Tax vs M/s. R. Muniraju (HUF) 2022 TAXSCAN (ITAT) 1771 The Income Tax Appellate Tribunal (ITAT), Bangalore has confirmed the addition of CIT(A) and held that capital gain is to be taxed from the year in which the Joint development agreement (JDA) was entered. The Bench consisting of Shri Goerge Goerge K (judicial member) and Shrimathi Pathmathy (accountant member) arrived at findings that the developer had acted in furtherance of the contract, which fulfilled the condition for sec 2(47)(v) of the Income Tax Act 1961 r.w. u/.53A of the Transfer of Property act. The tribunal dismissed the appeal filed by the assessee upholding the order of CIT(A) that capital gain is to be taxed from the date on which the JDA was entered. The tribunal also dismissed the appeal filed by revenue to increase the tax rate to compute capital gain from JDA. Pradeep Kumar Sonthalia vs Deputy Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1740 The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), allowed deduction under Section 54 and 54F of the Income Tax Act, 1961 on the ground that Utilization of capital gain within one year from taking possession of new flat. A Bench consisting of Rajpal Yadav, Vice-President (KZ) and Girish Agrawal, Accountant Member observed that “The assessee has utilized the capital gain arose within one year from taking possession of the new flat and, therefore, on the basis of the Circulars and the judgments referred by the CIT(Appeals), is entitled for the deduction. Accordingly, we allow the claim of the assessee and direct the ld. Assessing Officer to grant deduction under section 54 and 54F of the Income Tax Act.” Rasilaben Yogeshbhai Patel vs I.T.O 2022 TAXSCAN (ITAT) 1731 The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that when exemption claimed on Long Term Capital Gain (LTCG) by a co-owner has been accepted, then Capital Gain Exemption u/s 54 of the Income Tax Act,1961 is allowable for the assessee. The ITAT bench accepted the contention of the assessee that once, the similar LTCG offered an exemption claimed by the co-owner has been accepted by the Revenue, and then the assessee is also entitled to similar relief. The appeal of the assessee was allowed. Smt. Neelima Pravinkumar Khamkar vs Income Tax Officer 2022 TAXSCAN (ITAT) 1671 The Income Tax Appellate Tribunal ( ITAT ), Pune Bench, has recently in an appeal filed before it, held that if construction of house ,couldn’t be completed within 3 years, the capital gain exemption under Section 54 F, is liable to be denied. Thus, pronouncing its ruling and thereby dismissing the assessee’s appeal the Pune ITAT held: “Therefore, the assessee made construction within three years and in my opinion, the AO rightly denied deduction u/s. 54F of the Act. Therefore, I find no infirmity in the order CIT(A) in confirming the order of AO”. Anita Jayant Oswal vs DCIT 2022 TAXSCAN (ITAT) 1650 The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently in an appeal filed before it, held that capital gain exemption u/s 54 cannot be claimed for multiple flats. “The contention of the ld. AR that the appellant is entitled to the exemption u/s 54 in respect of the investment made into two flats cannot be accepted in view of the decision of the Hon’ble Jurisdictional High Court in the case of K.C. Kaushik vs. ITO. Hence, the order of the ld. CIT(A) which is based on the decision of the Hon’ble Jurisdictional High Court, does not call for any interference. Accordingly, the grounds of appeal filed by the assessee stand dismissed.” MUNICIPAL CORPORATION vs OPERTY OWNERS’ ASSOCIATION & ORS 2022 TAXSCAN (SC) 197 The two-judge Bench of Supreme Court Chief Justice U U Lalit and Justice Ajay Rastogi recently held that the future capital value of the property is not to be taken for determining the property tax as per The Mumbai Municipal Corporation Act (MMC Act), 1888 and upheld the High Court judgment which had refused to strike the validity of various provisions of the MMC Act. It was held that future capital value of land/building is not to be taken for determining property tax as per the Mumbai Municipal Corporation Act, 1888 and the rules made cannot have any retrospective effect whatsoever. Janardhan Gupta vs Dy. Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1440 The Income Tax Appellate Tribunal (ITAT), New Delhi confirmed the addition of capital gain by disallowing cost of purchase and cost of improvement on failure to produce relevant evidence. The Bench consisting of Shamim Yahya, Accountant Member and Anubhav Sharma, Judicial Member observed that “We note that several notices have been sent to the assessee but they have returned unserved. None has appeared on behalf of the assessee. Hence, we proceed to adjudicate the issue by hearing the Departmental Representative and perusing the records. We find that as emanating from the facts narrated above, the revenue authorities have disallowed the assessee’s claim of cost of purchase and cost of improvement of any corroborative evidence.” Smt. Parthiban Kalavathi vs The Asst. Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1609 Capital gain exemption u/s 54 of the Income Tax Act, 1961 is allowable to more than one Residential house, the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) held as above. A Coram of Shri Mahavir Singh, vice president and Shri Manoj Kumar Aggarwal, accountant member observed that as per records assessee neither had any knowledge or capability about the business or property development nor had any intention to do so as the assessee gave a general power of attorney in favor of the builder accordingly. Shri Baldevji Motiji Thakore vs ITO 2022 TAXSCAN (ITAT) 1562 The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) directed to Compute Capital gain and Exemption u/s 54 F based on Details of expenses incurred on the construction of house. A Coram of Smt Annapurna Gupta, accountant member and T R Senthil Kumar, judicial member set aside the matter back to the file of the AO with direction to compute capital gain on sale of the property by applying amended proviso to section 50C of the Act and recompute the capital gain. Bhawneshwar Kumar vs Income Tax Officer 2022 TAXSCAN (ITAT) 1526 The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has held that the claim of interest paid to the firm on overdrawn capital is an allowable business expense. A Single member Coram consisting of Shri Vikram Singh Yadav, AM viewed that the assessment and penalty proceedings are independent proceedings and the AO has to arrive at an independent finding as to why the matter calls for levy of penalty u/s 271(1)(c) of the Act. The claim of interest paid by the assessee to the partnership firm where the assessee is a partner and from where the assessee also draws the remuneration. M/s. sri Ganadhiraj Co–operative Housing Society vs Dy. Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1523 The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that the provisions of section 50c will not be applicable to capital gains which are prior to 1st of April 2003. “In view of the aforesaid factual and legal position, we are of the considered view that development rights in the plot of land were transferred to the builder in the financial year 2000–01. Further, since provisions of section 50C of the Actwere inserted in the Act w.e.f. 01/04/2003, the same are not applicable in the present case.” Vijay Channabasav Suttatti vs Asstt. Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1500 The Income Tax Appellate Tribunal (ITAT), Pune Bench held that there was no claim of capital loss when the revised return filed under Section 139(5) of the Income Tax Act, 1961 became non-est. The Bench consisting of S S Viswanethra Ravi, Judicial Member and G D Padmashali, Accountant member held that “The provisions relating to furnishing of a revised return is provided u/s 139(5), which entitles an assessee to furnish a revised return if he discovers any omission or any wrong statement in the original return filed, however for the impugned assessment year, this right or entitlement of revision was given to an assessee who has filed original return either u/s 139(1) oru/s 142(1), this by necessary implication means that, such a right was denied and not at all available to the assessee who has filed the return u/s 139(4), this view has been historically held by the Hon’ble Supreme Court in much celebrated case of “Kumar Jagdish Chandra Sinha Vs CIT”.” Smt. Bhanuben Dhanji Shah vs Dy. Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1328 The Income Tax Appellate Tribunal(ITAT) “SMC” Bench, Mumbai, has recently, in an appeal filed before it by an assessee, held that the Assessing Officer (A0), shall compute the capital gains only after considering the value as determined by the Department Valuation Officer. “Since the impugned addition under the head “Long Term Capital Gain”, which was upheld by the learned CIT(A), has been made on the basis of the value determined by the Registration Authority without taking into consideration the report of the Department Valuation Officer, we deem it fit and proper to restore this issue to the file of the Assessing Officer for de novo adjudication”, it added. “The Assessing Officer is directed to compute the capital gains after considering the value, as determined by the Department Valuation Officer”, the Bench concluded allowing the assessee’s appeal. Sh. Kanwal Mohan Singh Sehgal vs DCIT 2022 TAXSCAN (ITAT) 1379 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) comprising N K Billaiya (Accountant Member) and Astha Chandra (Judicial Member), upholding an order of the CIT(A), held in favor of the Assessee that, the exemption under section 54 & 54 F of the Income Tax Act,1961 is allowable in respect of the amount invested in the construction of a residential house. Analyzing the differences between deduction under Section 24(b) and computation of capital gains under Section 48 of the IT Act, the tribunal clarified that both provisions related to different heads of income. As the exemption was rightly claimed by the assessee, the tribunal upheld the order of CIT (A) in this regard. The tribunal held in favor of the respondent that the farmhouse was also a residential house and that there was no limit on the size of the land in this regard. Analyzing the differences between deduction under Section 24(b) and computation of capital gains under Section 48 of the IT Act, the tribunal clarified that both provisions related to different heads of income. As the exemption was rightly claimed by the assessee, the tribunal upheld the order of CIT (A) in this regard. The tribunal held in favor of the respondent that the farmhouse was also a residential house and that there was no limit on the size of the land in this regard. Shri Babubhai Shantilal Solanki 189 vs The Income Tax Officer 2022 TAXSCAN (ITAT) 1230 The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax department cannot treat the same income received as sale consideration from the same property by co-owners differently for the purpose of imposing tax under the Income Tax Act, 1961. Deleting the order, the Tribunal held that “following the above judicial precedents, we have no hesitation in holding that different treatments cannot be given on the same set of facts in respect of different co-owners of a common piece of land which are subjected to capital gains. If such action on the part of the Revision Authority is approved, it would militate against the principle of equality of law as enshrined in the Article 14 of the Constitution of India. Further, it is seen that the ld.CIT has not taken any steps for reopening the case of other co-owners viz. Smt. Hiraben Shantilal and Smt. Indiraben Shantilal and thereby accepted similar long term capital gain and on the said transaction. Therefore, in our considered view, the assessee cannot be treated differently for similar transactions.” Shri I. Gulam vs The Income Tax Officer 2022 TAXSCAN (ITAT) 1207 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount paid by the purchaser of property to the tenant can’t be taxed in the capital asset of the owner. The Tribunal observed that whatever amount paid by the buyer to the tenant for the vacation of tenancy should not be taxed in the hands of the owner of the capital asset. It was evident that there was no search and seizure operation carried out on the premises of the assessees and no evidence to show that the assessees have received on-money for the sale of the property. Arihant Patni vs DCIT 2022 TAXSCAN (ITAT) 1162 Income from Portfolio Management Services (PMS) is accessible under capital gains, so was held by Income Tax Appellate Tribunal (ITAT), Pune. The Bench consisting of Inturi Rama Rao, Accountant Member and S S Vishwanetra Ravi, Judicial Member observed that “the Co-ordinate Bench of this Tribunal has held that earning under PMS should be assessable under the head “capital gains”. Accordingly, we do not find any illegality in the order of the CIT(A).” Leila Advani vs ACIT-16(2) 2022 TAXSCAN (ITAT) 1128 The Income Tax Appellate Tribunal (ITAT) of the Mumbai bench held that the amount paid for land enhancement is capital expenditure and can avail deduction under section 48 of the Income Tax Act,1961. The Tribunal comprising Shri Amit Shukla, judicial member and Shri Gagan Goyal, accountant member concluded that “the interest paid to the assessee for any delay in payment of the compensation from the date of acquisition of the property in pursuance to Hon’ble Supreme Court order, the same should be taxed under the head “Income from other sources” and compensation with interest received by the assessee up to the date of land acquired pursuant to the Hon’ble Supreme Court order should be taxed under the head “Capital Gains”. Texraj Realty Pvt. Ltd. vs Principal Commissioner of Income-tax 2022 TAXSCAN (ITAT) 1069 The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the capital gain exemption under section 54F of the Income Tax Act, 1961 shall not be allowable to a new house purchased in the name of wife. The Tribunal observed that “the section 54F has two important phrases, “an assessee being an individual” and “the assessee has purchased”. Thus the section starts with the word “an assessee being an individual'' and then refers to the same assessee as “the assessee has purchased” means the assessee who has sold the asset has to purchase the new asset within the specified time period. The section 54F uses the word, “purchased a residential house”, here the word purchased is used, it does not mean invested. The purchase has to be a legal purchase. To have an effective purchase the name of the person must be mentioned in the document. In this case the purchase agreement is in the name of the wife of the assessee who is an independent assessee earning income independently. We find strength from the order of Hon’ble Rajasthan High Court. Manoj Tekriwal vs Dy. Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1062 The Income Tax Appellate Tribunal (ITAT), Mumbai held that capital gain exemption u/s 54F cannot be denied on grounds of joint ownership in two residential flats. The bench consisting of Pramod Kumar, Vice President, and Sandeep Singh Karhail, Judicial Member held that “joint ownership of the assessee, in the present case, in 2 residential Flats, namely, Flat No. A–408 and B–504 on the date of transfer of original capital asset will not disentitle the assessee from claiming relief under section 54F of the Act. Further, as it is not disputed that the aforesaid properties were purchased by the assessee within the prescribed time, therefore, we are of the considered view that the assessee is entitled to claim benefit under section 54F of the Act.” Ramesh Chander Ni jhawan vs ACIT 2022 TAXSCAN (ITAT) 1049 The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the capital gain exemption under section 54 of the Income Tax Act, 1961 cannot be denied on the sole ground that the amount invested in the capital gain account is utilized for the purchase of new house without the NOC from Assessing Officer within two years as permitted in the statute. A bench consists of Sh. Saktijit Dey, Judicial Member Dr. B. R. R. Kumar, Accountant Member observed that “It is not in dispute that an amount of Rs. 40,00,000/- has been invested in the specified bonds, in this case, REC Bonds and purchased house for Rs .82,50,000/-. Hence, the observation of CIT(A) that the assessee is not eligible for claim of exemption u/s 54 and u/s 54F is against the provisions of the Act. With regard to the closer of the account without the NOC of the Assessing Officer, the broad provisions and compliance of the law surpass the mere default in not taking the prior permission o f the ITO before closer of the account, especially when the amounts have been utilized for purchase of the house in accordance with the provisions of the Act within two years from the date of sale.” M/s.Dhanalakshmi Mills Ltd vs The Deputy Commissioner of Income Tax 2022 TAXSCAN (ITAT) 1028 The Chennai bench of the Income Tax Appellate Tribunal (ITAT), held that if AO failed to rightly compute capital gain on the sale of the land then the revisional jurisdiction of PCIT will sustain and uphold the revisional order. It was viewed that the assessee itself had declared capital gain from the transfer of property for the assessment year 2015-16 on the ground that possession of the property has been handed over to the buyer in the financial year 2014-15 and it was clear that there was a difference between the stated consideration received for transfer of property and the guideline value of the property as on the date of registration. Shri Venkatesharaiyer Subramanian vs ACIT 2022 TAXSCAN (ITAT) 1004 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under section 54F of the Income Tax Act, 1961 is allowable to separate independent liveable residential units on a single piece of land. A division bench of Shri V. Durga Rao (Judicial Member) and Shri Manoj Kumar Aggarwal (Accountant Member) observed that “It is also evident that the ground floor has been occupied by the assessee himself whereas each of the other two floors are occupied by two tenants each. The same is one of the factors as considered by Ld. AO to deny the deduction. However, the conclusion of Ld. AO would necessarily mean that the assessee was debarred from making separate units on a single piece of land and secondly, it raises a presumption that complete building should have been used by the assessee for its own residential purposes as a single unit. However, the same is not the intention of the legislature. The only requirement is that the assessee should make an investment in one residential house.” Mr.Naresh Chand vs Income Tax Officer 2022 TAXSCAN (ITAT) 965 The Income Tax Appellate Tribunal (ITAT), Delhi Bench presided by Mr. Anil Chaturvedi, Accountant Member,and Shri N.K. Choudhry, Judicial Member has held that deduction u/s 54 EC is applicable within six calendar months from the date of transfer of property and not within 180 days. The Tribunal observed that under the provision the investment can be made as a whole or in part of the capital gains. As per section 54EC of the Act, the period of investment starts from the date of transfer and not from the date of receipt of consideration. By relying on the decision of Coordinate Benches of the Mumbai Tribunal in the case of Neela S. Karyakarte vs. ITO ‘six months’ means ‘six calendar months’ and not 180 days. Jigneshbhai Kishorbhai Bhajiyawala (HUF) vs I.T.O 2022 TAXSCAN (ITAT) 990 The Income Tax Appellate Tribunal (ITAT), Surat Bench has upheld the denial of capital gain exemption under section 54 by holding that an unregistered document has no evidentiary value. The Coram of Mr. Pawan Singh, Judicial Member, and Dr. Arjun Lal Saini, Accountant Member observed that there is no reference in the sale deed executed by the previous owner on 16/09/2008 that the assessee agreed to sell before execution of the sale deed on 16/09/2008, thus the assessee propounded the theory of Satakat-cum-possession letter dated 14/02/2007 only to get qualified for long term capital gain. Shri Kamanahalli Pilla Reddy Nagesh vs The Income Tax Officer 2022 TAXSCAN (ITAT) 904 The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), has held that the sale of agricultural land does not amount to capital gain for the purpose of allowing exemption under section 10(1) of the Income Tax Act, 1961. The Tribunal observed that if the cultivation of land continued till the date of sale of the land, then the land should have been treated as agricultural land and exempt from the capital gain in view of section 2(14) of the Act. Saireddy Pruthviraj Reddy vs Income Tax Officer 2022 TAXSCAN (ITAT) 891 The Income Tax Appellate Tribunal, Hyderabad Bench has held that when the property is acquired as a gift or will, the tax liability is calculated based on the cost of acquisition u/s 49(1) of the Income Tax Act, 1961. Shri Rama Kanta Panda, accountant member & Shri K Narasimha Chary, judicial member observed that merely because of some voluntary act of the mother of the assessee in valuing the property on the higher side at the time of receiving of the same is not valid and upheld the findings of the CIT(A). The appeal of the assessee was dismissed. Mihir Madhavrao Suryawanshi vs ITO 2022 TAXSCAN (ITAT) 735 Penalty cannot be levied for mere deletion of Capital Gain Exemption Claim under Section 54F of the Income Tax Act, 1961 and so was held by Income Tax Appellate Tribunal (ITAT), Pune. The Bench consisting of R.S. Syal, Vice President and S.S. Godara, Judicial Member observed ”that this Tribunal's co-ordinate Bench has already deleted the foregoing 54F disallowance and therefore, we conclude that the penalty in issue herein has no legs to stand as a necessary corollary.” The DCIT vs Shri Goverdhan Prasad Singhal 2022 TAXSCAN (ITAT) 766 The Income Tax Appellate Tribunal ( ITAT ), Jaipur Bench has been directed to adopt actual sale consideration instead of stamp duty value for calculating Capital gain tax. The Coram of Dr. Meetha Lal Meena, AM and Smt. S. Seethalakshmi, JM by relying on the decision of ITAT Jaipur in the case of Smt. Sharda Devi Alwar Vs ITO has observed that if objection is made by the assessee for value taken, the Assessing Officer ought to have referred the matter to the Valuation Officer as per section 50C(2) to ascertain fair Market value. The Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2). The AO and the CIT(A) have also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. The DCIT vs Shri Goverdhan Prasad Singhal 2022 TAXSCAN (ITAT) 766 The Income Tax Appellate Tribunal, Jaipur Bench has upheld allowing deduction u/s 54F for purchased new house property since residential house properties are shown as stock in trade in books of account. The Coram of Dr. Meetha Lal Meena, AM and Smt. S. Seethalakshmi, JM has held that “the assessee had purchased new house property within specified period as per provisions of Section 54 of the Act and the conditions stipulated u/s 54F stands fulfilled by the assessee. Thus, taking into consideration, the facts, circumstances of the case and written submissions of the assessee, we feel that the CIT(A) has been justified in judiciously allowing the deduction u/s 54F of the Act, to the assessee and therefore, we concur with the findings of the ld. CIT(A)” Shri Chandrakant L. Patel vs DCIT 2022 TAXSCAN (ITAT) 727 The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that a null and void transfer of land does not form capital gain and additional short term capital gain was not sustainable. It was observed that the land in question remained to be an agricultural land till 11.01.2011 when it was converted into non-agricultural land and viewed that there was no valid transfer of land in question by the assessee to the partnership firm of M/s. Vallabh Developers in the year under consideration giving rise to any capital gain and the transfer of the said land. Kaushlendra Singh vs ITO 2022 TAXSCAN (ITAT) 500 The Income Tax Appellate Tribunal (ITAT), Jaipur bench consisting of DR. S. Seethalakshmi, Judicial Member, and Rathod Kamlesh Jayantbhai, Accountant Member held that the husband can claim Capital Gain Exemption for Investment made in the name of the wife. After considering the arguments, the Tribunal held that “the claim of deduction U/s 54F of the Act cannot be denied merely on the ground that the new residential house was purchased in the name of his wife when the investment made by the assessee from the sale proceeds of the existing asset and yielded capital gain from the said transactions.” Mrs. Sanika Avadhoot vs Income Tax Officer 2022 TAXSCAN (ITAT) 473 The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that if the booking of a flat which is to be constructed in a future time is treated as “transfer” for the purpose of computing the capital gain, the same shall be allowable as capital gain exemption under section 54 of the Income Tax Act, 1961. While holding in favor of the assessee, the Tribunal bench comprising Shri Pavan Kumar Gadale, Judicial Member & Shri Amarjit Singh, Accountant Member observed that the CIT(A) has clearly elaborated in his findings that when the developer failed to provide original flat then it had offered another flat in the building which was to be constructed on a future date. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick update

Case Digest: Capital gain on Property (Part -2)

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