Case Digest: Capital gain on Property (Part -3)

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.

Y. Manjula Reddy vs ITO 2022 TAXSCAN (ITAT) 433

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under section 54F is allowable on the amount spent on interiors, renovation, furnishing etc.

Allowing the benefit of the provision, the Tribunal bench comprising Shri N.V. Vasudevan, Vice President and Shri B.R. Baskaran, Accountant Member has observed that there is no dispute that the assessee has invested the money to the above said extent in acquisition of the property.

DCIT vs Muppala Bhasker Reddy 2022 TAXSCAN (ITAT) 426

The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) with respect to the right to receive built-up area under the Joint Development Agreement has directed the Assessing Officer to examine the entire gain that has to be considered as a long-term capital gain.

The Coram of SRI N. V. Vasudevan, Vice President And Sri B. R. Baskaran, Accountant Member “we find that the AO has not examined the claim of the assessee under the head “Capital Gain” in accordance with the provisions relating to capital gain as given in the Act. We, therefore, remand the question of computation of Capital Gain to the AO after the due opportunity of being heard afforded to the assessee”.

Sri Mathew Pradeep Francis vs ACIT 2022 TAXSCAN (ITAT) 417

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has allowed 1% of the sale consideration as brokerage for the sale of the property since the assessee could not prove the evidence for the payment of brokerage for the sale of property to compute the amount of capital gain under the provisions of the Income Tax Act, 1961.

In the absence of proper evidence, we are of the view that the entire claim of brokerage of Rs.4,90,000/- may not be allowed. Accordingly, we restrict the brokerage payment to the extent of 1% of the sale consideration and direct the AO to allow brokerage expenses to the extent of Rs.2,45,000/- as against the claim of Rs.4,90,000/-. Accordingly, we set aside the order of Ld. CIT(A) passed on this issue and directed the A.O. to allow brokerage expenses to the tune of Rs.2,45,000/-.” Smt. Sunaina Bhatia appeared for the assessment.

Hiren Himmatsingh Rathod vs ITO 2022 TAXSCAN (ITAT) 393

The Income Tax Appellate Tribunal (ITAT), Ahmedabad has held that the capital gain exemption under section 54 of the Income Tax Act, 1961 can be allowed on bonafide expenses incurred for making the new house habitable prior to its possession.

The Tribunal bench comprising Shri Waseem Ahmed, Accountant Member & Ms. Madhumita Roy, Judicial Member referred the judgment passed by the Coordinate Bench in the matter of Shriniwas R. Desai vs. ACIT(OSD) wherein it was held that there is no restriction on the buyer from incurring any construction expenditure on improvisation or supplementary work of ready-made unit. The additional expenses so incurred would be eligible for qualifying investment under Section 54 of the Act.

S.M. Shoba vs The Income Tax Officer 2022 TAXSCAN (ITAT) 378

The Bangalore bench of the ITAT has held that the date of completion of construction of new property is irrelevant to allow exemption under section 54F of the Income Tax Act, 1961 and the same is allowable if the ownership of the property is transferred to the assessee within the prescribed statutory period.

The Tribunal bench comprising Shri. Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Member relied on a catena of decisions and observed that the passport to derive benefit under sec.54F(1) is investment in construction of property within the period required u/s 54(1)F or to invest in residential property within the stipulated time for enabling deduction under section 5 4F of the Act.

Mr. K.P. Manjunatha Reddy vs ITO Ward-4(3)(2) 2022 TAXSCAN (ITAT) 357

The ITAT Bangalore bench has held that since the agricultural land was not converted at the time of sale, the sale consideration shall not be included in the total income of the assessee to compute capital gain under the provisions of the Income Tax Act, 1961.

“The assessee also declared agricultural income from the said land as an agricultural income at Rs.9 lakhs, which was accepted by the department and there was no disturbance on this count. The situation of land within the BMRDA limits cannot be considered as the land is situated within the limit of municipality and moreover, BMRDA is not a municipal or local authority in terms of section 2(14)(iii)(a) of the Act,” the Tribunal observed. Quashing the addition based on the judicial precedents, the Tribunal held that the property sold by assessee is not liable for capital gains being an agricultural land.

Arun Keshavrao Narwade (HUF) vs ITO, Ward-2(1) 2022 TAXSCAN (ITAT) 348

The Pune bench of the ITAT has held that the capital gain exemption under section 54F of the Income Tax Act, 1961 is not available if the sale consideration is used to purchase ‘office premises’.

“This claim was jettisoned by the AO on the ground that the assessee did not purchase a new residential flat but only an “office premises” and hence, section 54F could not apply. It is apparent from the bare reading of section 54F that the exemption becomes available towards capital gain arising from the transfer of any long-term capital asset on purchasing or constructing one residential house in India. Thus, it is patent that in order to qualify for exemption u/s.54F, it is necessary that the new asset must be a ‘residential house’. Turning to the facts of the instant case, it is seen that the new asset purchased by the assessee is an ‘office premises’ and not a ‘residential premises’. In that view of the matter, the inescapable conclusion is that the authorities below were justified in repelling the assessee’s contention on this issue,” the Tribunal said.

Hariom Associates vs ITO 2022 TAXSCAN (ITAT) 147

The Pune bench of the ITAT has held that the income from the sale of land purchased by a partnership firm for the purpose of business and declared the same as fixed assets in the books shall constitute capital gain under the Income Tax Act, 1961.

The land purchased by the assessee in the year 2005 has rightly been treated as a Capital asset by the assessee, income from whose transfer is liable to be taken under the head `Capital Gains’ and not as Business Income. I, therefore, overturn the impugned order and restore the assessee’s point of view on this issue,” the Tribunal said.

The Income Tax Officer vs Kirit Raojibhai Patel 2022 TAXSCAN (ITAT) 209

The Income Tax Appellate Tribunal (ITAT), Mumbai has held that sale of transferable development rights does not attract capital gains tax since the cost of acquisition for the same does not exist.

The ITAT, noting that the case of the Assessee was squarely covered by the case of Shambhaji Nagar Cooperative Housing Society, held that the receipts against the sale of TDR were not chargeable to capital gain tax, and dismissed the appeal of the AO.

Anita Mahindr akumar Oberai vs ITO, Ward-2,Ahmednagar 2022 TAXSCAN (ITAT) 257

The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption under section 54 of the Income Tax Act, 1961 is available to purchase of two flats by the assessee to be used as a single dwelling unit.

The Tribunal Vice-President Mr. R S Syal observed that the Finance Act, 2014 substituted the relevant part of the provision by inserting the words: “constructed, one residential house” in place of “constructed, a residential house”. The effect of the amendment is that now exemption is available only in respect of one residential house.

Krishna Prasad Mikkilineni vs Deputy Commissioner of Income-tax 2022 TAXSCAN (ITAT) 262

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that no capital gain can be computed in the hands of the assessee (landowner) on the ground that only permissive possession was allocated to the developer under the Joint Development Agreement (JDA).

The Tribunal held that “in the instant case also we have noticed that the assessee has given only permissive possession and not legal possession. Accordingly, following the above-said decision of the coordinate bench, we hold that the transfer has not taken place during the year under consideration. Accordingly, the capital gain is not accessible in the hands of the assessee during the year under consideration. We order accordingly.”

Godha Realtors Pvt. Ltd vs ACIT 2022 TAXSCAN (ITAT) 268

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that mere ‘agreement to sell’ would not result in the transfer of assets for the purpose of computing the amount of capital gain under the Income Tax Act, 1961.

“Hence, what was entered by the assessee with the above-said person was mere “Agreement to sell”. In the above-said decision, the Hon’ble Gujarat High Court has held that the agreement to sell will not result in the transfer of assets. In that case, there is no question of any extinguishment of right, as held by the AO and confirmed by Ld CIT(A). Hence the question of assessing any capital gain in AY 2008-09 does not arise. In that view of the matter, we are unable to approve the computation of capital gain made by the AO in AY 2011-12 also. Accordingly, the computation of capital gain made by the assessee in AY 2011-12 is upheld,” the Tribunal said.

Sunandan Kumar Minocha vs ITO, Ward 63 (1) 2022 TAXSCAN (ITAT) 325

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the assessee is eligible for Section 54 exemption in respect of the purchase of 3 different residential houses.

The Coram of President, G.S.Panu, and Judicial Member, Amit Shukla held that assessee is eligible for claim of exemption u/s 54 in respect of the purchase of 3 different residential houses and amendment brought in the Finance Act, 2014 w.e.f. 01.04.2015 will not be applicable in AY 2013-14.

Arihant Kumar Jain vs ACIT 2021 TAXSCAN (ITAT) 145

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) while disallowing the Income Tax Exemption on bogus Long Term Capital Gains (LTCG) held that the onus to prove the genuineness of trading of shares leading to LTCG gain lies on the assessee.

“The ​​CIT(A) has erred in deleting the disallowance made by the AO on account of exempt LTCG claimed by the assessee u/s 10(38) of the Act, hence the question framed is decided affirmatively. Resultantly, the impugned order passed by the ld. CIT (A) is set aside and an assessment order passed by the AO is upheld by way of allowing the appeal filed by the Revenue,” the ITAT ruled.

Sri Ganga Poorna Prasad vs Assistant Commissioner of Income Tax 2021 TAXSCAN (ITAT) 187

The Bangalore 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 available to multiple flats obtained by the assessee under a joint development agreement (JDA).

While allowing the plea of the assessee, the Tribunal bench comprising Vice President N V Vasudevan and Accountant Member B R Bhaskaran held that “we notice from the perusal of the order of the AO that he has come to the conclusion that the assessee held the property that was the subject matter of JDA as stock in trade and therefore the assessee was not eligible to claim deduction under section 54F of the Act. This finding of the AO is without any basis and is liable to be vacated. The issues to be considered afresh are whether the property at Vishnuvardhan Road, Mysuru, belongs to the HUF or the assessee. The second issue that the AO has to consider is whether the assessee would be entitled to deduction under section 54F of the Act. In this regard, learned Counsel for the assessee placed reliance on the decision of the ITAT, Bengaluru Bench in the case of Smt. Nethravathi, Bengaluru vs ITO in ITA No.2630/Bang/2017 order dated 25.04.2018 wherein this Tribunal took the view that multiple flats obtained under JDA would be entitled to deduction under section 54F of the Act,” the Tribunal said.

Shri Jayaseelan vs Income Tax Officer 2021 TAXSCAN (ITAT) 106

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the capital gain exemption under section 54F of the Income Tax Act, 1961 cannot be granted to the assessee merely on the basis of the facts mentioned in the sale deed.

The benefits under section 54 of the Act cannot be granted to the assessee for the main reason that the sale deed clearly mentions that the entire sale consideration was received on the same day, and possession was also handed over. In view of the above, we find no reason to interfere with the order of the ld. CIT(A). Thus, the ground raised by the assessee is dismissed,” the Tribunal said.

Sri Ramaiah Harish vs ITO 2021 TAXSCAN (ITAT) 210

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that an independent building with more than one residential unit within it shall be eligible for capital gain exemption under section 54F of the Income Tax Act, 1961.

“The view taken in the case cited above is that an independent building can have a number of residential units and it will not lose the character of “one residential house”. The identical view has been expressed by another coordinate Bench in the case of Shri Chandrashekar Veerabhadraiah vs. ITO (ITA No.2293/Bang/2019 dated 07-12-2020 relating to AY 2015-16). Accordingly, we are unable to agree with the view taken by the tax authorities that each floor of the individual house/each portion in a floor is separate house property. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and hold that the house property received by the assessee is “one residential house” only within the meaning of sec.54F of the Act. Accordingly, we are of the view that the reasoning given by the AO to reject the claim for deduction u/s 54F is not justified,” the bench said.

Michael E Desa vs Income Tax Officer 2021 TAXSCAN (ITAT) 207

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) while allowing the set-off of Long Term Capital Loss (LTCL) on sale of shares against Long Term Capital Gain (LTCG) on sale of property ruled that every taxpayer was entitled to arrange his affairs to lower down taxes.

“The Assessing Officer cannot disregard a transaction just because it results in a tax advantage to the assessee. Just as much as we cannot legitimize and glorify tax evasion through colorable devices and tax shelters, we cannot also deprecate and disapprove genuine tax planning within the framework of the law. The line of demarcation between what is permissible tax planning and what turns into impermissible tax avoidance may be somewhat thin, but that cannot be an excuse enough for the tax authorities to err on the side of excessive caution,” the ITAT ruled.

M/s. Jaguar Buildcon Pvt. Ltd vs Dy. 2021 TAXSCAN (ITAT) 234

In a major relief to Jaguar Buildcon, the Delhi Bench of Income Tax Appellate Tribunal (ITAT) deleted the addition worth Rs.103.80 Crores made on account of unexplained share capital and premium as no adverse material brought by AO.

The Coram of Judicial Member, Amit Shukla and Accountant Member Prashant Maharishi said that it cannot be held that the onus cast upon the assessee to prove the identity, creditworthiness of the investee parties or genuineness of the transaction has not been explained properly nor there is any adverse finding or material gathered from any inquiry that it is a bogus transaction or kind of accommodation entry.

Smt. Swati Oberoi vs ITO 2021 TAXSCAN (ITAT) 294

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the benefit of capital gain deduction under section 54F of the Income Tax Act, 1961 cannot be denied to the assessee merely on the ground that the conveyance deed was not registered.

“In view of what has been discussed above, we are of the considered view that benefit of deduction u/s 54F of the Act cannot be denied to the assessee merely on the ground that conveyance deed has not yet been got registered particularly when the assessee is proved to be in possession of the property in question out of which she was already owner in possession of 1/3rd share since 2008 after making a complete payment of the sale consideration to the vendors and has duly proved her possession over the property by way of electricity and water charges bills. So, we find no reason to interfere into the impugned order passed by the ld. CIT (A) allowing deduction to the assessee u/s 54F of the Act,” the bench said.

Suresh Babu Vasireddy vs Income-tax Officer 2021 TAXSCAN (ITAT) 351

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the sale consideration received by a real estate agent towards the sale of property shall be treated as business income for the purpose of taxation.

Allowing the contentions of the assessee, the Tribunal bench consisting of Judicial Member S.S Godara and Accountant Member L P Sahu observed that the assessee is basically engaged in the business as a real estate agent in Hyderabad deriving commission income.

Sri Alugaddala Kistaiah vs Income Tax Officer 2021 TAXSCAN (ITAT) 401

The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench quashed the assessment order as property belongs to the HUF of assessee and not to the assessee individual.

The coram of Judicial Member, P.Madhavi Devi while quashing the Assessment order noted that prior to the enactment of Hindu Succession Act, in 1956, and the ancestral property became the HUF property and after the said Act, the ancestral property becomes the self-acquired property of the person on whom it devolves. In the case before me clearly, the property was inherited by the father of the assessee in 1952 and was also conveyed to the assessee after the death of his father in 1955, i.e. before coming into force of Hindu Succession Act, 1950. Accordingly, the property belongs to the HUF of the assessee and not to the assessee individual.

Sh. Shiv Kumar Jatia vs Income Tax Officer 2021 TAXSCAN (ITAT) 456

The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that the Booking Rights or Rights to Purchase Apartment or Rights to obtain title to the Apartment are “Transfer” to impose Capital Gain.

The ITAT ruled that the right to acquire property through an “agreement for sale” under section 54 of the Transfer of Property Act is an actionable claim which is capable of being transferred. Thus, it is a capital asset under section 2(14) as per the provisions of the Income-tax Act, 1961. The period of holding is to be reckoned from the date of the first agreement while calculating the capital gain on the sale of such property.

Shailaja vs ITO 2021 TAXSCAN (ITAT) 470

The Income Tax Appellate Tribunal (ITAT), Delhi Bench upheld the disallowance of loss of Short Term Capital Gain (STCG) and reiterated that the assessee must declare sale of property either in the original return or in the revised return and pay taxes.

The Coram of R.K.Panda and Suchitra Kamble said that there was a sale of property which should have been declared by the assessee either in the original return or in the revised return and should have paid taxes accordingly or at the most should have offered to tax to the Revenue. Thus, the assessee has not done the same in the present case. There was property purchase and though the assessee is entitled to claim benefit under Section 54F, but the same is determined when she satisfies all the conditions laid down in the said provisions, the same was not done by the assessee at the revised income stage also.

M/s Nutech Engineering Technologies Ltd vs Dy 2021 TAXSCAN (ITAT) 471

The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench ruled that Property ceases to be a business asset when no depreciation is claimed and profit and gain arising out of sale of property to be treated as Long Term Capital Gain.

The Coram of Manoj Kumar Aggarwal and Mahavir Singh held that the moment assessee stopped claiming depreciation in respect of property and let out the same for rent, it ceases to be a business asset and thus, the profit or gain arising out of sale of property is to be considered as long term capital gain after indexation.

DipalSureshbhai Patel vs ITO 2021 TAXSCAN (ITAT) 489

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has recently held that the provisions of section 54 of the Income Tax Act, which is a beneficial provision, shall be interpreted liberally. The Tribunal, while concluding an appeal in favor of the assessee, held that the deduction under section 54F of the Act is allowable even in case of unutilized capital gain was deposited into the prescribed account within the due date of filing of the income tax return.

“Therefore the Ld. Tribunal has been pleased to hold that the assessee has fulfilled the condition for deduction under Section 54F within the extended time limit of filing of return under Section 139(4) and the claim of the assessee cannot be negated merely he did not deposit the amount in the said scheme before the expiry of the time period provided under Section 139(1) of the Act,” the Tribunal said.

Shri Dharamvir Singh vs I.T.O. 2021 TAXSCAN (ITAT) 530

The Income Tax Appellate Tribunal (ITAT), Jaipur Bench allowed the deduction under section 54F of the Income Tax Act in respect of residential house property purchased in the name of wife.

The Coram of Sandeep Gosain and Vikram Singh Yadav held that the assessee is eligible for deduction under section 54F of the Act in respect of residential house property purchased in the name of his wife.

Peerless General Finance & Investment Company Limited vs Deputy Commissioner of Income Tax 2021 TAXSCAN (ITAT) 564

The Income Tax Appellate Tribunal (ITAT), Kolkata Bench allowed the Long-Term Capital Loss arising from the sale of Government Securities after applying the Cost Inflation Index.

The coram of A.T. Varkey and P.M. Jagtap ruled that the claim of the assessee for Long-Term Capital Loss arising from the sale of Government Securities after applying the Cost Inflation Index having been already allowed by the ld. CIT(A), there was no error in the order of the Assessing Officer in allowing the set-off of such loss against the Long-Term Capital Gain arising from the Bonds and Right to Property.

Sri.Mahendrasingh Ramsingh vs Income Tax Officer 2021 TAXSCAN (ITAT) 578

The Income Tax Appellate Tribunal (ITAT), Bangalore Bench restored the case to the AO for examining whether the assessee is entitled to deduction under section 54 of the Income Tax Act.

The ITAT held that reinvestment was made within the period specified under section 54. However, since the Assessing Officer and the CIT(A) had held that income arising on sale of impugned flat is short term capital gains, they did not have an occasion to consider the claim of deduction under section 54 on reinvestment.

WGF Financial Services Pvt.Ltd. vs ACIT CITATION: 2021 TAXSCAN (ITAT) 590

The Income Tax Appellate Tribunal (ITAT), Delhi Bench refused to delete addition of Rs.27.39 Crores as a taxable long-term capital gain.

The ITAT noted that the appellant company received the entire sale consideration and it cannot be said that it was a forced sale due to the pressure mounted by IBFSL. It may be possible that the plot of lands were sold under the vigil and direction of IBFSL but the fact remains that the entire sale consideration was realized by the appellant and thereafter the sale consideration was taken by IBFSL in discharge of its loan.

Shri. Ayi Vaman Narasimha Acharya vs Deputy Commissioner of Income Tax 2021 TAXSCAN (ITAT) 591

The Income Tax Appellate Tribunal (ITAT) Bangalore, has deleted an addition made by the revenue department under section 50C of the Income Tax Act.

Vice President N.V. Vasudevan allowed the appeal filed by the assessee and held, “The decision referred to by the learned DR in the case of J.Appa Rao (supra) is a case where it was held that applicability of the provisions of Sec.50C of the Act is mandatory w.e.f .1-4-2003. This decision does not in any way support the case of the revenue regarding the year in which capital gain is liable to be taxed. For the reasons given above, I hold that the capital gain in question cannot be brought to tax in Assessment Year 2011-12. The Revenue authorities erred in bringing to tax the capital gain in Assessment Year 2011-12. The addition made by the AO is accordingly directed to be deleted.”

Halesh K.C vs ITO CITATION: 2021 TAXSCAN (ITAT) 594

The Income Tax Appellate Tribunal (ITAT), Bangalore Bench allowed the deduction on account of long-term Capital Gain.

The Coram consisting of Beena Pillai and B.R.Baskaran noted that an independent building can have a number of residential units and it will not lose the character of “one residential house”. Therefore, the ITAT set aside the order passed by CIT(A) on this issue and held that the house property received by the assessee is “one residential house” only within the meaning of section 54F of the Act. Accordingly, the reasoning given by the AO to reject the claim for deduction under section 54F is not justified.

Shri. Babulal vs The Income Tax Officer CITATION: 2021 TAXSCAN (ITAT) 593

The Income Tax Appellate Tribunal (ITAT) Bangalore, held that the gain on sale of land is to be regarded as income under the head “capital gain” and is therefore entitled to all the deductions permissible while computing income under the head “Capital Gain”.

In this case however the intention at the time of purchase was to construct a house for self-occupation and that intention was given up due to the fact that the land was outside Mysore city and due to financial crunch. Therefore the tests laid down in the decisions support the plea of the Assessee that he did not do any adventure in the nature of trade when he sold the larger extent of property after dividing them into smaller sites. The dates of acquisition of the property and its conversion into sites and obtaining approval and the dates of sale by the Assessee all go to show his intention at the time of acquisition was not with a view to indulge in an adventure in the nature of trade.”

Sri.Maurice Patrick De Rebello vs The Income Tax Officer CITATION: 2021 TAXSCAN (ITAT) 592

The Income Tax Appellate Tribunal (ITAT), Banglore Bench held that the capital gain deduction is allowable for eight flats received under Joint Venture Agreement.

The Coram consisting of Chandra Poojari and George George K held that the assessee is entitled to deduction under section 54 of the Income Tax Act on the entire built-up area received from the builder as per the JDA. To Read the full text of the Order.

Noida Cyber Park Pvt. Ltd. vs Income Tax Officer CITATION: 2020 TAXSCAN (ITAT) 130

The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that the leasehold rights cannot be computed as capital gains in respect of transactions in land or building under Section 50C of the Income Tax Act.

The tribunal opined that the point sought to be raised by the assessee deserves to be upheld. “In view of the aforesaid factual position and in law, we find that the present transaction of six properties in question does not warrant invoking section 50C (1) of the Act as the property in question is not of the nature covered by section 50C (1) of the Act. Therefore, on this point itself, we set aside the order of the ld. Commissioner of Income Tax (A) and direct the Assessing Officer to delete the addition,” the tribunal said.

COMMISSIONER OF INCOME TAX vs MR. VINAY MISHRA 2020 TAXSCAN (HC) 212

The Karnataka High Court held that the assessee is eligible for exemption under Section 54F of the Income Tax Act for the investment made in the house property in the USA.

“In the light of aforesaid well-settled legal principles as well as the memorandum of objects of Finance Act, 2014, which clearly provide that amendments will take effect from April 01, 2015 and will apply to Assessment year 2015-16 onwards as well as the CBDT’s Circular dated January 21, 2015, it is evident that amendment incorporated in Section 54F (1) of the Act is prospective in nature,” the bench while answering against the revenue said.

Yogini Mohit Sahita vs ITO CITATION: 2020 TAXSCAN (ITAT) 129

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the income from the relinquishment of right over a property cannot be treated as “capital gain” for the purpose of levying an income tax.

Granting relief to the assessee, the Tribunal observed that “the distillation of precedents must now be applied to the facts of the present case. We are of the considered view that the ratio laid down in the decisions mentioned at para 7 & 7.3 hereinabove is applicable to the instant case. Following the same, we set aside the order of the Ld. CIT(A).”

Goulikar Jawaharlal vs Income-tax Officer CITATION: 2020 TAXSCAN (ITAT) 134

The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has held that the default in home loan by the owner of the property cannot be a reason to disallow the capital gain deduction under section 54F of the Income Tax Act, 1961.

The Tribunal further cited the decision of the Delhi High Court wherein it was observed that “wherein the assessee purchases a new house in the name of his wife and not in the name of any stranger who was unconnected with him, the exemption cannot be denied if the entire investment had come out of proceeds of old property”. “From the above, it is clear that the assessee has not violated any of the provisions mentioned in section 54F of the Act in order to be denied for the benefit of the deduction,” the Tribunal added.

Income Tax Officer vs Smt. Rekha Shetty CITATION: 2020 TAXSCAN (ITAT) 127

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the benefit of section 54 of the Income Tax Act, being a beneficial provision, cannot be denied to the assessee due to non-compliance of procedural requirements.

“In this case, the assessee should have purchased the residential house within two years from 19.10.2015, i.e. the date of transfer. She has utilized such a sum towards the purchase of the new house on 26.8.2016 itself. Further, she had explained the reasons for not depositing the amount in the Capital Gains Accounts Scheme which is also not disputed. Since the assessee has substantially complied with section 54(1), therefore, a mere non-compliance of a procedural requirement under section 54(2) itself cannot stand in the way of the assessee in getting the benefit under section 54. Therefore, we do not find any reason to interfere with the order of the learned CIT (A),” the Tribunal said.

Late Susan Cherian vs Income Tax Officer CITATION: 2020 TAXSCAN (ITAT) 135

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain deduction benefit is restricted to only one residential property under section 54F of the Income Tax Act, 1961 after its amendment in the year 2015.

“Courts have consistently held that the post amendment benefit of section 54F will be applicable only to one residential house in India whereas prior to the amendment residential house would include multiple residential houses/units,” the Tribunal added. With regard to the deduction in respect of the constructed area, the Tribunal further observed that “in view of consistent view taken by jurisdictional High Court, as well as other High Courts, we are of the opinion that assessee is entitled to deduction under section 54F of the act in respect of 35% of constructed property received by her.”

Shri Shailesh Kumar Chaturvedi vs ITO CITATION: 2020 TAXSCAN (ITAT) 133

The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has recently held that past electricity and water bills cannot come to the aid of the assessee to demonstrate the existence of the constructed house at the time of sale for availing capital gain deduction under section 54F of the Income Tax Act, 1961.

However, the Tribunal added that “at the same time, where the AO is ceased of the information that the assessee has made a fresh investment in certain house property and plots of land and is also accepting that such investment may be eligible for a claim under section 54F, it is incumbent on the part of the Assessing officer that in such a situation, where he had denied the assessee’s claim under section 54, he should have allowed the appropriate claim to the assessee under section 54F as per law. Since we have already quashed the notice u/s 148, no useful purpose would be served in setting aside the matter to the AO to allow the deduction under section 54F as the consequent proceedings stand quashed.” To Read the full text of the Order CLICK HERE

Bhagwan Keshu Sakhare vs ITO CITATION: 2020 TAXSCAN (ITAT) 132

The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the income tax can be levied on the amount of capital gain on transfer of land used for agricultural purposes if new land is not purchased within a period of three years or the amount is deposited in a designated capital gain account scheme.

Upholding the orders of the lower authorities, the Tribunal held that “We have heard the rival submissions through virtual hearing and gone through the relevant material on record. The ld. AR fairly admitted that a sum of Rs.35.00 lakhs was neither deposited in the Capital Gain Account scheme nor was it used for the purchase of land before the prescribed date. Section 54B of the Act categorically states that the amount of capital gain on transfer of land used for agricultural purposes should not be charged to tax if new land is purchased within a period of three years or the amount is deposited in a designated capital gain account scheme. Since the assessee failed to satisfy none of these conditions, no exception can be taken to the view canvassed by the ld. CIT in this regard. We, therefore, uphold the impugned order.”

SHRI.NAVIN JOLLY vs INCOME TAX OFFICER CITATION: 2020 TAXSCAN (HC) 275

The High Court of Karnataka, while quashing the ITAT held that assessee entitled to the benefit of exemption under Section 54F(1) of the Income Tax Act, 1961 as the assessee owns two apartments of 500 square feet in the same building and it has to be treated as one residential unit.

“A similar view was taken by Delhi High Court in case of Geeta Duggal wherein the issue whether a residential house which consists of several independent residential units would be entitled to exemption under Section 54F (1) of the Act was dealt with and the same was answered in the affirmative. The appeal against the aforesaid decision was dismissed by the Supreme Court,” the judgment said.

Shri Pyare Lal Saini vs I.T.O CITATION: 2020 TAXSCAN (ITAT) 136

In an assessee-friendly ruling, the Income Tax Appellate Tribunal (ITAT), Jaipur bench has held that the assessee can claim the benefit of capital gain deduction under section 54F of the Income Tax Act, 1961 during the re-assessment proceedings under section 147 and 148 of the Income Tax Act in case of non-filing of income tax returns.

“However, the assessee at the time of filing of the appeal before the L’d. CIT(A) has specifically raised an issue of claiming deduction U/s 54F of the Act and claimed that the sale consideration has been used for the construction of a new residential house which is eligible for deduction U/s 54F of the Act. Having regard to the facts and circumstances, where the assessee is a farmer and a senior citizen, the claim of deduction U/s 54F of the Act cannot be denied without verification of the fact of the utilization of the sale consideration for construction of the house. Since it is a case of non-filing of return of income and the A.O. has issued notice U/s 148 of the Act for assessing the capital gain in the hands of the assessee, therefore, there is no bar in claiming the deduction U/s 54F of the Act against the capital gain proposed to be taxed by the A.O. in the proceedings U/s 147 of the Act,” the Tribunal said.

Seshagiri Rao vs ITO CITATION: 2020 TAXSCAN (ITAT) 131

The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has recently held that liability to pay capital gain tax would attract despite the fact that the assessee signed a release deed waiving all his rights, title and interests in the property. The Tribunal further clarified that the deduction under section 54F of the Income Tax Act, 1961 would still be applicable in such cases and the non-utilized portion of the capital gain is brought to tax only on the expiry of three years as per the relevant provisions.

With regard to the deduction, the Tribunal observed that “the assessee has filed details of such expenditure before the Tribunal by way of additional evidence. I, therefore, deem it fit and proper to admit such additional evidence and remand it to the file of AO for verification of the same. After verification, the AO shall recomputed the eligible exemption under section 54F of the Act and the un-utilized capital gain shall be brought to tax as provided under the proviso to Section 54F of the Act.”

Shri Srinivas Bejgam vs ACIT CITATION: 2020 TAXSCAN (ITAT) 138

In an assessee-friendly ruling, the Income Tax Appellate Tribunal (ITAT), Hyderabad bench has recently observed that the assessee is eligible for deduction under section 54F of the Income Tax Act even if he did not disclose the amount of capital gain in the original return and disclosed the same in the revised return.

“Since Section 54F of the Act is a beneficial provision and the Hon’ble Courts have held that the beneficial provision should be construed liberally, I deem it fit and proper to admit assessee’s claim of deduction under Section 54F of the Act and remand the issue to the file of the AO with a direction to consider the eligibility of the assessee for deduction under Section 54F of the Act and allow the same if the assessee satisfies the conditions. Needless to mention that the assessee shall be given a fair opportunity of hearing. The assessee is directed to produce all the necessary evidence before the AO and cooper

Shri Ramphal Hooda vs Income Tax Officer CITATION: 2020 TAXSCAN (ITAT) 127

In a recent ruling, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the husband shall be eligible for a capital gain exemption if he invests the entire long term capital gain towards the investment in another property in the name of the wife.

On the second appeal, the Tribunal relied on the above decision of the Delhi High Court and held that since the entire sale amount of long term capital gain has been invested in purchase of other property in the name of the wife of the assessee, the assessee would be entitled to exemption on account of long term capital gains. In this view of the matter, we set aside the Orders of the authorities below and delete the entire addition. The A.O. is directed to allow exemption of assessee.

Smt.A.Tamil Ponni vs Income Tax Officer CITATION: 2020 TAXSCAN (ITAT) 128

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the wife is eligible for deduction under section 54 of the Income Tax Act for the investment in a house in the name of her husband.

“Ïn the instant case, the assessee purchased a house property at Anna Nagar in the name of his wife Smt. Meera after selling a property at Bangalore, but the same was assessed in the hands of the assessee. Hence, as correctly held by the learned CIT(A) as well as by the Tribunal, the assessee is entitled to exemption under Section.54F of the Act. Respectfully following the aforesaid decision, we hold that even though the new property has been invested in the name of assessee’s husband, an exemption under Section.54F cannot be denied to the assessee. We direct the A.O. accordingly. The grounds raised by the assessee are disposed of in an aforesaid manner,” the Tribunal said.

The Income Tax Appellate Tribunal (ITAT) of Bangalore has allowed a claim of deduction under section 54/54F of the Income Tax Act on a house purchased by the assessee outside India.

Vice President Shri N.V. Vasudevan, and Accountant Member Shri B.B. Baskaran, while allowing the appeal held, “We have given careful consideration to the rival submissions. We find that in the decision rendered in the case of Jai Kumar Gupta HUF (supra) on identical facts the assessee had claimed deduction u/s. 54 of the Act instead of 54F of the Act. The Tribunal held that the assessee’s claim for deduction u/s. 54F should be examined. In the case of Arshia Basith (supra), the Bangalore Bench of the Tribunal held that the assessee would be entitled to deduction u/s. 54F of the Act even in respect of property purchased which is located outside India.”

PR. COMMISSIONER OF INCOME TAX vs SH. AKSHAY SOBTI CITATION: 2020 TAXSCAN (HC) 274

The Delhi High Court has held that CBDT in its circulars No. 672 dated 16.12.1993 has made it clear that the acquisition of flat through allotment by DDA has to be treated as construction of flat and deduction of capital gains under Section 54 of the Act is allowed.

While dismissing the appeal, the court held that Respondents had fulfilled the conditions laid down under Section 54 (1) of the Act. The presumption drawn by the AO for making the addition was patently false, based on conjectures and surmises, without appreciating the records and making an inquiry to discredit the evidence and confirmation placed on record by the assessee. This consistent factual finding arrived at by the CIT (A) and ITAT does not give rise to any question of law.

ACIT vs Shri Anil Gulabdas Shah CITATION: 2019 TAXSCAN (ITAT) 112

The Income Tax Appellate Tribunal (ITAT), Mumbai has held that the assessee cannot be assessed for capital gain on the ground of transfer of right to sue.

“The additional compensation was towards the time, cost and effort of the assessee in pursuing the litigation. This being so, we are unable to concur with the submissions of Ld. DR that the said compensation was part and parcel for the sale transaction and received by the assessee as a consideration of the sale of the property. On the other hand, the learned CIT(A), in our considered opinion, has clinched the issue in the proper perspective. As rightly held, there could not be any transfer of a “right to sue” under Indian Law and any capital receipt arising from a right to sue cannot thus be considered capital gains under Section 45. Additionally, the cost of the said right being indeterminable, the charging Section would fail as per the cited decision of Hon’ble Supreme Court rendered in CIT V/s B.C.Srinivasa Shetty [supra]. Therefore, no infirmity could be found on the issue in adjudication done by learned CIT(A),” the Tribunal said.

Smt. Archana Kanwar vs The Income Tax Officer CITATION: 2019 TAXSCAN (ITAT) 113

The Chennai bench of the Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the exemption under Section 54F of the Income Tax Act, 1961 has held that the exemption is allowable merely on the basis of the agreement without the evidence of payment of the purchase of new flat.

“Since there was a long delay in construction of the property, the assessee made a request dated 18.08.2014 for withdrawal of the amount paid and the entire amount of Rs.59,22,521/- was refunded to the assessee on 06.02.2015. However, the assessee has not furnished any evidence of payment of Rs. 59,22,521/- with the builder with whom the assessee has entered into an agreement for the purchase of a new flat. Without furnishing payment details, the assessee’s claim cannot be entertained. In view of these facts and circumstances, we direct the assessee to furnish complete evidence towards payment of the above amount before the Assessing Officer for verification and the details are found to be correct, the assessee can be allowed to claim deduction under section 54F of the Act and otherwise not,” the Tribunal said.

Smt. Yoga Sikka vs Income Tax Officer CITATION: 2019 TAXSCAN (ITAT) 114

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the cost of investment in land is also part of the cost of construction of the residential house, for the purpose of availing capital gain exemption under Section 54F of the Income Tax Act.

“It is also not in dispute that before the lower authorities the assessee could not adduce any evidence. The certificate from the municipal corporation, Moradabad has been furnished for the first time. In the interest of justice I restore this issue to the files of the Assessing Officer. The Assessing Officer is directed to verify the certificate of construction issued by Municipal Corporation, Moradabad and decide the issue afresh as per provisions of law, keeping in mind that the cost of investment in land is also part of cost of construction of the residential house to avail the exemption u/s. 54 F Act. Needless to mention the Assessing Officer shall give a reasonable opportunity of being heard to the assessee,” the Tribunal said.

Smt. Tupel Raja Iyengar Shakuntala vs The Income-Tax Officer CITATION: 2019 TAXSCAN (ITAT) 115

The benefit of the capital gain exemption cannot be denied to a taxpayer on the ground that the income tax return is not filed declaring such income, said the Income Tax Appellate Tribunal (ITAT), Bangalore bench.

There is no prohibition under the Act on the assessee in claiming an exemption under section 54 of the Act in case it has not filed a return of income. Such a legal claim can be put forth at any stage of assessment/appellate proceedings and should be considered on merits in the light of the details/documents/ corroborative evidence filed in this regard. Having considered the entire material on record on this issue and taking into account the peculiar facts and circumstances of the case on hand, I am of the considered view that the assessee is entitled to exemption under section 54 of the Act and therefore the entire sale consideration of Rs.46,65,000/- assessed by the AO is hereby deleted,” the Tribunal said.

Kaushik D. Mistry vs Income Tax Officer-20 (2)(3) CITATION: 2019 TAXSCAN (ITAT) 116

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the acquisition of the tenancy rights would not amount to purchase or construction of a new property and therefore, the capital gain exemptions under sections 54 and 54F of the Income Tax Act, 1961 are not available.

The Tribunal held that “the assessee has not acquired the ownership rights in the new property but merely acquired tenancy right which could not be equated with ownership rights. The conditions of Section 54, as well as Section 54F, is that the assessee must purchase or construct the new property within the specified time. The acquisition of tenancy right, in our opinion, does not tantamount to purchase or construction of a new property, in any manner. Therefore, the assessee would not be eligible to claim the aforesaid deduction either u/s 54 or u/s 54F.”

Neelam Nananni vs Income Tax Officer CITATION: 2019 TAXSCAN (ITAT) 117

In an assessee-favor ruling, the Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the deduction under section 54 is available on the purchase of two residential houses by the assessee from the capital gain earned from the sale of the old asset. The bench further clarified that such deduction would be available even if the investment is not made out of the capital gain.

Assessee's claim of deduction under section 54 of the Act has not been disallowed by the departmental authorities on the said reasoning. In any case of the matter, as per the provision of section 54 of the Act applicable to the impugned assessment year, the expression “a residential house” used in section 54(1) of the Act does not mean “one residential house”. Moreover, there is no allegation by the departmental authorities that the flats are not in the same building or are not interconnected,” the Tribunal said.

Mrs. Krithika Lingappan vs The Income Tax Officer CITATION: 2019 TAXSCAN (ITAT) 118

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of Section 50C of the Income Tax Act, 1961 cannot be applied when the property in question was sold under pressure.

This Tribunal is of the considered opinion that the fact and circumstances of the case and the circumstance the assessee executed the sale deed, the apparent sale consideration disclosed in the sale deed has to be considered as market value and the same has to be adopted for the purpose of computing capital gain. Hence, this Tribunal is unable to uphold the orders of both the authorities below.” the Tribunal said.

Shri Devraj PKYN Iyer Sharma vs ITO CITATION: 2019 TAXSCAN (ITAT) 119

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the tax liability for capital gain cannot arise in the year in which the assessee entered into a development agreement where there was only a promise of allotment of flats was made. The Tribunal clarified that no such tax liability can be imposed when no actual allotment took place.

We are of the view that the tax authorities are not justified in placing reliance on the allotment letter given by the developer to the assessee.” The Tribunal, therefore, held that the capital gains, if any, arising on account of the development agreement is not assessable in assessment year 2008-09.

Smt. Sabita Devi Agarwal vs Income Tax Officer CITATION: 2019 TAXSCAN (ITAT) 120

The Kolkata 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 in case of possession handed over as part performance of the Contract.

In the case on hand, part performance of a contract has taken place and possession has been handed over. Under these circumstances, the claim of the assessee that her 1/4th share in the house property in Gurgaon has been transferred has to be accepted. Hence we hold that the assessee has only one house property as on the date of sale of the plots of land giving rise to long-term capital gain. Hence this issue is decided in favor of the assessee.”

Dy. Commissioner of Income-tax vs Shri Pankaj Chimanlal Patel CITATION: 2019 TAXSCAN (ITAT) 121

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the capital gain of multiple years can be claimed against purchase/construction of the same new residential house i.e. new asset for the exemption under section 54 of the Income Tax Act subject to fulfillment of other conditions.

Significantly, we also notice the use of the broader expression ‘any’ long-term asset in distinction to the expression ‘a’ long-term asset as used in Section 10(38) of the Act. Thus, the legislative intent when gathered from the distinct language used, it is clear that a narrower interpretation would fail to achieve the manifest purpose of the deduction provision. We thus, prefer to avoid a construction which would reduce the legislation to futility and grant broader construction to bring effective result on the availability of such deduction,” the Tribunal added.

Kiranbhai Jamnadas Sheth vs Assistant Commissioner of Income Tax CITATION: 2018 TAXSCAN (ITAT) 139

The Income Tax Appellate Tribunal (ITAT), Rajkot has held that a houseboat purchased for use as a residential house by the assessee is not eligible for capital gain exemption under section 54 of the Income Tax Act.

“Further, there is a ban on the purchase of immovable property as well as a boat by the non-state subject of the J & K State. Therefore, the assessee is not legally entitled to purchase a houseboat, which is movable property but held to be land by J & K Land Revenue Act, 1939. Hence, the same cannot be equated with the residential house which is immovable property. Therefore, in these circumstances and considering the letter of the Assistant Commissioner (C), Government of Jammu & Kashmir dated 05.07.2013 we are inclined to hold the findings of the Lower Authorities are correct, accordingly this ground of assessee is dismissed,” the Tribunal said.

Smt. Waheeda Asif Abbas vs Income Tax Officer CITATION: 2018 TAXSCAN (ITAT) 141

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain received by the minor daughters can be clubbed in the hands of the Mother under the provisions of the Income Tax Act.

“Therefore, the Assessing Officer has rightly clubbed the minors’ income in the hands of the assessee. Since the nature of a bank deposit is not readily available for verification, This Tribunal is of the considered opinion that the matter needs to be verified by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the matter is remitted back to the file of the Assessing Officer only for a limited purpose of verifying whether the capital gain was deposited in the specified Capital Gains Account as required under Section 54F of the Act. The Assessing Officer shall verify the nature of the deposit and thereafter decide the issue whether the assessee is eligible for exemption under Section 54F of the Act or not,” the Tribunal said.

Income Tax Officer vs Smt. Jaya Deepak Bhavnani CITATION: 2018 TAXSCAN (ITAT) 128

The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) in Income Tax Officer versus Smt. Jaya Deepak Bhavnani upheld that capital gain arising from depreciable assets is long term capital gain for the purpose of claiming exemption under Section 54F/54E of the Act.

On departmental appeal, the bench including Judicial Member Amarjit Singh and Accountant Member Rajesh Kumar observed that “the deeming provisions as contained in section 50 of the Act only provide that any gain resulting from the depreciable assets shall be deemed to be capital gain arising from short term capital assets”. Also, the bench while relying on the decision of Bombay High Court in CIT vs. ACE Builders (P.) Ltd. holds that capital gain arising from depreciable assets is long term capital gain for the purpose of claiming exemption under Section 54F/54E of the Act.

M/s. Telukunta Chandra Mohan Rao vs Income Tax Officer CITATION: 2018 TAXSCAN (ITAT) 129

The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has held that the land owner is liable to pay capital gain in the year in which the actual possession of the land was transferred to the developer under the Joint Development Agreement.

The Tribunal noted that in the earlier case, the Tribunal noted that “the assessee has entered into ‘JDA’ in the year 10/01/2000 and possession was handed over for development. But due to occupation of the property by the tenants, the developer was able to vacate the tenants only in the year 2003. Hence, it can be construed that the actual vacant possession was handed over to the developer only in 2003. Therefore, the actual transfer took place in the year 2003. The provisions of capital gains are attracted in the year 2003. Hence, the stand of the AO to charge the capital gains in the year 2010-11 is not proper.”

Deputy Commissioner of Income Tax vs Ramesh Madhavrao Bhujang CITATION: 2018 TAXSCAN (ITAT) 130

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the date of full payment of money must be treated as the date of acquisition for determination of capital gain under the provisions of the Income Tax Act.

The above-stated fact demonstrates that the assessee had acquired an identifiable right in a specific property and also made the full payment thereof by 25/06/2008. The registration of purchase documents, in such a case, was to convey the ownership rights to the assessee which already existed in assessee’s favor by way of allotment letter dated 10/03/2008. It is also the undisputed fact that the same property has been sold by the assessee during impugned AY.”

Smt. Padmini Chand vs Asstt. Commissioner of Income Tax CITATION: 2018 TAXSCAN (ITAT) 131

In Padmini Chand & Anr. vs. Asstt. Commissioner of Income Tax, the Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) held that capital gain will not arise when sale deeds have been executed to safeguard the properties of the vendee and to settle legal disputes.

he opinion that the transfer is not complete and the capital gain therein will not arise. However, the outcome of the civil suits will determine the question of transfer and if the Civil Courts hold the transfer to be final, then in that year, the assessee’s will be liable to pay the tax on the capital gain. In view of the same, I am inclined to allow the assessee’s appeals with the above observations.”

K. Vijaya Lakshmi vs Asst.Commissioner of Income Tax CITATION: 2018 TAXSCAN (ITAT) 132

The Hyderabad bench of ITAT confirmed that handing over of possession under development agreement would amount to ‘Transfer’ for attracting capital gain tax.

Accordingly, the bench observed that Section 2(47) is clearly attracted since there is the part performance of the contract in nature referred to in Section 53 of Transfer of Property Act, 1882. Finally, the tribunal held that the issue of bringing to tax the capital gains during the year is to be upheld and relied on the decision of the jurisdictional High Court in the case of Potla Nageswara Rao vs. DCIT and uphold the taxability of the capital gains in the year under consideration.

Dy. Commissioner of Income Tax vs Shri Dawood Abdulhussain Gandhi CITATION: 2018 TAXSCAN (ITAT) 133

In DIT v. Dawood Abdulhussain, Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently ruled that capital gain exemption under section 54F of the Income Tax Act cannot be denied to the Assessee even though he has only a partial or fractional ownership in the residential house.

After analyzing the above narrated facts and circumstances, the Tribunal bench consisting of Judicial Member Ravish Sood and Accountant Member Rajendra observed that the sole issue in the present case is whether the Assessee is entitled to get deduction under section 54F of the Act or not. The division bench further observed that the Assessee in the present case is only a co-owner having fractional ownership in the said respective properties, therefore, the precondition of being the owner of more than one residential house, other than the new asset, on the date of transfer of the original asset was not satisfied.

Shri Raghuram P Nambyar vs Asst. Commissioner of Income Tax CITATION: 2018 TAXSCAN (ITAT) 134

While hearing the case between Raghuram P Nambyar and Assistant Commissioner of Income Tax, Bangalore bench of Income Tax Appellate Tribunal (ITAT) recently held that sharing of cost between husband and wife is not a ground to allow capital gain exemption under section 54F of the Income Tax Act 1961 to both of them upon transfer of jointly owned property. The bench further denied the benefit of the provision to the wife as the sale deed recognizes only Husband as the legal owner of the transferred property.

While concluding the issue the division bench further held that benefit of section 54F and 54EC of the Act on account of capital gain cannot be allowed since the Assessee (Wife) has failed to prove ownership of the property and the sales deed recognizes only one of them as the legal owner.

ACIT vs Shri Michelle N. Sanghvi CITATION: 2018 TAXSCAN (ITAT) 135

The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) has ruled that date of possession is not material fact for deciding the period of holding to Compute Short Term or Long Term Capital Gain.

While dismissing the appeal by revenue, the Tribunal observed that, “the interest in the property is created the movement the agreement to purchase is entered into in favor of the assessee accompanying with part payment. The date of possession is not material for deciding the period of holding by the assessee for the purpose whether the gain is long term or short term”. “Assets held by the assessee were long term assets and directed the AO to recompute the long term capital gain by allowing indexation on the cost of acquisition taking the date of purchase as 18.12.2006”, the bench also added.

Mr. Ravi Shankar vs Assistant Commissioner of Income Tax CITATION: 2018 TAXSCAN (ITAT) 136

In Mr. Ravi Shankar vs. The Assistant Commissioner of Income Tax, Mumbai bench of Income Tax Appellate Tribunal (ITAT) proclaimed in its recent order that pre-amended capital gain under section 54 of the Income Tax Act 1961 can be availed for two residential houses.

The division bench also supported the assessee's submission in light of the order pronounced by Madras High Court in a previous case on a similar issue and the bench also specified that the assessee was entitled to claim the deduction in respect of investments made in more than one residential house. The tribunal bench concluded the issue by declaring that there no restriction was placed by the legislature in respect of investments in the residential houses that an assessee could make for claiming deduction under Sec. 54 of the Act. Thus the bench allowed the assessee's claim on an exemption.

Sonega Trades & Investments Private Limited vs Income Tax Officer CITATION: 2018 TAXSCAN (ITAT) 137

In the case of Sonega Trades & Investments Private Limited vs. Income Tax Officer, Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently held that interest income earned from capital gains bonds would be taxable under the head other income and the same cannot be taxed as business income.

“The assessee could not claim any expenditure from Income from House Property outside the ambit of Section 24. The expenditure as claimed by the assessee was not covered by the statutory provisions and hence not allowable. The interest income was earned from Capital Gains Bonds which was rightly assessed as Income from Other Sources,” the bench said.

Income Tax Officer vs Narayan Mali CITATION: 2018 TAXSCAN (ITAT) 138

Indore bench of Income Tax Appellate Tribunal (ITAT) deleted the penalty imposed by the Assessing Officer (AO) by considering the fact that the assessee conceded the transaction of Sale of Agricultural Land in the hands of his Hindu Undivided Family (HUF).

The bench observed that the assessee has filed all the details of the aforesaid transaction of sale of agriculture land which have been shown in the income tax return filed by the assessee in the capacity of his HUF. Hence it cannot be presumed that the assessee concealed particulars of income or furnished inaccurate particulars of income because the assessee has shown transaction of sale of agricultural land in the hands of assessee’s HUF as a hereditary property. Hence there is no significance to impose penalty under section 271(1)(c) of the act, consequently the division bench upheld the decision of the CIT(A) to delete the penalty imposed by the AO.

DCIT vs M/s EIH Limited CITATION: 2018 TAXSCAN (ITAT) 140

The Kolkata bench of ITAT recently announced that the depreciable assets which had been held for more than 36 months prior to its sale, does not lose its character of being a long term capital asset, even though it might get taxed as short term capital gain in terms of deeming fiction provided u/s 50 of the Act.

The tribunal bench relied on the decision of High Court in the case of CIT vs Manali Investment wherein held that short term capital gain computed u/s 50 of the Act on long term depreciable assets can be set off against long term capital loss u/s 74 of the Act. Accordingly, the bench allowed the appeal of the assessee and granted the permission to set off the brought forward long term capital loss against the deemed short term capital gain.

Dy.CIT vs M/s Amartara Pvt Ltd CITATION: 2018 TAXSCAN (ITAT) 142

Mumbai bench of Income Tax Appellate Tribunal (ITAT), recently upheld the book-value based taxation of partners on capital contribution of immovable property in the case of a Limited Liability Partnership (LLP) and proclaimed in its recently published order.

“The purpose of insertion of section 45(3) is to deal with cases of transfer between the partnership firm and partners and in such cases, the Act provides for the computation mechanism of capital gain and also provides for the consideration to be adopted for the purpose of determination of the full value of consideration. Since the Act itself is provided for deeming consideration to be adopted for the purpose of section 48 of the Act, another deeming fiction provided by way of section 50C cannot be extended to compute the deemed full value of consideration as a result of the transfer of capital asset,” the bench said.

V.V.V. Satyanarayana vs Income Tax Officer CITATION: 2017 TAXSCAN (ITAT) 129

Hyderabad bench of Income Tax Appellate Tribunal (ITAT) has held that an assessee is entitled to claim exemption under section 54F of the Income Tax Act even if he holds more than one residential property.

The bench, while accepting the contentions of the assessee, observed that section 54 read provides exemption to capital gains arising from transfer of a residential house property (being building or land appurtenant thereto), the income of which is chargeable under the head Income from house property. In this case the assessee fulfilled the conditions of the said section, hence he is entitled to claim exemption under section 54/54F of the Act.

Shri Bhagwan Swaroop Agarwal vs Income Tax Officer CITATION: 2017 TAXSCAN (ITAT) 130

The Jaipur bench of Income Tax Appellate Tribunal (ITAT) consisting of Judicial Member Vijay Pal Rao has held that Capital Gain Exemption is available on residential houses constructed on a commercial plot under Section 54F of Income Tax Act.

The appeal of the assessee was regarding the deduction of interest of Rs. 5,82,565/-paid on the loan facility as part of the acquisition under Section 48 of the Income Tax Act and also claimed the cost cost of the deduction under Section 24(b) of the Income Tax Act. It is an allowable claim when a loan was used for construction of the property. In light of the relevant materials and records the bench partly allowed the appeal of the assessee.

Miss Indira Vasanji Shah vs DCIT CITATION: 2017 TAXSCAN (ITAT) 131

The Income Tax Appellate Tribunal (Mumbai) has held that, Income from Capital Asset is ‘Capital Gain and not business Income even if Assessee was regularly booking Flats and Selling the same. Any kind of Income from Capital Assets held by the Assess whether or not connected with his business or profession earned must be treated as capital gain.

While allowing the appeal the Tribunal bench comprising of Pawan Singh (Judicial Member) and P.K.Bansal (Vice President) also observed that, the capital derived by the assessee is long term capital gain as the assessee held the right on the asset for more than 36 months. Therefore the order of the CIT(A) and direct the AO to treat the said profit as long term capital gains as returned by the assessee

COMMISSIONER OF INCOME TAX vs VASAVI PRATAP CHAND CITATION: 2017 TAXSCAN (HC) 111

In a significant ruling, a division bench of the Delhi High Court upheld the order of the ITAT that the value of land as declared and assessed under Section 7(4) of the Wealth Tax Act could not be adopted as market value of the asset as on 1.4.1981 for purposes of computing taxable gain under the Income Tax Act.

Before the High Court, assessee argued that land transferred on the date of collaboration agreement is rejected because the sale consideration of 44% land was in kind amounted to investment in the construction of built up area. Hence, the same will be taken as cost of acquisition of flats after examining the record of the builder. Considering the facts and arguments, the bench ruled that the ITAT did commit an error by not reducing the land and development charges from the sale consideration received by the Assessee while working out the capital gains.

Kodanda Ramaiah Varadhi vs ITO CITATION: 2017 TAXSCAN (ITAT) 128

In cases where the stamp duty and registration cost is borne by the vendor, the consideration received by the vendor would be reduced. In such cases, the value as per the stamp valuation authorities has to be adopted for the purpose of computing the capital gain under the provisions of the Income Tax Act, the ITAT Visakhapatnam bench ruled on Friday.

The bench further upheld the view taken by the first appellate authority that the arrangement of incurring stamp duty and registration charges by the vendor effectively reduces the value of the consideration received by the vendor and also violates the mandate specified in the section 50C of the Act. “In such a case, while determining capital gains, the value as per the stamp valuation authorities has to be adopted for the purpose of computing the capital gains. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld.”

bunnisaDy.CIT vs M/s Amartara Pvt Ltd CITATION: 2017 TAXSCAN (ITAT) 132

In a significant ruling, the ITAT, Hyderabad bench held that for computing Long Term Capital Gain of an assessee who transferred his land under a Joint Development Agreement, the cost of construction of the flats by the builder as the sale consideration received by the assessee. The division bench also clarified that in such cases, the Assessing Officer cannot apply section 50C of the Income Tax Act, 1961 and cannot adopt SRO value for computation of capital gain.

The SRO value u/s 50C of the Act would come into play when the assessees sell their share of the flats and if the sale consideration received by them is less than the SRO value. Therefore, the AO is directed to take the cost of construction of the flats by the builder as the sale consideration received by the assessee for transfer of land to the development for computing the long term capital gain.”

Smt Ramita Mahendra Mehta vs Income Tax officer CITATION: 2017 TAXSCAN (ITAT) 133

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), recently held that it is the date of possession of a new house, and not that of the purchase/sale agreement, will be considered for calculating the eligibility period for claiming exemption on reinvestment of long term capital gain in residential property under section 54F of the Income Tax Act, 1961.

The division bench of the Tribunal, after recognizing the issues facing by the flat buyers in metropolitan cities due to project delays, observed that, “The buyers even after having the agreement for purchase of the new flat cannot exercise any right of ownership or their right cannot be traced to any part of the construction till such time the builder actually gives the possession of a particular flat to the buyer… Against this background of flat transactions, we are now faced with the provisions of Section 54 for granting exemption to the taxpayer, who at one point of time, enters into purchase and another point of time, takes possession and starts actual enjoyment of the flat.”

Income-tax Officer vs Shri. Ramakrishna M. J CITATION: 2017 TAXSCAN (ITAT) 134

In a significant ruling delivered on Friday, a division bench of the ITAT Bengaluru held that the benefit of section 54F of the Income Tax Act, 1961 can be extended to the cost incurred by the assessee on alteration / renovation on the purchased unit.

Our reading of the provision makes it abundantly clear that the purchase does not include a purchase which is not a purchase of an asset which is not incapable of being used by the assessee. The assets for the purpose of Section of 54F should be an asset purchased by the assessee and if an assessee incurs a cost for making it useful and convenient after taking approval from the competent authority, as in the present case, then the assessee is entitled to deduction u/s.54F of the Act.”

Anil Plantations Pvt. Ltd. vs Pr. C.I.T. CITATION: 2017 TAXSCAN (ITAT) 135

A division bench of the Kolkata ITAT, on Wednesday held that any income accrues on compulsory acquisition of agricultural land it is to be regarded as agricultural income and not chargeable to tax under the head ‘capital gain’ under the provisions of the Income Tax Act, 1961.

The bench noted that up to the date of acquisition of the land, it was used by the assessee for the purpose of agriculture. “It is also not disputed that the other condition regarding the property of the assessee that was acquired by the Government as agricultural land within the meaning of Sec.2 (14)(iii) of the Act is satisfied. As we have already noticed, the definition of a capital asset u/s 2(14) of the Act does not include agricultural land. Therefore if any income accrues on compulsory acquisition of agricultural land it is to be regarded as agricultural income and not chargeable to tax under the Act under the head ‘capital gain’.”

Shri Gyan Chand Agarwal vs Addl. Commissioner of Income-tax CITATION: 2017 TAXSCAN (ITAT) 136

In Shri Gyan Chand Agarwal v. ACIT, a division bench of the ITAT Jaipur held that addition of income against a power of attorney holder for the consideration received on the sale of land is not sustainable when the Department has no evidence to prove that this power of attorney was executed in lieu of a consideration.

The bench further relied on the decision of the Supreme Court in the case of Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra, wherein the Court has held that a power of attorney is not an instrument of transfer in regard to any right, title or interest in any immovable property. “The power of attorney is a creation of an agency whereby the grantor authorizes the grantee to do acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done and by him.” It said,

Sri Ajeet Kumar Jaiswal vs Income Tax Officer CITATION: 2017 TAXSCAN (ITAT) 137

The Income Tax Appellate Tribunal (ITAT), Hyderabad held that exemption under section 54(2) of the Income Tax Act, 1961 cannot be denied to the assessee for the mere reason that the assessee has invested the capital gain in a normal term deposit account instead of Capital Gain Scheme account.

Taking the above features into consideration and also that the assessee has not utilized the term deposit for any other purpose till investment in the residential flats, we agree with the contention of the assessee that the defect is only a technical defect which can be condoned provided he fulfills all the conditions of the capital gains a/c except for the nomenclature of the a/c. It is not the case of the Revenue that the assessee has violated any of the above conditions.”

COMMISSIONER OF INCOME TAX­ vs RAVISHANKAR R. SINGH CITATION: 2017 TAXSCAN (HC) 112

When a partnership Firm is converted into a Company, revaluation of the satellite rights by the partnership firm would not attract any capital gain, a division bench of the Bombay High Court said.

Upholding the findings of the Tribunal, the bench said that “There is neither dissolution of the firm nor distribution of assets of the firm amongst the partners. No transfer of assets has taken place. It is further observed that the partnership firm was converted into a private limited company and the satellite rights thereafter vest with the company. The revaluation of the assets by the partnership firm would not attract any capital gain. There was no transfer as defined under Section 47 of the Act.”

Income Tax Officer vs Shri R.J.V. Kaiwar CITATION: 2017 TAXSCAN (ITAT) 138

In ITO v. Raj Kaiwar, a division bench of the ITAT Chennai held that mere license to enter into the property for preparing a plan & to carry on necessary formalities for construction cannot be treated as transfer of Possession for the purpose of determining capital gain under the provisions of the Income Tax Act.

“The cost of 30% of undivided share of land would be deemed to be invested and deposited with the developer on transfer of 30% of undivided share of land to the developer, for the assessment year 2013-14. Since the cost of 30% share of undivided land was deemed to be invested with the developer for construction, this Tribunal is of the considered opinion that the assessee is eligible for exemption under Section 54 of the Act,” it said.

Smt Rama Vohra vs ITO CITATION: 2017 TAXSCAN (ITAT) 139

In Rama Vohra v. ITO, Delhi, a division bench of the ITAT Delhi held that the amount paid to the beneficiary of a property as per the original will under a compromise agreement can be deducted while computing long term capital gain even if the property was transferred to the assessee with a recital that the it is free from all encumbrances. The bench pointed out that in such a case, merely deciding the issue on the basis of recital in the sale deed that the property in question is free from all encumbrances is incorrect interpretation of legal proposition.

The bench said that “more so, there is no limitation to file a title suit on the basis of natural inheritance. So merely rejecting the claim of the assessee on the basis of recital in the sale deed dated 06.09.2000 that the property in question was free from all encumbrances, is not sustainable in the eyes of law. This issue is required to be determined on the basis of outcome of litigation between Ajith Vohra, vendor of the sale deed dated 26.09.2006 executed in favor of assessee and his sister, Sheetal Giridhar, pending in the civil court.”

.B.A.Mohota Textiles Traders Pvt. Ltd vs Deputy Commissioner of Income-tax CITATION: 2017 TAXSCAN (HC) 113

In B.A.Mohota Textiles Traders Pvt. Ltd v. DCIT & Ors, the division bench of the Bombay High Court held that receipt from the transfer of Shares by Company in consequent to family arrangement by its shareholders would be exigible to capital gain tax under the provisions of the Income Tax Act.

Upholding the findings of the ITAT, the bench said that “lifting of corporate veil at the instance of the assessee would mean that it is denying its corporate existence. This, after taking advantage of the separate existence of a Company under the Act. Therefore, after having incorporated the Limited Company and given it separate existence from its shareholders, it is not open to the Company to urge “Please ignore my separate existence and look at the persons behind me. “ If that be so, the Appellant/Company must opt for voluntarily winding up and then the shares being allotted to the individual members on liquidation would be governed by the family arrangement/ settlement.

Smt. Maniza Jumabhoy vs Asst. Commissioner of Income-tax CITATION: 2017 TAXSCAN (ITAT) 140

In Maniza Jumabhoi v. ACIT, the ITAT, Hyderabad held that the payments in the nature of Compensation made by assessee for release of lease hold rights created by ancestors is allowable as expenditure while determining capital gains under section 48 of the Income Tax Act.

Allowing the claim of the assessee, the bench relied on the decision of the co-ordinate bench in Farida Alladin Vs. ACIT, wherein the tribunal allowed a similar claim in respect of payment made to M/s. Voltas Limited for release of lease hold rights created by her ancestors/predecessors.

Citicorp Investment Bank vs DCIT CITATION: 2017 TAXSCAN (ITAT) 141

The ITAT Mumbai in Citicorp Investment Bank (Singapore) Ltd v. DCIT, held that the sale consideration received by a Singapore based Company on sale of debt instrument is not taxable as capital gain under the Income Tax Act in view of article 13(4) of the India-Singapore Double Taxation Avoidance Agreement (DTAA).

“Article 13(4) of Treaty (supra) clearly says that gain derived by a resident of a contracting State (Singapore) from the alienation of any property other than those mentioned in paragraph 1 & 2 of this Article (13) shall be taxable in that State (Singapore). Article 24 of the Treaty provides the limitation of benefit provision used by such a country which imposes a tax of certain payer on remittance basis. The limitation provided under this Article operates in conjunction with the provisions of the Treaty which are related to ‘reduced rate of tax’ or ‘exempted’ not taxed in the country of source.”

ITO vs Akansha Ranju Pilani CITATION: 2017 TAXSCAN (ITAT) 123

In a significant ruling, the Mumbai bench of the Income Tax Appellate Tribunal recently held that if a cheque is encashed by the builder after the deadline for filing income-tax return, it will not debar the taxpayer from claiming I-T exemption under section 54 of the Income Tax Act, which is available on reinvestment of long term capital gains in residential property.

Diving deeply into the facts of the case, the bench noted that the Assessing Officer had disallowed the claim on ground that the payment for purchase of new house property has not been made within one year from the date of transfer of original asset. Deleting the order, the bench noted that the provisions of section 54(1) allow purchase of a new house within two years from the date of transfer of assets.

Smt. Uppada Sarvani vs Income Tax Officer CITATION: 2017 TAXSCAN (ITAT) 122

Recently, in Uppada Sarvani v. ITO, the Hyderabad High Court held that Capital Gain Tax cannot be levied when assessee denies ownership and sale. While deleting Assessment and penalty proceedings initiated against the assessee under the Income Tax Act, the Court permitted the department to investigate the impugned transaction by proceeding against all the persons through whom title to the property has passed on.

Allowing the petition, the bench noted that “Assuming that the petitioner has played fraud upon the Income Tax Department after having sold the property, the best way of exposing such a fraud would be to bring the property disowned by her to sale. It is true that the property has now passed on to several hands. But once notices are issued to all the purchasers including the one under the disputed document, the truth will come out. Till then, it is not possible to tax the petitioner. Therefore the writ petitions are allowed and the impugned orders are set aside. It is open to the department to initiate proceedings against the property after serving notices on all the persons through whom title to the property has passed on.”

Income-tax Officer vs Mr. Nishant Lalit JadhavCITATION: 2017 TAXSCAN (ITAT) 121

In ITO v. Nishant Lalit Jadhav, the Mumbai Income Tax Appellate Tribunal (ITAT) held that the provisions of Section 54/54F of Income Tax Act prior to its amendment in 2014, w.e.f. 01/04/015, does not mandate that investment in the new residential house should be situated in India. Consequently, the Tribunal allowed the benefit of the said section to the assessee in respect of purchase of residential property in the USA.

The division bench placed reliance on the Gujarat High Court decision in the case of Smt.Leena J. Shah wherein it was held the requirement of sections 54F & 54F of the Act is pari-materia, inter-alia, requiring the assessee to make investment in a new residential house in order to avail the exemption on the capital gains earned. “As per the Hon’ble High Court, prior to the amendment the only stipulation was to invest in a new residential property and that there was no scope for importing the requirement of making such investment in a residential property located in India.”

Gayatri Maheswari v. ITO CITATION: 2017 TAXSCAN (ITAT) 119

In Gayatri Maheswari v. ITO, the division bench of the ITAT held that the interest paid to the bank for acquiring capital assets would be eligible as part of the cost of acquisition and therefore, is deductible while computing capital gains under the provisions of the Income Tax Act.

Based on judicial pronouncements, the bench clarified that if the property is purchased from borrowed funds then consideration for the purchased amount, the interest on borrowed funds also has to be paid. “The amount of interest paid by the assessee constitutes the actual cost to the assessee for that property. To exclude the interest amount from the actual cost of the assets/property would lead to anomalous results. The interest amount should be definitely added to the actual cost of the property.”

Jithendra V Faria v. ITO CITATION: 2017 TAXSCAN (ITAT) 120

In Jithendra V Faria v. ITO, the Mumbai ITAT has held that AO cannot deny exemption under Section 54F of the Income Tax Act to the assessee when the entire cost of new property was borne by him though the property is in the joint name with his brother.

The Single Member found that the wife has already offered her share of capital gains in her return of income filed with the Department and therefore, the view of the Assessing Officer that the entire sale consideration is taxable in the hands of the assessee is not sustainable.

“Under these facts and circumstances, there is no justification for giving 50% benefit of investment in the new house. The issue is also covered by the decision of Delhi High Court in the case of CIT v Ravinder Kumar Arora (2012) 342 ITR 38 (Del) wherein High Court held that the assessee was entitled to full exemption u/s. 54F when the full amount was invested by the assessee even though the property was purchased in the joint names of the assessee and his wife. It may be appreciated that even in the case before the hon’ble Delhi High Court, the AO had allowed exemption only to the extent of 50%.”

Satnam Overseas Exports v. DCIT CITATION: 2017 TAXSCAN (ITAT) 124

In Satnam Overseas Exports v. DCIT, the Delhi bench of the ITAT has held that the right to receive a property is a valuable and a transferable right which falls within the ambit of “capital asset” under the provisions of the Income Tax Act. While holding so, the bench clarified that the sale consideration on the transfer of such allotment right (without physical possession of the property) is taxable as Capital Gains and not as “Income from other sources”.

Allowing the appeal, the bench said, “in view of the facts in the present case and the decision relied upon by the learned counsel for the assessee more than 90% of the payments made for the said property will tantamount to a right which is transferrable and will be termed as a capital asset. The total payment having been made for Rs.89,50,0001- whereas on transfer the assessee received Rs. 1,19,32,0001- fetching about 30 lakhs profit which has been offered under the head “capital gains”.”

DCIT vs Dinesh Sharma CITATION: 2017 TAXSCAN (ITAT) 127

In DCIT v. Dinesh Sharma, indexation should be given from the year when the property was acquired by the previous owner for the purpose of computing long Term Capital Gain under the provisions of the Income Tax Act.

The Assessing Officer held that the benefit of indexation, for the purpose of computation of long term capital gain, is allowable to the assessee from the F.Y. 1987-88. The assessee claimed that the indexation is allowable from 1981-82, the year in which the previous owner has acquired the property.

Dismissing the departmental appeal, the bench held that “the order of Ld.CIT(A) on this issue is a well-reasoned order and in accordance with law in the facts and circumstances of this case. Ld. DR has failed to make out a case for any interference with the order of Ld.CIT(A) on this issue. The order of the Ld.CIT(A) is also based on precedent of Hon’ble Delhi High Court in the case of Arun Shungloo Trust (supra). In view of the foregoing, we decline to interfere with the order of the Ld.CIT(A)”

Anita D Kanjani vs ACIT 23(1), Mumbai CITATION: 2017 TAXSCAN (ITAT) 126

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) held that, holding period of property shall be computed from date of allotment letter and not from the date when the sale agreement was registered.

The Tribunal bench observed that, “On perusal of definition of section 2(42A) of the Income Tax Act, 1961 (“The Act”), the expression used is “held” and not"owned ". Thus, for determining capital gain the Legislature is concerned with the holding period on a de facto basis and not absolute legal ownership. The court in the case of CIT vs Suresh Rao has briefly defined the expression held where a similar issue was encountered. Also judgements of various high courts state that the holding period should be computed from the date of allotment letter”.

BALAKRISHNAN vs UNION OF INDIA & ORS CITATION: 2023 TAXSCAN (SC) 102

Recently, in Balakrishnan v. Union of India, the two-judge bench of the Supreme Court categorically held that negotiation on amount compensation between the parties for compulsory land acquisition do not make a sale ‘voluntary’, and therefore, the same cannot be made chargeable to tax under the head ‘Capital gain’. The bench comprising Justice A.K. Sikri and Justice R.K Agarwal, overruled the decision in Info Park Kerala vs. Assistant Commissioner of Income Tax, and clarified that merely because the compensation amount is agreed upon would not change the character of acquisition from that of compulsory acquisition to the voluntary sale.

The bench noted that, in the present case,the compensation as fixed by the Land Acquisition Collector was not acceptable to the appellant. It was further noted that the LA Act provides for making a reference under Section 18 of the Act to the District Judge for determining the compensation and to decide as to whether the compensation fixed by the Land Acquisition Collector was proper or not. In the opinion of the bench, the appellant had objection only with regard to the quantum of objection, which he had an option to approach the Court under s. 18 of the Land Acquisition Act to determine the market value.Instead, the appellant negotiated with Techno Park and arrived at an amicable settlement by agreeing to receive the compensation in the sum of Rs. 38,42,489/-. For this purpose, after entering into the agreement, the appellant agreed to execute the sale deed as well which was a necessary consequence and a step which the appellant had to take.

Asst. Commissioner of Income- tax vs Sri B. Surendra Choudary CITATION: 2017 TAXSCAN (ITAT) 125

In ACIT v. B. Surendra Choudary, the division bench of the ITAT, Hyderabad bench held that the new property registered in the name of assessee’s wife is eligible to get deduction under section 54F of the Income Tax Act even if the wife is having independent income.

In the opinion of the bench, the term ‘assessee’ was already defined by various courts to include wife and other dependent family members. “Whether to exclude those members who are also having independent income is, in our view, misplaced. What is relevant is whether the net consideration derived from the property is invested in the new asset. In the given case, the assessee has invested whole of the net consideration in the new asset, hence, the assessee is allowed to get the benefit u/s 54F. Here the benefit is extended to the assessee not to the wife of the assessee. It is absolutely irrelevant to qualify the status of the wife of the assessee to extend the benefit u/s 54F. As discussed, the net consideration from the original asset invested in the new asset is relevant, whether in his own name or in the name of his family member will qualify for the deduction u/s 54F.”

ACIT 17(3) Vs. Shri Jawaharlal L. Agicha 2016 TAXSCAN (ITAT) 110

In a recent ruling, the ITAT Mumbai bench held that the handing over of possession of the land to a developer for the limited purpose of developing the land will not give rise to capital gains tax under the provisions of Income Tax Act, 1961. While upholding the order of the first appellate authority, the Tribunal further observed that the transfer of land on the basis of an unregistered agreement cannot constitute “transfer” under section 2(47)(v) of the Income Tax Act.

“When the possession is given along with other legal rights to the developer resulting into entitlement of the developer for full use and enjoyment of the property as well as its further sale after converting it into developed units at its full, own and sole discretion, then it may result into ‘transfer’ provided other conditions also suggest so. Thus, handing over of the possession has to be necessarily coupled with the intention of transferring the rights of ownership and enjoyment of the property to the developer. Handing over of the possession for the limited purpose of developing the land while still retaining the ownership and control of various legal rights upon the property by the landowner would not fall in clause (v) of section 2(47).”

Shri Shaileshkumar P. Lukhi vs ITO CITATION: 2016 TAXSCAN (ITAT) 109

The Ahmedabad bench of the Income Tax Appellate Tribunal, in a recent decision, held that determining capital gain by applying section 50C of the Income Tax Act, 1961 cannot be treated as a conclusive proof that sale deed is incorrect or wrong. While observing so, the Tribunal invalidated the penalty order passed under section 271(1)(c) of the Income Tax Act.

The Tribunal found that the Officer has never questioned the actual sale consideration received by the assessee. Further, the Revenue has no case that the assessee has underestimated the sale consideration while filing the return. The Tribunal noted that “The Assessing Officer had not questioned the actual sale consideration received by the assessee but the addition was purely made on deeming fiction and he has also not given the finding that actual sale consideration is more than the sale consideration admitted and mentioned in sale deed. Application of Section 50C of the Income Tax Act is not a conclusive proof that sale deed is incorrect or wrong and addition because of deeming fiction would not ipso facto attract penalty us/ 271(1)(c).

Shri.G.Chinnadurai Vs The Income Tax Officer CITATION: 2016 TAXSCAN (HC) 102

The single bench of the Madras High Court, recently held that the benefit of exemption from Long term Capital Gain Tax under section 54F of the Income Tax Act, 1961 can be claimed by an assessee for investing in multiple flats.

In the instant case, there is no doubt raised by the respondent with regard to the petitioner’s eligibility to claim exemption under Section 54F, but the dispute is as to whether the petitioner is entitled to claim such exemption for all the five flats or for only one flat. In view of the above findings, the Court held that the petitioner is entitled to the benefit of exemption under Section 54F as claimed by him and the reasons for reopening the assessment for the relevant AY is unsustainable.

Gouri Shankar Paul vs. I.T.OCITATION: 2016 TAXSCAN (ITAT) 108

The Kolkata bench of the Income Tax Appellate Tribunal recently ruled that the capital gain cannot be determined solely on the basis of the stamp duty against the actual amount received shown by the assessee in his return.

it was held that “Valuation by departmental valuation officer, contemplated u/s. 50C, was required to avoid miscarriage of justice. Legislature did not intend that capital gain should be fixed merely on the basis of valuation to be made by the District Sub Registrar for the purpose of stamp duty. Legislature had taken care to provide adequate machinery to give fair treatment to citizens/taxpayers. No inference could be made as against the Assessee that he had accepted that the price fixed by the District Sub Registrar was the fair market value of the property. Option ought to be given to the Assessee to have valuation made by the departmental valuation officer contemplated u/s. 50C.

Income Tax Officer-11(3)(4) Vs. Dr. Vandana Bhulchandani CITATION: 2016 TAXSCAN (ITAT) 10

In a recent ruling, the Mumbai bench of the Income Tax Appellate Tribunal observed that the spouse, who has not invested in the property, will not have the liability to pay income tax for the capital gains though she is a co-owner of the said property.

The Tribunal observed that “In this factual matrix of the case, we concur with the finding rendered by the learned CIT(A) that the entire STCG arising on sale of the said property is to be assessed in the hands of Sri Arjun Bulchandani, the assessee’s husband and not in the assessee’s hands and consequently uphold his direction to the AO to delete the addition of `45,38,254/- on account of 50% STCG arising on sale of the said property. Revenue’s grounds at Sr. No. 1 to 3 are accordingly dismissed.”

Smt. Sita Bai Khetan, Vs. The Income Tax Officer CITATION: 2016 TAXSCAN (ITAT) 106

The Jaipur bench of Income Tax Appellate Tribunal, has recently ruled that while computing capital gains, the AO shall adopt the value Declared By the Assessee, if the difference between the valuation adopted by the SVA and declared by the assessee is less than 10%. The Tribunal was considering an appeal filed by the assessee against the assessment order passed by it by the Income Tax Authorities.

The Tribunal noticed the decision of the Coordinate Bench in the case of Rahul construction vs. DCIT in ITA No. 1543/PN/2007 (2010) 38 DTR (Pune Trib.) in which the Tribunal followed the above dictum of the Supreme Court. On this basis the Tribunal directed the AO to adopt the value as declared by the assessee since the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee, in the instant case is less than 10%.

Ramesh Builders (India), v. Income Tax Officer CITATION: 2016 TAXSCAN (ITAT) 105

The Income Tax Appellate Tribunal of Mumbai bench, in a recent decision, held that u/s 45(4) of the Income Tax Act, 1961, the capital gain arising out of distribution of capital asset on the dissolution of a firm shall be chargeable to tax as income of the firm. The ITAT further observed that for the purpose of section 48 of the Act, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.

It was observed the ITAT that section 45(4) of the Act profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of person or body of individuals(not being a company or a co-operative society) or otherwise , shall be chargeable to tax as the income of the firm, association or body , of the previous year in which the said transfer takes place and for the purpose of section 48 of the Act, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.

Income Tax Officer 24(1)(5) Vs. M/s Engineering Equipment CITATION: 2016 TAXSCAN (ITAT) 104

The Mumbai Bench of the Income Tax Appellate Tribunal has recently observed that it is immaterial whether the corresponding gain is a short term capital gain by virtue of deeming fiction under section 50 of the Act.The Tribunal was confirming the order of the CIT(A) in which the assessee’s claim towards deduction in respect of transfer of a long term capital asset was allowed.

the Tribunal found that the ld. CIT(A) further observed that the direction u/s 54EC is allowed on the gain should result from transfer of Long Term capital asset and it is immaterial whether the corresponding gain is a short term capital gain by virtue of deeming fiction under section 50 of the Act. As per the provisions of section 50 of the Act only gains resulted from sale of assets on which the depreciation is claimed, is deemed to be short term capital gains and the said provision does not stipulate that the asset on the sale of which, the said gains arise will be considered as a “short term capital assets” regardless of the period of its holding by the assessee.

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