The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held purchase of property within specified period of one year before sale of capital asset allowable as capital gain exemption under section 54F of the Income Tax Act 1961.
Assesee Akshay Janak Shah is an individual engaged in the business of trading in diamonds under the name and style of Universal Gems. The return filed by the assessee was selected for scrutiny. During the assessment proceedings, the Assessing Officer noted that the Appellant had sold his 50% share along with the other joint owner in the commercial property being office premises and the consideration amount was not mentioned in the return Income.
Assessee was asked to show cause why amount consideration of sale amount should not be added to the total income of the assessee under the head short-term capital gains
Assessee replied that at the same time the assessee purchased residential property. The purchase consideration for the residential house was more than the assessee‟s share in the sale consideration arising from sale of Capital Asset and therefore, the assessee had claimed exemption from long term capital gains under Section 54F of the Income Tax Act 1961.
After the document verification assessing officer computed the period of holding of Capital Asset as 33 months and concluded that short term capital gain accrued to the assessee.Against this order assessee filed an appeal before ITAT
Rajesh Shah Counsel for the assessee contended that Capital Asset was held by the Appellant for more than 36 months and therefore, the capital gains arising on transfer of such Capital Asset were in the nature of long-term capital gains
Moreover, the transfer of the Capital Asset took place during the previous year relevant to the Assessment Year 2013-14. The long terms capital gains arising transfer of capital was exempt under Section 54F of the Income Tax Act 1961 as the assessee had purchased a residential property within a period of one year before the sale of the Capital Asset
Tejinder Pal Singh Anand counsel for the revenue contented that the Capital Asset transferred by the Appellant was held by the assessee only for a period of 33 months and therefore was a short-term capital asset. Hence the exemption under Section 54F of the Income Tax Act 1961 was not available to assessee.
After considering the contentions of the both parties the division bench of ITAT comprising M. Balaganesh, (Accountant) and Rahul Chaudhary, (Judicial Member) allowed the appeal filed by the assessee
The bench further observed that “in terms of Section 2(47(v) of the Act, the transfer of Capital Asset took place on 30.09.2012, which fell within the previous year relevant to the Assessment Year 2013-14. The Appellant had purchased residential property on 17.08.2012 which fell within the specified period of one year before the sale of the Capital Asset. The Appellant was, therefore, entitled to claim exemption under Section 54F of the Income Tax Act 1961.”
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