Sole Beneficiary Status of Assessee Ignored: ITAT Upholds 54F/54EC Exemptions and Full LTCG [Read Order]
The AO’s disallowances, based on alleged non-submission of documentary evidence and partial treatment of capital gains, were found unsustainable. This decision reinforces the importance of recognising documentary evidence and the actual beneficial ownership in capital gains assessments
LTCG
LTCG
The Income Tax Appellate Tribunal (ITAT) Mumbai has dismissed both the revenue and assessee appeals, upholding the CIT(A)’s approval of exemptions claimed under Sections 54F and 54EC of the Income Tax Act, 1961. The tribunal confirmed that the assessee was the sole beneficial owner of the shares and had fully complied with statutory provisions for claiming exemptions.
These cross-appeals pertain to AY 2017-18 and challenge the order of the CIT(A) regarding the sale of 87 shares of Industrial Minerals & Chemicals Company Pvt. Ltd. (IMCCPL) by the assessee, Ms Nishita Vijay Mehta.
The assessee had declared long-term capital gains of Rs. 5.05 crore after indexing the cost of acquisition and claimed exemptions of Rs. 5.25 crore under Section 54F and Rs. 50 lakh under Section 54EC of the Income Tax Act.
The AO disallowed the exemptions and treated 50% of the sale proceeds as income from other sources, alleging that the investments were made beyond the due date and that documentary evidence was not furnished.
The assessee had received the shares from her father, Mr Vijay Tulsidas Mehta, via a gift deed dated January 6, 2017. Although the share certificate included her father’s name for convenience, documentary confirmations and a declaration established that Ms Mehta was the sole beneficial owner.
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The assessee deposited the proceeds in the Capital Gain Account Scheme (CGAS) and invested in Rural Electrification Bonds within the prescribed timelines. The unutilized amounts in the CGAS were subsequently offered in AY 2021-22, ensuring that no double taxation occurred.
At the first appellate stage, the CIT(A) carefully considered the documentary evidence, including gift deeds, share transfer forms, deposit receipts, and confirmations, and allowed the exemptions under Sections 54F and 54EC.
The CIT(A) also recognized the entire sale consideration as long-term capital gain, rejecting the AO’s view that 50% of the proceeds should be taxed under “income from other sources.” On the issue of indexation from 1981, the assessee chose not to press the claim.
After hearing arguments from both sides and reviewing the records, the tribunal found that the AO had ignored substantial documentary evidence and incorrectly questioned the assessee’s ownership of the shares.
The two-member bench comprising Amit Shukla (Judicial Member) and Padmavathy S (Accountant Member) observed that the assessee had fully complied with statutory requirements for claiming exemptions and that treating a portion of the gains as other income would have resulted in an incorrect tax computation.
Consequently, the Tribunal dismissed both the revenue and assessee appeals, upholding the CIT(A)’s order in its entirety.
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