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2022 (12) TMI 573 - AT - Income TaxCapital gain - Addition made with regard to sale of Madambakkam Land - Year of assessment - period of holding of asset - considering date of allotment or date of final sale deed executed for conveying the title - HELD THAT - If you take sequence of events, it is undoubtedly clear that the assessee has acquired right over the above property in the year 1984 and is enjoying the title and interest. However, legal ownership has been finally came to the assessee through sale deed dated 06.01.2012. If you consider the date of allotment and subsequent documents, it can be clearly held that the assessee has acquired the property in the year 1984 and thus, if you consider said date, the period of holding of asset is more than 36 months and thus, profit from sale of asset is assessable under the head long term capital gains as claimed by the assessee. Therefore, we direct the AO to assess profit from sale of land under the head long term capital gains as claimed by the assessee, because various courts including case of CIT vs Ravindar Kumar Arora 2011 (9) TMI 343 - DELHI HIGH COURT held that for the purpose of computing period of holding, date of allotment should be considered, but not the final sale deed executed for conveying the title and interest in the property. Hence, we direct the AO to compute long term capital gains as claimed by the assessee. Deduction claimed u/s. 54F - We find that the assessee has spent about Rs. 88,75,400/- towards construction of another residential house which includes purchase of land, payment for labour charges and payment to M/s. Raj Constructions for material supply. However, the contractors M/s. Chintu Constructions and M/s. Raj Constructions could not complete construction for various reasons. In the mean time, the assessee went out of India for official work and could not oversee construction work and only after she came back settled dispute with contractors and ultimately completed construction in the year 2009 and obtained necessary electricity connection to prove that the house property has been successfully completed. No doubt, the assessee could not complete construction of house within three years from the date of transfer of original asset. However, for any reason which is beyond control of the assessee, construction could not be completed and also assessee has spent entire amount of consideration received for transfer of original asset for acquiring new asset, then there is no reason for the AO to deny deduction u/s. 54F. Provisions of section 54F should be construed liberally as per various High Court decisions including case of CIT vs Sardarmal Kothari 2008 (6) TMI 15 - MADRAS HIGH COURT and also Ravindar Kumar Arora 2011 (9) TMI 343 - DELHI HIGH COURT . Thus we are of the considered view that, the AO has erred in denying deduction u/s. 54F of the Act and thus, we direct the AO to allow deduction as claimed by the assessee. Appeal filed by the assessee is allowed.
Issues Involved:
1. Nature of the land sold on 12.04.2012 (Short Term or Long Term Capital Asset). 2. Entitlement for deduction under Section 54F of the Income-tax Act, 1961. 3. Taxability of the sale of land situated at Nayapakkam Village. Issue-wise Detailed Analysis: Issue No. 1: Nature of Land Sold on 12.04.2012 (Short Term or Long Term Capital Asset) The assessee sold a vacant land at Madambakkam for Rs. 86,40,000/- on 12.04.2012, which was purchased on 06.01.2012. The AO treated the land as a Short Term Capital Asset since the holding period was less than 36 months. The assessee argued that the land was allotted in 1984, making it a Long Term Capital Asset. However, the CIT(A) observed that the land came into the assessee's possession only on 06.01.2012, with no evidence of the 1984 allotment in the registered sale deed. The agreement dated 05.09.2007 was unsigned and unregistered, and no cogent evidence was provided to prove the 1984 purchase. Thus, the CIT(A) upheld the AO's decision, treating the land as a Short Term Capital Asset. Issue No. 2: Claim of Deduction Under Section 54F Since the land was deemed a Short Term Capital Asset, the CIT(A) ruled that the assessee was not entitled to deduction under Section 54F, which applies only to Long Term Capital Assets. The AO also denied the exemption because the assessee could not complete the construction of the new house within three years from the date of transfer of the original asset. Issue No. 3: Taxability of Sale of Land at Nayapakkam Village The AO taxed the sale of land at Nayapakkam Village in the hands of the assessee, amounting to Rs. 19,32,330/-. However, the CIT(A) found that the transaction was between the assessee's spouse and her son-in-law, with no role of the assessee. The recitals in the registered sale deed were final, and thus, the taxability of capital gains should be in the hands of the assessee's spouse, not the assessee. Therefore, the CIT(A) directed the AO to delete the addition. Tribunal's Decision: The Tribunal considered the documents provided by the assessee, including the allotment letter from 1984, PoA, sale agreement, and registered sale deed. It concluded that the assessee had acquired the property in 1984, making the holding period more than 36 months. Thus, the profit from the sale of the asset should be assessed as Long Term Capital Gains. The Tribunal directed the AO to compute the gains accordingly. Regarding the deduction under Section 54F, the Tribunal noted that the assessee had spent Rs. 88,75,400/- for constructing a new residential house, including payments to contractors. Despite the construction delay, the Tribunal held that the assessee was entitled to the deduction, as the entire sale consideration was invested in the new asset. The Tribunal directed the AO to allow the deduction as claimed by the assessee. Conclusion: The appeal filed by the assessee was allowed, with the Tribunal directing the AO to assess the profit from the sale of the land as Long Term Capital Gains and to allow the deduction under Section 54F.
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