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2022 (12) TMI 573 - AT - Income Tax


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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