2010 (4) TMI 1017 - AT - Income Tax

Summary

Issues involved: Determination of long term capital gains, denial of benefit of cost and indexation, initiation of penalty proceedings u/s 271(1)(c), additional ground of appeal challenging assessment of received amount as long term capital gain.

Determination of long term capital gains: The appellant challenged the correctness of the order passed by the Commissioner (Appeals) regarding the assessment of long term capital gains earned on the intended transfer of additional Transfer of Development Rights (TDR). The Assessing Officer treated the long term capital gain for the assessment year 2002-03, while the appellant argued that the transfer was completed in the previous year relevant to the assessment year 2003-04. The appellant's submissions were not accepted, leading to an appeal. The Tribunal found in favor of the appellant, citing a similar case where it was held that the receipts on the sale of assignment of rights to receive TDRs are not liable to tax. Consequently, the authorities erred in taxing the amount as income for the assessment year in question. The Assessing Officer was directed to delete the additions of Rs.12,62,619, providing relief to the appellant.

Denial of benefit of cost and indexation: The appellant contended that the Assessing Officer erred in determining long term capital gain by considering total receipts as capital, thereby denying the benefit of cost and indexation. However, the main issue focused on the taxability of the received amount as long term capital gain for a specific assessment year. The Tribunal's decision in favor of the appellant on the taxability issue rendered the denial of cost and indexation benefit irrelevant in this context.

Initiation of penalty proceedings u/s 271(1)(c): The Assessing Officer initiated penalty proceedings u/s 271(1)(c) without appreciating the detailed working provided by the appellant for the calculation of long term capital gain in a subsequent assessment year and the precautionary payment of tax. This issue was not the primary focus of the appeal, as the Tribunal's decision primarily addressed the taxability of the received amount as long term capital gain. Therefore, the penalty proceedings were not discussed in detail in the judgment.

Additional ground of appeal challenging assessment of received amount as long term capital gain: The appellant sought admission of an additional ground of appeal challenging the assessment of an amount received upon the sale of additional TDR as long term capital gain. The Tribunal admitted the additional ground of appeal, considering it a purely legal issue based on undisputed facts of the case. The Tribunal's decision on the primary issue of taxability of the received amount as long term capital gain encompassed the additional ground of appeal, leading to the allowance of the appeal in favor of the appellant.