2012 (7) TMI 917 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of short term capital gains.
2. Deletion of addition on account of Income from House Property.
3. Additional grounds regarding the sale of property and treatment of received amount as a gift.

Summary:

Issue 1: Deletion of Addition on Account of Short Term Capital Gains

The revenue challenged the deletion of Rs. 1,07,25,000/- added by the Assessing Officer (AO) as short term capital gains. The assessee received Rs. 1,05,00,000/- from her brother as per their father's will, which directed that 30% of the sale proceeds of a specific land be given to the assessee. The AO treated this as short term capital gains and denied exemption u/s 54EC. The CIT(A) held that the issue should be examined in A.Y. 2005-06 and deleted the addition. The Tribunal upheld the CIT(A)'s decision, stating that the right to receive money was not a capital asset and could not be transferred. The Tribunal found support from the Delhi High Court's decision in CIT Vs. J. Dalmia, concluding that the AO was not justified in making the addition as short term capital gains.

Issue 2: Deletion of Addition on Account of Income from House Property

The AO estimated the annual value of vacant properties u/s 23(1)(a) at Rs. 14,21,082/- against the declared notional income of Rs. 7,48,172/-. The CIT(A) granted relief based on a similar decision in A.Y. 2005-06. The Tribunal upheld the CIT(A)'s decision, emphasizing the rule of consistency and rejecting the revenue's ground.

Additional Grounds:

Ground (i): Sale of Property Relates Back to Date When Assessee's Father Was Alive

The revenue argued that the CIT(A) erred in holding that the sale of the property relates back to the date when the assessee's father was alive. The Tribunal found this observation irrelevant for deciding the validity of the addition of Rs. 1,07,25,000/- and set it aside.

Ground (ii): Treatment of Amount Received as a Gift

The revenue contended that the amount received by the assessee from her brother should not be treated as a gift u/s 56(2)(v). The Tribunal upheld the CIT(A)'s decision, noting that the amount was received as per the will and the brother qualifies as a "relative" under the Explanation below Section 56(2)(v). The Tribunal concluded that the assessee is entitled to the benefit u/s 56(2)(v).

Conclusion:

The Tribunal partly allowed the appeal, rejecting the revenue's grounds on short term capital gains and income from house property, while setting aside the CIT(A)'s observation on the sale date relating back to the father's lifetime. The order was pronounced on 19/07/2012.