2015 (12) TMI 1681 - HC - Income Tax

Capital gain accrued on sale of land as LTCG - land sold on 7th April, 2007 and which was acquired by Assessee in terms of perpetual lease deed dated 9th May, 1973 and acquired on freehold only on 25th January, 2007 - Held that - Issue stands covered against the Revenue and in favour of the Assessee by the decision of CIT v. Frick India Ltd. 2014 (9) TMI 394 - DELHI HIGH COURT wherein held conversion of leasehold right into freehold by way of improving the title over the property would not affect the taxability of the gain from property, which is relatable to the period over which the property is held - Thus the asset, i.e. the tenancy rights were held for nearly 14 years and consideration received on surrender has been rightly treated as a long term capital gain Decided against revenue. Issue notice limited to question B, returnable on 22nd March, 2016 - Whether in the present facts and circumstances of the case the ITAT has erred in allowing indexation benefit on the borrowing cost when the leasehold right was cancelled on 29th March, 1998 and the same was restored back on 6th August, 2004?

Summary

Issues: Condonation of delay in re-filing the appeal; Treatment of capital gain as long term capital gain; Allowance of indexation benefit on borrowing cost.

Condonation of Delay: The High Court condoned the delay in re-filing the appeal based on reasons provided. The application for condonation of delay was disposed of accordingly.

Treatment of Capital Gain: The appeal raised the issue of whether the Income Tax Appellate Tribunal (ITAT) erred in treating the capital gain accrued on the sale of land as a long term capital gain. The land was sold on a specific date and acquired through a perpetual lease deed, later converted to freehold. The appellant argued that a previous decision favored the Assessee on a similar issue, thereby supporting their position.

Indexation Benefit on Borrowing Cost: Another question raised in the appeal was whether the ITAT erred in allowing indexation benefit on the borrowing cost. This issue pertained to the cancellation and subsequent restoration of the leasehold right. The High Court issued notice limited to this question, with a returnable date set for further consideration.

In conclusion, the judgment addressed the issues of condonation of delay, treatment of capital gain, and allowance of indexation benefit on borrowing cost. The decision provided insights into the legal interpretations and precedents relevant to the specific circumstances of the case, ensuring a comprehensive analysis of the appeal's key aspects.