2017 (2) TMI 1321 - AT - Income Tax

Deduction u/s 54 - Held that - CIT(A) observed that the deduction u/s 54 is available only to an individual or a Hindu Undivided Family and the assessee-trust is neither an individual nor a Hindu Undivided Family; whereas the assessee-trust is being assessee in the status of AOP . Thus, he rightly held that the assessee is not entitled to the deduction u/s 54. CIT(A) held that the Long Term Capital Gain arised from the transfer of a capital asset should be a building or land appurtenant thereto and must be used as a residential house. CIT(A) observed that the assessee had sold its Farm House which was never been used as a residential house. No evidence was furnished in this regard either before the lower authorities or before us for the contention that the Farm House was used as a residential house. The assessee could not establish as to whether any income was earned from the aforesaid farm house which was being assessed as income from house property .- Decided against assessee. Disallowance for set off of brought forward capital loss - Held that - CIT(A) held that no capital loss was declared in the return filed by the assessee for the AY 2006-07, which could have disclosed the Long Term Capital Loss in the column meant for income from capital gains. CIT(A) also observed that the assessment for the AY 2006-07 was completed u/s 143(3) and the said assessment order, there was no mention about the loss incurred on account of sale of shares and he accordingly concluded that the assessee had not disclosed the Long Term Capital Loss in the return filed for AY 2006-07 and also not raised the issue of not determining the loss to be carried forward in the order passed u/s 143(3) of the Act before the Assessing Officer and therefore, the set off of carried forward Long Term Capital Loss was not allowable to the assessee. - Decided against assessee.

Summary

Issues:
1. Disallowance of exemption claimed under section 54 of the Income Tax Act.
2. Disallowance of set off of brought forward capital loss.

Issue 1: Disallowance of exemption claimed under section 54 of the Income Tax Act:
The appeal was filed against the Commissioner of Income-Tax (Appeals) order for Assessment Year 2008-09. The assessee contended that the Assessing Officer's order under section 143(3) of the IT Act was illegal and deserved amendment. The main issue was the disallowance of exemption amounting to ?36,85,222 claimed under section 54 of the IT Act. The CIT(A) confirmed the disallowance, stating that the deduction under section 54 is only available to individuals or Hindu Undivided Families, whereas the assessee-trust was classified as an 'AOP'. The CIT(A) also noted that the capital gain arose from the sale of a property that was not used as a residential house, as required by the Act. The Tribunal upheld the CIT(A)'s decision, dismissing the appeal on this ground.

Issue 2: Disallowance of set off of brought forward capital loss:
The second issue pertained to the disallowance of ?55,91,510 for the set off of brought forward capital loss. The CIT(A) found that no capital loss was declared in the return for AY 2006-07, which should have disclosed the Long Term Capital Loss. The CIT(A) also observed that the assessment for AY 2006-07 did not mention the loss incurred on the sale of shares. Consequently, the CIT(A) concluded that the assessee had not disclosed the Long Term Capital Loss for AY 2006-07 and had not raised the issue before the Assessing Officer. As a result, the set off of carried forward Long Term Capital Loss was deemed not allowable. The Tribunal upheld the CIT(A)'s decision on this issue as well, dismissing the appeal.

In summary, the Tribunal dismissed the appeal filed by the assessee against the CIT(A)'s order for Assessment Year 2008-09. The disallowance of the exemption claimed under section 54 of the IT Act and the disallowance of set off of brought forward capital loss were the main issues addressed in the judgment. The Tribunal upheld the CIT(A)'s decisions on both issues, finding no infirmity in the orders.