2014 (6) TMI 699 - AT - Income Tax

Exemption u/s 54EA of the Act - income on account of surrender of tenancy rights Income from other sources or capital gains Held that - Following Bhogilal M. Mehta (HUF) C/o. Mehta Trading Corporation Versus The Income Tax Officer 2014 (6) TMI 575 - ITAT MUMBAI - merely because the correction is made in the agreement would not render entire agreement as non-genuine when all other place the name of the assessee is correctly appearing in the agreement even this is immaterial mistake which has been corrected in the name of the assessee - it does not affect the terms and conditions of the agreement - the rent receipts placed on record are duly signed and also appearing dates and month for which the rent was paid - The rent receipt coupled with the agreement in respect of the premises establish the fact that the assessee was having tenancy right in respect of the premises - tenancy right was surrendered by the assessee in lieu of alternative accommodation to be constructed by the developer under the redevelopment plan. The tenancy right has been recognized as the capital asset u/s 55(2) of the Income Tax Act - there is no doubt that the consideration to be received by the assessee against the surrender of tenancy rights is capital in nature and to be assessed as capital gain - the value of tenancy rights along with the construction cost was converted/substituted into the alternative accommodation to be provided by the builder in the year 2000 - the amount received against the transfer of tenancy is assessable as capital gain and not income from other sources - the amount received by the assessee is against the transfer of capital asset there was no justification in treating the same as income from other sources - assessee has produced sufficient material to establish the tenancy rights and surrender of tenancy rights and creating the right to have alternative accommodation - the assessee surrendered the right in alternative accommodation and received the amount in question which is capital gain in nature the amount has been invested in the prescribed units u/s 54EA thus, the assessee is entitled for deduction u/s 54EA against the receipt Decided in favour of Assessee.

Summary

Issues:
1. Addition of Rs.21,35,000 as income from other source against long term capital gain claimed by assessee.
2. Confirmation of chargeability of interest under sections 234B & 234C of the Income Tax Act, 1961.
3. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Issue 1: Addition of Income from Other Source:
The appeal contested the addition of Rs.21,35,000 as income from other sources instead of long term capital gain under section 54EA. The tribunal noted a common agreement of surrender of tenancy right involving the assessee and his brother. Referring to a similar case, the tribunal analyzed the transaction's genuineness and the surrender of tenancy rights. It was established that the consideration received against the surrender of tenancy rights was capital in nature and should be assessed as capital gain. The tribunal upheld the deduction under section 54EA, allowing the assessee's claim for exemption.

Issue 2: Chargeability of Interest:
The appeal challenged the confirmation of interest under sections 234B & 234C of the Income Tax Act, 1961. The tribunal considered the relevant material and found that the interest provisions were correctly invoked based on the facts of the case. The chargeability of interest was upheld in accordance with the provisions of the Income Tax Act, 1961.

Issue 3: Penalty under Section 271(1)(c):
The appeal disputed the confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961. The tribunal reviewed the case and observed that the penalty provision was correctly invoked by the assessing officer. Considering the circumstances and evidence presented, the tribunal affirmed the imposition of penalty under section 271(1)(c) as per the provisions of the Income Tax Act, 1961.

In conclusion, the appellate tribunal addressed the issues raised by the assessee comprehensively. It ruled in favor of the assessee regarding the addition of income from other sources, allowing the claim for exemption under section 54EA. However, the tribunal upheld the chargeability of interest under sections 234B & 234C and confirmed the penalty under section 271(1)(c) in line with the provisions of the Income Tax Act, 1961.