2014 (6) TMI 811 - AT - Income Tax

Claim of exemption u/s 54 Nature of Property sold is housing property or agricultural land - Held that - The reasons for not treating the property as residential is, the built up area viz-a-viz total land and description of land given in purchase deed - The property is situated within the municipal limits of Sholinganallur, door number has been allotted to the property by Municipal Authorities - once a door number is allotted to the premises, this itself makes it clear that it is not an agricultural property - the property (Long Term Capital Asset) transferred by the assessee is a residential building with land appurtenant there to - The assessee has satisfied all the conditions laid down in section 54 - the assessee is eligible for claiming exemption u/s 54 of the Act Decided in favour of Assessee.

Issues Involved:
1. Assessment of Long Term Capital Gain on sale of property.
2. Eligibility for exemption u/s.54 of the Income Tax Act.
3. Dispute over the nature of property sold - residential or agricultural land.

Analysis:

Issue 1: Assessment of Long Term Capital Gain on sale of property
The appeal was filed against the Commissioner of Income Tax(Appeals)'s order relevant to the Assessment Year 2009-10. The assessee initially declared income of Rs. 4,71,310, later revised to Rs. 12,59,760. The Assessing Officer observed Long Term Capital Gain on the sale of land and building at Sholinganallur and a flat. The assessee claimed exemption u/s.54 of the Act, but the Assessing Officer concluded that the property sold at Sholinganallur was agricultural land, hence not eligible for exemption.

Issue 2: Eligibility for exemption u/s.54 of the Income Tax Act
The CIT(Appeals) confirmed the Assessing Officer's findings, stating the built-up area at Sholinganallur was only 600 sq. ft., resembling a storage place in agricultural land. The assessee contended that the property was residential, supported by documents like sale deed and attorney details. The assessee invested the sale proceeds in constructing a residential flat within three years, meeting the conditions of section 54. The Tribunal held that the property was a residential building with land, allowing the exemption u/s.54 and setting aside the impugned order.

Issue 3: Dispute over the nature of property sold
The property in question was purchased as land and later a residential accommodation was constructed on it. The property was sold to a buyer, and possession was handed over. The Revenue disputed the property's nature, claiming it was agricultural land, while the assessee argued it was residential. The Tribunal analyzed the property's location, presence of a door number, and the investment in a residential flat within the stipulated time, concluding that the property was residential, making the assessee eligible for exemption u/s.54.

The Tribunal considered the documents submitted by the assessee, including the sale deed, GPA, and purchase deed, to support the claim for exemption. The Tribunal noted that the property was situated within municipal limits and had a door number, indicating it was not agricultural land. The Tribunal emphasized that the term "residential house" in section 54 did not specify a minimum covered area, and the assessee met all conditions for claiming exemption.

In conclusion, the Tribunal allowed the appeal, setting aside the CIT(Appeals)'s order and granting the assessee exemption u/s.54 of the Income Tax Act.

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