2015 (10) TMI 534 - AT - Income Tax

Revision u/s 263 - CIT held that the consideration received under a separate agreement towards sale of fixtures and fittings does not qualify for deduction u/s 54 as according to him the fittings and furnitures are not capital asset u/s 2(14) of the I. T. Act, thus AO has failed to assess the sum under the head income from other sources and therefore, held that the assessment order passed is both erroneous and prejudicial to the interests of the revenue - Held that - As the list of the fittings and fixtures are not part of the record, we are unable to examine the nature of the asset and also as to whether they form part of the flat. The assets in question are fittings and fixtures in the flat. Even if they are not accepted to be part of the flat, whether the income from sale of such assets is taxable in the hands of the assessee as income from other sources ?. The furniture and fittings are in the nature of personal effects of the assessee held for her personal use and income from such affects is not chargeable to tax. Whether the amount is considered as sale consideration and allowed deduction u/s 54F or excluded from computation and disallowed the deductions, there is no tax effect. Therefore, by not bringing it to tax, there is no prejudice caused to the Revenue. The additional grounds of appeal are accordingly allowed. Since the assessment order is held to be not prejudicial to the interests of Revenue, the revision order u/s 263 is not sustainable and is accordingly quashed. - Decided in favour of assessee.

Summary

Issues:
Assessment order under Section 263 of the Income Tax Act, 1961 regarding the tax treatment of sale proceeds from fixtures and fittings in a property.

Analysis:
The case involved an appeal by the assessee against the order of the ld CIT-II, Hyderabad under Section 263 of the Act for the assessment year 2009-10. The dispute arose from the sale of a flat along with fixtures and fittings, where the CIT contended that the consideration from the sale of fixtures and fittings did not qualify for deduction under Section 54 of the Act. The assessee argued that the fittings and fixtures were integral to the flat and part of the capital asset, thus eligible for exemption under Section 54 or 54F. The CIT directed the AO to tax the sum received from the fixtures and fittings as income from other sources. The assessee challenged this order on various grounds, including the nature of the assets sold and the eligibility for deductions under the Act.

The assessee contended that the sale proceeds of fixtures and fittings should be treated as a capital asset, resulting in capital gains. Additionally, an application was made to treat the fittings and fixtures as personal assets if not considered capital assets, thereby exempting them from taxation under the head "Income from Other Sources." The Tribunal admitted the additional ground of appeal, citing legal precedents and the absence of disputed facts. It was argued that even if the fittings and fixtures were not part of the flat, they should be considered personal assets, as held in previous judgments. The Tribunal relied on case law to support the assessee's position that income from the sale of personal assets is not taxable.

The Tribunal found that the nature of the assets in question, being fittings and fixtures in the flat, was not clearly established in the record. Whether these assets were part of the flat or personal effects held for personal use was crucial in determining the tax treatment. Ultimately, the Tribunal concluded that regardless of whether the amount from the sale of fixtures and fittings was considered for deductions under Section 54F or excluded from computation, there was no tax effect. As there was no prejudice to the revenue by not taxing the amount, the revision order under Section 263 was deemed unsustainable and quashed. Consequently, the assessee's appeal was allowed, and the assessment order was held not to be prejudicial to the interests of revenue.