2015 (10) TMI 1714 - AT - Income Tax

Exemption claimed u/s 54 or alternative claim u/s 54F - whether the property sold is a vacant land or residential house property? - whether the property takes the character of land or house property? - CIT(A) allowed the claim - Held that - The property was sold on 03.07.2009. Even though it is vacant land, without prejudice to the rights of the assessee, assessee is eligible for exemption under Section 54F of the Act. Before the due date under Section 139(1) of the Act, the assessee has deposited long term capital gains in Capital Gains Account Scheme and complied with the pre-conditions and also took the possession of the property on 30.05.2012 and there is no dispute of possession by the A.O. in the assessment order. Further, the Ld. D.R. relied on the judgment of Andhra Pradesh High Court in CIT v. Smt. Zaibunisa Begum (1984 (7) TMI 62 - ANDHRA PRADESH High Court) where Lordships have considered the issue in respect of transfer of building and land appurtenant, and the issue is on different facts where the construction was in a smaller area compared to the open land left on which the building is constructed. The same cannot be applied to the present case, as the assessee in toto has sold the land along with building. - Decided in favour of assessee.

Summary

Issues:
- Exemption under Section 54 or alternative claim under Section 54F of the Income Tax Act.
- Characterization of property sold as vacant land or residential house property.

Analysis:
1. The case involved an appeal by the Revenue against the orders of the Commissioner of Income Tax (Appeals) regarding the denial of exemption claimed under Section 54 or Section 54F of the Income Tax Act for the assessment year 2010-11.
2. The Revenue contended that the property sold was only vacant land and hence did not qualify for exemption under Section 54 of the Act. The Assessing Officer brought to tax the long term capital gains, leading to a demand of Rs. 24,56,150.
3. The assessee, on the other hand, argued that the property sold was a long term asset subject to rental income and assessed under the head "income from house property." The assessee complied with the conditions of the Capital Gains Scheme by investing in a new residential property within the stipulated time frame.
4. The CIT(A) directed the Assessing Officer to allow the exemption under Section 54 or the alternative claim under Section 54F after considering the evidence provided by the assessee regarding the purchase and construction of the new residential property.
5. The dispute centered on whether the property sold was a vacant land or a residential house property. The CIT(A) considered the evidence presented by the assessee, including rental income details and proof of investment in a new residential property, to support the claim for exemption.
6. The Tribunal noted that the provisions of Section 54 and Section 54F are to be construed liberally for the construction of residential house properties within the specified time frame. The Tribunal upheld the CIT(A)'s order, dismissing the grounds raised by the Revenue and affirming the exemption allowed to the assessee under the Act.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the arguments presented by both parties, leading to the final decision of the Tribunal in favor of the assessee.