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2014 (9) TMI 1157 - AT - Income TaxExemption u/s 54 / 54EC - Long Term Capital Gains (LTCG) - The assessee has claimed exemption u/s 54EC by investing a sum in REC Bonds. He has further claimed exemption of a sum as invested in residential property and therefore, claimed exemption u/s 54 of the Income Tax Act - As per the AO, the window period for investment of capital gain, if any, accrued to an assessee on transfer of a property is of three years i.e. one year before the transfer of the property or two years after the transfer. Since the assessee had agreed to purchase the flat on 25.11.2006, which is much prior to the sale of the property i.e. 1.9.2008, therefore, it cannot be said that the flat was purchased just before one year of the sale of the property. Held that - CIT (A) has erred in restricting the benefit u/s 54 to the extent the payments made within a period of one year for purchase of the new asset. The purchase of the new asset is to be considered either as May, 2008 or 15.10.2009 on that date total investment in the new asset is to be taken into consideration. The assessee has computed the capital gain on this basis and therefore, he is entitled for the exemption to the extent of the investment made in the purchase of new asset. - Decided in favor of assessee.
Issues involved:
- Denial of exemption u/s 54 of the Income Tax Act in respect of Long Term Capital Gain. - Interpretation of section 54 regarding the timeline for investment of capital gain in a house property. - Disagreement on the calculation of exemption u/s 54EC and 54 of the Act. - Dispute over the possession and transfer dates of the new residential property. - Examination of relevant case laws to support the contentions presented. Issue 1: Denial of exemption u/s 54 of the Income Tax Act in respect of Long Term Capital Gain: - The appellant contested the denial of exemption u/s 54 by the learned CIT (A) regarding the Long Term Capital Gain of &8377; 10,66,400. The Assessing Officer based the denial on the timing of the purchase agreement for a flat, which was deemed to be before the sale of the property, thus not meeting the criteria for exemption under section 54. Issue 2: Interpretation of section 54 regarding the timeline for investment of capital gain in a house property: - The disagreement revolved around the interpretation of section 54, specifically the timeline for investing capital gain in a house property. The appellant argued that possession of the flat was received within the window period, making it eligible for exemption u/s 54. The Assessing Officer, however, maintained that the investment made beyond one year prior to the sale did not qualify for exemption. Issue 3: Disagreement on the calculation of exemption u/s 54EC and 54 of the Act: - There was a discrepancy in the calculation of exemption u/s 54EC and 54 of the Act, leading to a partial allowance of the appeal. The Assessing Officer's calculation was deemed correct, limiting the appellant's exemption to &8377; 35,25,600 based on the investments made within the stipulated timeline. Issue 4: Dispute over the possession and transfer dates of the new residential property: - The appellant argued that the possession of the new property fell within the permissible timeline for exemption u/s 54. The transfer dates of the flat were crucial in determining eligibility for exemption, with the appellant asserting that the investment should be considered based on possession dates rather than the agreement date. Issue 5: Examination of relevant case laws to support the contentions presented: - Both parties relied on various case laws to support their arguments. The appellant cited judgments highlighting the importance of possession dates and the flexibility in interpreting the timeline for investment. In contrast, the Assessing Officer referenced case laws emphasizing the strict adherence to the specified timeline for claiming exemptions under section 54. This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the arguments presented by the parties, leading to the final decision in favor of the appellant based on the interpretation of relevant legal provisions and case laws.
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