2017 (3) TMI 1778 - AT - Income Tax

Deduction u/s.54 - deduction allowable based on the investment of LTCG - HELD THAT - Claim of deduction is allowable based on the investment of LTCG and not based on completeness of the asset in question. While the payment of the gains to the builder is in the hand of the assessee, the completeness of construction and the if any is attributable to the builder. In view of the above said facts and circumstances and in view of the above mentioned law, we are of the view that the CIT(A) has wrongly confirmed the addition which is liable to be treated as Long Term Capital Gain and entitled to be exempted u/s.54 of the Act. The Assessing Officer is directed to re-compute the assessment by allowing the addition as exempt as Long Term Capital Gain. Accordingly, this issue is decided in favour of the assessee against the revenue.

Summary

Issues Involved:
1. Disallowance of long-term capital gain exemption under section 54 of the Income Tax Act, 1961.
2. Confirmation of assessing officer's decision to assess income higher than declared by the appellant.

Issue 1 & 2 - Disallowance of Long-Term Capital Gain Exemption:
The appellant appealed against the Commissioner of Income Tax (Appeals) confirming the assessing officer's decision to assess the income at a higher amount than declared. The appellant declared income of ?66,10,765 but was assessed at ?2,41,21,150. The primary issue was the denial of deduction under section 54 of ?1,74,03,119. The appellant sold a flat and claimed exemption on the capital gain for purchasing another property. The assessing officer considered the tentative possession date for the new property and denied the exemption. The appellant argued that the possession date was wrongly considered, and the investment was made within the stipulated period. Citing relevant case law, the Tribunal held that the deduction is allowable based on the investment of long-term capital gain, irrespective of the property's completeness. The Tribunal directed the assessing officer to recompute the assessment, allowing the exemption of ?1,74,03,119 as long-term capital gain. The decision favored the appellant against the revenue.

In conclusion, the Appellate Tribunal ITAT MUMBAI ruled in favor of the appellant, allowing the appeal and directing the assessing officer to recompute the assessment by granting the exemption for long-term capital gain under section 54 of the Income Tax Act, 1961.