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2016 (3) TMI 600 - HC - Income TaxTaxability of income - Whether 50% of the sale consideration received by the assessee with respect to the matrimonial house situated at 25, Mandeville Gardens, Calcutta was taxable in the hands of the assessee despite the fact that the Tribunal arrived at a finding that the said amount was paid on account of alimony? - Held that - The amount received by the assessee was a capital receipt and hence not taxable. - Decided in favour of assessee
Issues Involved:
I) Admissibility of deduction under Section 54 of the Income Tax Act. II) Applicability of Section 49(1)(iii) concerning the assessee's status as a co-owner of the property. III) Justification of disallowance of Rs. 50,000/- as brokerage for computation of long-term capital gains. IV) Taxability of 50% of the sale consideration received by the assessee as alimony. Issue-wise Detailed Analysis: I) Admissibility of Deduction under Section 54 of the Income Tax Act: The Tribunal reversed the CIT(A)'s decision that allowed the assessee's claim for deduction under Section 54 of the Act. The Tribunal refrained from commenting on the CIT(A)'s direction on this issue, which the Revenue had not agitated. The Tribunal's decision to allow the appeal on the issues raised by the Revenue and reverse the CIT(A)'s order was deemed perverse as it failed to appreciate the CIT(A)'s findings. II) Applicability of Section 49(1)(iii) Concerning the Assessee's Status as a Co-owner of the Property: The Tribunal failed to appreciate that the divorce decree and related agreements clearly established the assessee as a co-owner, providing 50% of the consideration for acquiring the property. The Tribunal's finding that the assessee did not participate in the acquisition and was merely a nominee was deemed perverse. The CIT(A) had correctly applied Section 49(1)(iii), recognizing the property as acquired by devolution upon divorce. III) Justification of Disallowance of Rs. 50,000/- as Brokerage for Computation of Long-term Capital Gains: The Tribunal upheld the Assessing Officer's disallowance of the brokerage claim, relying on the Inspector's report that the brokerage parties could not be found. The CIT(A) had allowed the brokerage claim, noting that the payment was made through account a cheque and the assessee was not given an opportunity to rebut the Inspector's report. The Tribunal's decision was based on irrelevant materials and failed to consider relevant evidence, making the findings perverse. IV) Taxability of 50% of the Sale Consideration Received by the Assessee as Alimony: The Tribunal concluded that 50% of the sale consideration received by the assessee was on account of alimony and thus not taxable. The assessee contended that lump sum alimony is a capital receipt, supported by the Bombay High Court judgment in Princess Maheshwari Devi of Pratapgarh, which held that lump sum alimony is a capital receipt and not taxable. The Tribunal's finding that the amount was received as alimony was not appealed by the Revenue, implying their satisfaction with this finding. Conclusion: The High Court concluded that the amount received by the assessee was a capital receipt and hence not taxable. Consequently, it was unnecessary to address questions I, II, and III. The fourth question was answered in the negative, favoring the assessee. The appeal was allowed, affirming that the 50% sale consideration received as alimony was not taxable. Order: The appeal is allowed, and the judgment is agreed upon by both judges.
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