2016 (9) TMI 749 - AT - Income Tax

Capital gain on the transfer of plot - year of assessment - Held that - The issue shall have to be determined on the anvil and touch stone of section 2(47)(v) of the Act r/w s. 53A of the Transfer of the Property Act, 1882. The assessee having returned capital gains (for the current year) despite having not received her share even during the current year is thus aware that the income by way of capital gains is assessable on accrual basis, stating resolution of the legal dispute during the current year as the reason for considering the same as having accrued/arisen thereat. If not during the current year, when did the same get resolved and, further, what is the basis or the evidence to consider it as so? No details with regard thereto stand furnished at any stage; the assessee changing her stand to claim that no gain in fact arose during the current year. The complete details need to be brought forth, and its impact considered in light and in the context of the provisions of law, while there is nothing on record toward the same, with, rather, even most of the facts stated by the ld. counsel being not borne out by the record. Then there is the question of whether the transferee has performed or was willing to perform his part of the contract (sec. 53A of the TP Act). If so, why is it that the payment was withheld, and for years, or given, as stated, to the assessee s brother-in-law, and when? Answers to these and other related questions would decide whether the capital gain had indeed arisen to the assessee during the relevant previous year and, if not, when. The matter is accordingly restored to the file of the assessing authority for fresh adjudication with regard to whether any part of the capital gains on transfer of plot no. 99 arise to the assessee during the relevant year. The AO shall decide issuing definite findings of fact.

Issues Involved:

1. Whether the capital gain on the transfer of plot no. 99 arises to the assessee during the current year or for any other year.
2. The restriction of the claim for exemption u/s. 54F to ?39,25,249/- against the claimed sum of ?52,67,319/-.
3. The Revenue's grievance regarding the CIT(A) relying on additional evidences without observing the mandate of rule 46A.

Issue-wise Detailed Analysis:

1. Capital Gain on Transfer of Plot No. 99:

The primary issue is whether the capital gain on the transfer of plot no. 99 should be assessed in the current year or for any other year, such as A.Y. 1995-96. The assessee, a widow, owned a 1/4th share in a plot of land and entered into an agreement for sale and development in 1994. The entire consideration was to be received within 12 months, but due to legal disputes, part of the consideration was received much later. The assessee returned the capital gain for the current year, which was contested by the Revenue authorities. The Tribunal noted that the liability to tax arises as soon as the Finance Act prescribes the rate/s for the relevant year, and the onus is on the assessee to show that the income as returned is not assessable for that year. The Tribunal restored the matter to the assessing authority for fresh adjudication, directing the AO to issue definite findings of fact regarding whether any part of the capital gains on the transfer of plot no. 99 arises to the assessee during the relevant year.

2. Restriction of Claim for Exemption u/s. 54F:

The second issue concerns the restriction of the claim for exemption u/s. 54F. The assessee claimed exemption on multiple plots, but the CIT(A) restricted the exemption to ?39,25,249/-. The Tribunal found no reason to disturb the findings and determination by the CIT(A), which were based on judicial precedents. The Tribunal confirmed the CIT(A)'s decision, noting that the exemption u/s. 54F should be allowed only with reference to the capital gain on the transfer of plot no. 688.

3. Revenue's Grievance on Additional Evidences:

The Revenue's appeal contended that the CIT(A) relied on additional evidences without observing the mandatory procedure prescribed under rule 46A. The Tribunal found the Revenue's objection valid, noting that the CIT(A) admitted new evidences without following the proper procedure. The Tribunal upheld the CIT(A)'s decision to admit additional evidences but directed that the relief granted by the CIT(A) should be subject to verification by the AO. The AO was directed to verify the nature of the house properties owned by the assessee, the nature of ownership, and the investment in the new residential house on a time scale. The AO was also directed to examine the commencement and completion dates of the new residential house, as it represents a primary condition for exemption u/s. 54F. The Tribunal confirmed the relief allowed by the CIT(A) in principle, subject to the AO's verification and positive findings.

Conclusion:

The Tribunal partly allowed the assessee's appeal for statistical purposes and allowed the Revenue's appeal for statistical purposes. The matter was restored to the file of the assessing authority for fresh adjudication, with specific directions for the AO to issue definite findings of fact and allow the assessee an opportunity to substantiate her claims. The Tribunal's order was pronounced in the open court on August 08, 2016.

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