2016 (10) TMI 973 - HC - Income Tax

Claim under Section 54-F denied - AO disallowed exemption holding that it is permissible only when residential house is purchased or constructed within stipulated period - Held that - There was an agreement for purchase of land which was not carried out and matter was taken to Court, where parties entered into settlement for transfer of plot. Fact remains that no legal document having effect of transfer of immovable property was placed before Appellate Authority. Under the provisions of transfer of Transfer of Property Act, 1882 unless a registered sale deed is executed, title of immovable property can not pass. Agreement to sale is not a transaction of immovable property but only a promise to enter into another agreement relating to sale of immovable property. That is why Tribunal has recorded a finding that from order of Assessing Authority it is evident that there was no sale of property in dispute for the reason that no sale deed was placed before Revenue authorities so as to claim capital gain. In view thereof, finding of Tribunal that there was no capital gain since there was no sale of property, is neither perverse nor illegal - Decided against assessee.

Issues:
1. Interpretation of Section 54-F of the Income Tax Act for claiming exemption.
2. Consideration of evidence outside the relevant record for prima facie adjustment under section 143(1)(a) of the Act.
3. Taxability of capital gains in Assessment Year 1995-96 under section 54F of the Act.
4. Treatment of investment outside the Capital Gains Scheme under section 143(1)(a) of the Act.

Issue 1: Interpretation of Section 54-F for Exemption Claim:
The dispute revolves around the disallowance of the assessee's claim under Section 54-F of the Income Tax Act. The Assessing Officer rejected the exemption, stating it is only applicable when a residential house is purchased or constructed within the stipulated period. The assessee initially succeeded in the appeal before the Commissioner of Income Tax (Appeals), but the Tribunal reversed this decision, allowing the appeal by the Revenue. The High Court noted that no legal document effecting the transfer of immovable property was presented before the Appellate Authority. As per the Transfer of Property Act, 1882, the title of immovable property cannot pass without a registered sale deed. The Tribunal found that no sale deed was provided to the Revenue authorities to claim capital gains, leading to the conclusion that there was no sale of the property in question.

Issue 2: Consideration of Evidence for Adjustment under Section 143(1)(a):
The appellant raised concerns about the Tribunal considering facts and evidence outside the relevant record, such as a letter dated 8.4.1999, for making prima facie adjustments under section 143(1)(a) of the Act. However, the High Court found that the Tribunal's finding that there was no capital gain due to the absence of a sale deed was neither perverse nor illegal. The Court upheld the Tribunal's decision, stating that the substantial questions of law raised by the assessee were answered against them.

Issue 3: Taxability of Capital Gains in Assessment Year 1995-96:
Regarding the taxability of capital gains in the Assessment Year 1995-96 under section 54F of the Act, the High Court concurred with the Tribunal's finding that there was no capital gain as there was no sale of the property in dispute due to the absence of a sale deed. The Court found no error in the Tribunal's judgment and dismissed the appeal accordingly.

Issue 4: Treatment of Investment outside the Capital Gains Scheme:
The Tribunal upheld the prima facie adjustment under section 143(1)(a) of the Act by treating the investment of Rs. one lakh outside the Capital Gains Scheme, despite the bank certificate stating otherwise. The High Court did not find any error in the Tribunal's decision and dismissed the appeal based on the findings related to the non-transfer of the property and the absence of a sale deed to claim capital gains.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision on the interpretation of Section 54-F, the consideration of evidence for adjustments, the taxability of capital gains, and the treatment of investments outside the Capital Gains Scheme.

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