2017 (3) TMI 329 - AT - Income Tax

Reopening of assessment - exemption claimed u/s.54F - income of the HUF was included in the individual hand and the claim of deduction was not taken on the net consideration - Held that - As relying on the CBDT Circular No.667 dated 18-10-1993 has held that when the property already stands in the name of the HUF and there is no evidence on record to show that the assessee received the land by way of release from the co-owners and the assessee has not paid any price to the coowners, there is no justification on the part of the assessee to claim deduction u/s.54F on the value of 614 square meters of land. Uphold the order of the CIT(A) in rejecting the claim of the assessee that the release of land by the members of the HUF in favour of HUF for utilization in construction of residential property be included in the exemption claimed u/s.54F of the Act. - Decided against assessee Investment towards construction of residential property - Held that - CIT(A) after elaborately discussing the issue has given clear cut finding that the assessee did not furnish any details towards the construction expenditure of ₹ 3 lakhs such as the nature of construction, permission from the competent authority for construction, date of utilization of funds for construction, bills and vouchers for various items of expenses for construction and above all whether the new building was completed within the specified period of 3 years from the date of transfer, completion certificate from competent authority and the nexus between the consideration received and the investment in the construction of house property. The Ld. Counsel for the assessee could not adduce any evidence before us to counter the above factual findings given by the Ld.CIT(A). Since the assessee failed to substantiate with evidence regarding the investment of ₹ 3 lakhs in construction of the house property, therefore, we find no infirmity in the order of the CIT(A) rejecting the claim of the assessee that an amount of ₹ 3 lakhs was utilized towards construction of the house property. - Decided against assessee Estimating the cost of acquisition @ ₹ 100/- per sq.mtr as on 01-04-1981 for the purpose of indexation - Held that - Since the order of the CIT(A) is based on the report of assessee s own valuer who has determined the value at ₹ 100/- per sq.mtr as on 01-04-1981, therefore, in view of the reasoned order given by the CIT(A) on this issue we find no infirmity in the same. - Decided against assessee

Summary

Issues Involved:

1. Taxation of capital gains in the hands of HUF vs. Individual.
2. Eligibility for exemption under Section 54F of the Income Tax Act.
3. Indexed cost of acquisition for capital gains calculation.
4. Levy of interest under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Taxation of Capital Gains in the Hands of HUF vs. Individual:

The assessee filed the return of income in an individual capacity, declaring a total loss of ?84,189/-. However, the Assessing Officer (AO) noticed that the capital gain from the sale of property belonging to the assessee's HUF was included in the individual return. The AO issued a notice under Section 148 to the HUF, and the HUF filed a return declaring total income of ?44,535/-, with the capital gain income offered at NIL, claiming exemption under Section 54F due to investment in a capital gain account scheme.

2. Eligibility for Exemption under Section 54F:

The AO rejected the assessee's claim for exemption under Section 54F, noting that the net consideration was not appropriated towards the acquisition of a new asset and only the capital gains were invested in the scheme. The AO emphasized that the net consideration should be deposited in the capital gain scheme, not just the capital gains. The CIT(A) upheld the AO's decision, rejecting the claim that the land utilized for construction was part of the cost of construction and thus eligible for exemption under Section 54F. The CIT(A) noted that there was no evidence of release of rights by the members of the HUF and no consideration was paid for the alleged release.

3. Indexed Cost of Acquisition for Capital Gains Calculation:

The CIT(A) directed the AO to adopt the cost of acquisition as on 01-04-1981 at ?100/- per sq.mtr for indexation purposes, as opposed to ?200/- per sq.mtr claimed by the assessee. The CIT(A) reasoned that the conversion of land to N.A. in 1998 did not affect the fair market value as on 01-04-1981.

4. Levy of Interest under Sections 234A, 234B, and 234C:

The CIT(A) and the Tribunal concluded that the levy of interest under Sections 234A, 234B, and 234C is mandatory and consequential in nature.

Tribunal's Decision:

The Tribunal upheld the CIT(A)'s order, rejecting the assessee's claims on all grounds. The Tribunal found no merit in the argument that the release of land by the members of the HUF in favor of the HUF for construction should be included in the exemption claimed under Section 54F. The Tribunal also agreed with the CIT(A) that the assessee failed to substantiate the investment of ?3 lakhs in the construction of the house property with evidence. Lastly, the Tribunal upheld the CIT(A)'s decision on the indexed cost of acquisition based on the valuer's report and dismissed the appeal regarding the levy of interest as it is mandatory and consequential.