2017 (3) TMI 575 - AT - Income Tax

Gain from the sale of flats treated as short-term capital - year in which the capital gain is to be taxed - selection of assessment year - Transfer taken place in which year? - Held that - The assessee in the instant case has relinquished its right by executing the sale deed in favour of the assessee. Accordingly, we are of the view that the transaction has taken place, therefore, the gain is liable to the taxed in the year under consideration. As such, we find no infirmity in the order of the lower authorities. - Decided against assessee Disallowances of brokerage expenses - Held that - The claim of brokerage expenses is not arising from the order of the AO and the Ld. CIT(A) has disregarded the claim of the assessee without referring the same to the AO. Thus from the above it is clear that the issue of brokerage has not been adjudicated by the AO. Therefore, in view of the above and in the interest of justice, we are inclined to restore this issue to the file of the AO for fresh adjudication in accordance with law. - Decided in favour of assessee by way or remand.

Summary

Issues:
1. Treatment of short term capital gain from the sale of flats for the assessment year.
2. Disallowance of brokerage paid for the sale of the flats.

Issue 1: Treatment of Short Term Capital Gain
The appellant challenged the Ld. CIT(A)'s decision to treat a sum as short term capital gain from the sale of flats, arguing that the sale proceeds were received in the subsequent year, thus the gain should be taxed in that year. The AO, however, considered the conveyance deed registration as the transfer taking place in the current year, leading to the addition of the gain to the total income. The Ld. CIT(A) upheld this decision, emphasizing that part of the sale consideration was received in the year under consideration itself. The ITAT agreed with the lower authorities, stating that the relinquishment of rights through the sale deed constituted a transfer, making the gain taxable in the current year. The appellant's argument regarding the receipt of consideration was dismissed, as the transaction was deemed to have occurred in the year under consideration based on the conveyance deed registration.

Issue 2: Disallowance of Brokerage Expenses
The appellant contested the disallowance of brokerage expenses incurred in connection with the sale of the flats. The Ld. CIT(A) disallowed the claim, considering it an afterthought to reduce tax liability. The ITAT noted that the AO did not address this issue, and the Ld. CIT(A) dismissed the claim without referring it back to the AO. Consequently, the ITAT decided to remand this issue to the AO for fresh adjudication in accordance with the law. Therefore, the disallowance of brokerage expenses was allowed for statistical purposes to ensure proper examination by the AO.

In conclusion, the ITAT Kolkata upheld the treatment of short term capital gain from the sale of flats in the current year and remanded the disallowance of brokerage expenses back to the AO for proper examination. The appeal was partly allowed for statistical purposes, emphasizing the importance of accurate tax assessment and adherence to legal procedures in determining taxable gains and allowable expenses.