2017 (10) TMI 1150 - AT - Income Tax

Capital gain computation - Held that - Indexed cost of acquisition should be at ₹ 25,82,368/- and accordingly, the long term capital gain has to be computed accordingly. It is directed to the Assessing Officer to act upon accordingly. Claim of deduction u/s 54 - Held that -Correct income has to be computed and correct income has to be given under the Income tax Act is the scheme of the Act and spirit of law and in this regard, the assessee having purchased a property in Kundli for which necessary papers were adduced before the ld. CIT(A) and also before us, which could not be controverted by the ld. DR and, therefore, in all fairness, and in the facts and circumstances of the case, the Assessing Officer is directed to allow the exemption u/s 54 of the Act as claimed before the ld. CIT(A) and accordingly, the addition so made is directed to be deleted. Grounds raised by the assessee are allowed.

Summary

Issues:
1. Denial of exemption under section 54 of the Income Tax Act
2. Denial of full benefit of indexation on cost of improvement

Analysis:
1. Exemption under Section 54:
The appeal involved the denial of exemption under section 54 of the Income Tax Act to the assessee on the long-term capital gain from the sale of a property in Ghaziabad. The Assessing Officer raised queries regarding the cost of acquisition, indexed cost, and evidence of improvement costs. The assessee provided explanations and documents, including details of the property sale and investments in a new property. The Assessing Officer and the CIT(A) disagreed on the computation of the indexed cost of acquisition. The tribunal found that the indexed cost of acquisition had been incorrectly calculated by the authorities. The correct indexed cost was determined, and the exemption under section 54 was allowed, directing the Assessing Officer to act accordingly.

2. Benefit of Indexation on Cost of Improvement:
The second issue revolved around the denial of the full benefit of indexation on the cost of improvement amounting to a specific sum claimed by the assessee. The Assessing Officer disallowed the claimed improvement cost due to lack of evidence beyond bank withdrawals for renovation. However, the tribunal noted that the improvement costs were substantiated by withdrawals and directed the Assessing Officer to allow the claimed benefit of indexation on the cost of improvement. The tribunal emphasized the importance of correctly computing income under the Income Tax Act and upheld the assessee's claim for the benefit of indexation on the cost of improvement.

In conclusion, the tribunal allowed the appeal of the assessee, directing the Assessing Officer to grant the exemption under section 54 and the benefit of indexation on the cost of improvement as claimed by the assessee. The judgment highlighted the significance of accurate computation of income and adherence to the provisions of the Income Tax Act.