2018 (6) TMI 1033 - AT - Income Tax

Capital gain on transfer of tenancy rights - Applicability of provisions of section 55(2)(b) - cost of acquisition - entitled for exemption u/s. 54F - investment made u/s. 54EC - Held that - As find that this aspect of the matter has been considered by the Ld.CIT(A) with reference to the submissions and the facts of the assessee s case and relevant case laws and held that the case of the assessee is falling under section 52(2)(b) of the Act. The Ld.CIT(A) following the decision of the Coordinate Bench of the Mumbai Tribunal in the case of Meher R. Surti v. ITO 2015 (4) TMI 52 - ITAT MUMBAI held that assessee s claim for adopting fair market value as on 01.04.1981 to compute the cost of acquisition is proper - no infirmity in the order of the Ld.CIT(A) in holding that the assessee is entitled for exemption u/s. 54F We find from Assessment Order that the assessee made submissions before the Assessing Officer that they have invested ₹.40,00,000/- for acquiring tenancy rights in the property by agreement dated 18.01.2012 and therefore entitled for exemption u/s. 54F of the Act. This agreement was neither produced before us nor any proof of investment was furnished either before the Ld.CIT(A) or before us. Therefore, though in principle we agree with the view taken by the Ld.CIT(A) that the assessee is entitled for exemption u/s. 54F for the limited purpose of verification of the fact that the assessee acquired tenancy rights in the above referred property has to be examined with reference to the agreement and proper proof.

Summary

Issues:
1. Interpretation of provisions under section 55(2)(a) and 55(2)(b) regarding the cost of acquisition of tenancy rights.
2. Application of provisions under section 54EC and 54F for exemption.
3. Verification of investment proofs submitted by the assessee.

Analysis:

Issue 1: Interpretation of provisions under section 55(2)(a) and 55(2)(b) regarding the cost of acquisition of tenancy rights:

The appeal by the Revenue was against the order of the Ld. Commissioner of Income-tax (Appeals) concerning the Assessment Year 2012-13. The Revenue contended that the CIT(A) erred in holding that section 55(2)(a) does not apply to the assessee's case related to the cost of acquisition of tenancy rights. The Revenue also argued that the provisions of section 55(2)(b) were incorrectly applied by the CIT(A). The Assessing Officer had taxed the consideration received on the transfer of tenancy rights as long-term capital gains. However, the CIT(A) held that the case fell under section 55(2)(b) and not 55(2)(a), allowing the adoption of fair market value as on 01.04.1981 for computing the cost of acquisition. The CIT(A) referred to relevant case laws and upheld the assessee's claim based on the option provided under section 55(2)(b)(i).

Issue 2: Application of provisions under section 54EC and 54F for exemption:

The Assessing Officer had denied the assessee's claim for exemption under section 54F and 54EC due to lack of compliance in producing necessary investment proofs. The CIT(A) found the assessee entitled to exemption under section 54F but noted the failure to provide sufficient proof of investment. The case was restored to the Assessing Officer for verification of the investment details submitted by the assessee. The CIT(A) emphasized the need for proper documentation to support the exemption claims under sections 54F and 54EC.

Issue 3: Verification of investment proofs submitted by the assessee:

The Assessing Officer had requested proof of investment under sections 54EC and 54F, which the assessee failed to provide adequately. The CIT(A) acknowledged the entitlement of the assessee to exemptions but stressed the importance of substantiating the investment claims with proper documentation. The case was remanded to the Assessing Officer for verification of the investment proofs submitted by the assessee to ensure the validity of the exemption claims.

In conclusion, the Tribunal allowed the appeal of the Revenue for statistical purposes, emphasizing the need for proper verification of investment proofs for exemption claims under sections 54F and 54EC. The judgment clarified the application of provisions under section 55(2)(a) and 55(2)(b) concerning the cost of acquisition of tenancy rights and highlighted the significance of supporting documentation in tax assessments.