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2018 (7) TMI 1091 - AT - Income TaxAddition of Short term capital gains under Section 45 - land sold as capital asset - Held that - The entire chain of events and the material available on record viz. (i). that prior to purchase of land the Government of Maharashtra had vide a notification dated 05.08.2009 accorded permission to M/s Prakhyat Infra Projects Pvt. Ltd (in which company the spouse of the assessee was a director) to purchase the said land for establishing an industrial estate for service industry and warehousing; (ii). that a perusal of the 7/12 extracts revealed that grass was grown on the said land; and (iii). the transfer of land by the assessee to M/s Prakhyat Infra Projects Pvt. Ltd within a short span of one year, clearly reveals that the land under consideration was never intended by the assessee to be exploited for agricultural operations, but was intended from the date of its purchase for setting up of an industry. As the assessee had sold a non-agricultural industrial land, therefore, the A.O had rightly brought the profit arising from the transfer of the same to tax as STCG in the hands of the assessee. We thus, not finding any infirmity in the order of the CIT(A) in context of the issue under consideration, thus uphold the same. The Ground of appeal No. 1 is dismissed. Entitlement towards deduction under Sec. 24(b) of the interest on housing loan to an amount - Held that - The property under consideration was not a residential property referred to in Sec. 23(2) of the Act, but was a residential property which was admittedly let out during the year to a third party, hence the applicability of the second proviso to Sec. 24(b) was not applicable in its case. We are persuaded to subscribe to the aforesaid claim of the ld. A.R and are of the considered view that as the property under consideration viz. Flat No. 1503/2A, Sidhanchal, Thane was admittedly let out and had fetched a rental income of ₹ 70,000/- during the year under consideration, thus, the applicability of the second proviso of Sec. 24(b) stands excluded. We thus, set aside the order of the CIT(A) in context of the issue under consideration and direct the A.O to allow the claim of the assessee as regards interest paid on housing loan under Sec. 24(b) to the extent of ₹ 2,93,656/-. The Ground of appeal No. 2 is allowed.
Issues Involved:
1. Addition of ?90,19,000 as Short Term Capital Gains (STCG) under Section 45 of the Income Tax Act by treating the sold land as a capital asset. 2. Disallowance of interest on housing loan claimed under Section 24(b) of the Income Tax Act. 3. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Addition of ?90,19,000 as Short Term Capital Gains (STCG) under Section 45 of the Income Tax Act by treating the sold land as a capital asset: The assessee contested the addition of ?90,19,000 as STCG, arguing that the land sold was rural agricultural land and thus not a capital asset under Section 2(14)(iii) of the Income Tax Act. The assessee provided evidence including a map from Google Earth and a certificate from the Sarpanch, Gram Panchayat, indicating that the land was beyond 8 km from the nearest municipality and had a population of 1470 persons. The lower authorities, however, noted that the land was notified by the Government of Maharashtra for establishing an industrial park and was sold as non-agricultural industrial land. The Tribunal upheld the lower authorities' view, stating that the land was a non-agricultural industrial land at the time of sale and thus a capital asset. Therefore, the profit from its sale was rightly taxed as STCG. The Tribunal dismissed the assessee's appeal on this ground. 2. Disallowance of interest on housing loan claimed under Section 24(b) of the Income Tax Act: The assessee claimed a deduction of ?6,59,065 as interest on borrowed capital under Section 24(b) against rental income from a property. The Assessing Officer (A.O.) limited the deduction to ?2,93,656 on a proportionate basis and disallowed the entire claim, citing non-compliance with Section 80C(2)(xviii)(c). The CIT(A) corrected the A.O.'s confusion between Sections 24(b) and 80C, but restricted the deduction to ?1,50,000, referring to the second proviso to Section 24(b). The Tribunal found that the property was let out and thus the second proviso to Section 24(b) did not apply. The Tribunal directed the A.O. to allow the full claim of ?2,93,656 as interest on housing loan under Section 24(b). The assessee's appeal on this ground was allowed. 3. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act: The assessee challenged the initiation of penalty proceedings under Section 271(1)(c). The Tribunal deemed this ground premature and dismissed it. 4. General Ground: The general ground of appeal raised by the assessee was dismissed as not pressed. Conclusion: The appeal was partly allowed. The Tribunal upheld the addition of ?90,19,000 as STCG, allowed the full claim of ?2,93,656 as interest on housing loan under Section 24(b), and dismissed the challenge to the initiation of penalty proceedings as premature. The general ground was also dismissed. The order was pronounced in the open court on 13.07.2018.
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