2018 (7) TMI 1317 - AT - Income Tax

Rejection of assessee s claim for grant of exemption u/s 54 - Taxability of a particular amount in a particular period - Held that- There will be no grievance if the long term capital gain be taxed in the assessment year 2011-12 on being refunded to him by the PIPL . We direct the AO to take action in the assessment year 2011-12 and assess the long term capital gain at ₹ 5,19,871/-. It is pertinent to observe that we do not find any merit in the contention of the assessee with regard to alleged wrong computation of capital gain at ₹ 5,19,871/-. The AO has rightly computed it because the assessee has failed to substantiate his computation at ₹ 3,7,607/-. The assessee has unnecessarily included a sum of ₹ 88,000/- in the cost of acquisition for taking benefit of indexation. He failed to substantiate the inclusion of ₹ 88,000/- in the cost of acquisition. We partly allow the appeal of the assessee. Assessment of long term capital gain is to be excluded from the assessment year 2009-10. But it is to be taxed in the assessment year 2011-12. The ld.AO shall give necessary effect accordingly. Decided in favour of assessee partly

Summary

Issues:
Appeal against order of ld.CIT(A)-11 dated 2.5.2016 for assessment year 2009-10. Main issue: Rejection of claim for exemption under section 54 of the Income Tax Act.

Analysis:
The assessee appealed against the rejection of the claim for exemption under section 54 of the Income Tax Act by the ld.CIT(A). The case involved the acquisition and subsequent sale of a residential flat, triggering a capital gain tax liability. The assessee contended that the ld.AO's computation of the long term capital gain was incorrect, while the ld.CIT(A) upheld the decision. The crux of the matter was the failure of the assessee to produce the purchase deed of the new property, leading to the denial of exemption under section 54.

Clarification of Circulars:
The case revolved around the interpretation of circulars related to deductions from capital gains under sections 54 and 54F of the Income Tax Act. Circular no. 471 clarified that allotment of flats under self-financing schemes should be treated as cases of construction for the purposes of sections 54 and 54F. The assessee argued that his case fell within the ambit of section 54 as he booked a flat under a self-finance scheme, but subsequent developments led to the builder returning the money, affecting the claim for exemption.

Taxability and Assessment Year:
The Tribunal noted that the capital gain amount was undisputedly taxable, with the dispute centering on the year of taxability. The change in circumstances due to the builder's inability to construct the flat and the subsequent return of money affected the assessee's entitlement to exemption under section 54 for the assessment year 2009-10. The Tribunal directed the AO to assess the long term capital gain in the assessment year 2011-12, as the assessee had offered it for taxation upon receipt from the builder.

Legal Provisions and Decision:
The Tribunal considered the provisions of section 153(6) and Explanation 2, highlighting that there was a mechanism to address taxability directions for specific amounts in particular periods. The Tribunal directed the AO to exclude the assessment of long term capital gain from the assessment year 2009-10 and tax it in the assessment year 2011-12. The appeal of the assessee was partly allowed, with the AO instructed to make necessary adjustments accordingly.

This detailed analysis of the judgment provides insights into the legal nuances and considerations involved in the case concerning the rejection of the claim for exemption under section 54 of the Income Tax Act.