2019 (8) TMI 615 - AT - Income Tax

Condonation of delay - delay of 658 days in filing appeal before the Tribunal - illness of assessee - sufficient cause within the meaning of section 5 of the Limitation Act - HELD THAT - Although, there is no supporting evidences filed in support of contents of affidavit explaining reasons for not filing the appeal, but a sworn statement in form of affidavit cannot be ignored in total. Further, when we go through, the reasons given by the assessee for not filing appeal in time, we find that the assessee was hospitalized for sickness, which is evident from the fact that during the period from 24/07/2008 to 11/09/2009, he was in hospital for three occasions for different treatments. We, further noted that when health issues and income tax matter comes together, certainly the matter concerning health issues needs to be given preference. In this case, it is not in dispute that the assessee is aged more than 82 years and obviously, the age old related sickness/health issues will follow. Therefore, we do not find anything suspicious about reasons given by the assessee for condonation of delay in filing of appeal. Nature of assets sold - computation of Period of holding - Transferable Development Rights (TDR) issue in lieu of acquisition of immovable property by the Municipal Corporation of Pune - as per assessee right in TDRs is a capital asset as defined u/s 2(14) - assesse has sold right in TDR by virtue of a MOU dated 17/08/1996 which was cancelled by way of cancellation deed dated 14/06/2004, the same right in TDR sold to third party vide agreement dated 14/06/2006 - HELD THAT - In this case, there is no doubt, with regard to the fact that the assessee has derived right in TDR by virtue of acquisition of immovable property by the municipal authorities in the year 1986 and such right is conferred on the assessee from the date of acquisition of the property. The subsequent cancellation and sale of TDR to third party cannot be considered as purchase of TDR from a third party. Therefore, we are of the considered view that, for the purpose of determination of period of holding, the period of holding of the asset from the date of acquisition of property by the municipal authorities has to be considered, but not from the date, when MOU was cancelled in the year 2004. If you take, the original date of acquisition of property, then the period of holding of the asset is more than 36 months and hence, surplus from transfer of asset is rightly assessable under the head long term capital gains. Benefit of exemption u/s 54EC - AO never discussed, the issue of exemption and CIT(A) not allowed as he consider sale of TDR as speculative business profit - HELD THAT - The assessee has filed copies of capital gain bonds issued by NABARD for amounting to ₹ 25 Lacs. However, the facts with regard to purchase of NABARD capital gain bonds within prescribed limit provided u/s 54EC, has not been examined by the Ld.AO, as well as the Ld. CIT(A). Therefore, we are of the considered view that the issue needs to be re-examined by the AO, in light of the evidences filed by the assessee and hence, we set aside the issue to the file of the AO, for the limited purpose of verification on facts with regard to the investments in NABARD capital gain Bonds for the purpose of exemption claimed u/s 54EC. In case, AO found the investment is within stipulated time and it has fulfilled all other conditions, then AO is directed to allow benefit of exemption u/s 54EC, as claimed by the assessee Appeal filed by the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Classification of gains from the transfer of TDR rights.
3. Entitlement to exemption under Section 54EC of the Income Tax Act.
4. Charging of interest under Sections 234A, 234B, 234C, and 234D of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Condonation of Delay:
The assessee filed the appeal with a delay of 658 days, attributing the delay to ill-health, supported by an affidavit. The Tribunal acknowledged the affidavit and the health issues, noting the assessee's advanced age and multiple hospitalizations. It emphasized that health issues should be prioritized over tax matters. The Tribunal referenced the Supreme Court's decision in Ummer Vs. Pottengal Subida, advocating a liberal approach to condonation of delay. Consequently, the Tribunal condoned the delay and admitted the appeal for hearing.

2. Classification of Gains from TDR Rights:
The assessee argued that the gains from the transfer of TDR rights should be classified as long-term capital gains, asserting that TDR rights are capital assets. The Assessing Officer (AO) initially classified the gains as short-term capital gains, citing a holding period of less than 36 months. The Commissioner of Income Tax (Appeals) [CIT(A)] reclassified the gains as speculative business profits under Section 43(5) of the Income Tax Act, arguing that the transactions were speculative in nature.

The Tribunal analyzed the facts and determined that TDR rights are indeed capital assets, as they are linked to immovable property. It noted that the original acquisition of the property by the municipal authorities in 1986 conferred the right to TDR on the assessee. The Tribunal concluded that the period of holding should be calculated from the original acquisition date, making the gains long-term capital gains, not speculative business profits.

3. Entitlement to Exemption under Section 54EC:
The AO did not address the exemption under Section 54EC for investments in NABARD Bonds. The CIT(A) denied the exemption, as the gains were classified as speculative business profits. The Tribunal, having reclassified the gains as long-term capital gains, directed the AO to verify the investment in NABARD Bonds. If the investment met the stipulated conditions and time limits, the AO was instructed to allow the exemption under Section 54EC.

4. Charging of Interest under Sections 234A, 234B, 234C, and 234D:
The Tribunal did not provide a detailed analysis of the charging of interest under Sections 234A, 234B, 234C, and 234D, as the primary focus was on the classification of gains and the entitlement to exemption. However, it is implied that the resolution of the classification issue would impact the calculation of interest under these sections.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, condoning the delay in filing, reclassifying the gains from TDR rights as long-term capital gains, and directing the AO to verify the exemption under Section 54EC. The Tribunal's decision underscores the importance of correctly classifying assets and adhering to procedural fairness in tax matters.