2019 (9) TMI 1257 - AT - Income Tax

LTCG - Exemption u/s 54 - assessee and her husband purchased the new property in their son s name - HELD THAT - The provisions of section 54 of the Act are beneficial and are to be considered liberally for reasonable bonafide cause but investment in residential property is mandatory which is not in dispute in this case. The Assessing Officer was not justified in rejecting the case law relied on by the assessee in the case of CIT v. Shri Kamal Wahal 2013 (1) TMI 401 - DELHI HIGH COURT , wherein, it was held that the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. Claiming exemption under section 54(1) of the Act deals with transfer of a long term capital asset being building or lands appurtenant, whereas, section 54F of the Act deals with transfer of any long term capital asset not being a residential house, but both are coming under computation of income from capital gains. From the observations of the Assessing Officer, it is evident that he has not appreciated the complete findings given The issue is covered in favour of the assessee by the decisions of CIT v. Kamal Wahal 2013 (1) TMI 401 - DELHI HIGH COURT , CIT v. V. Natarajan 2006 (2) TMI 136 - MADRAS HIGH COURT , CIT v. Gurnam Singh 2008 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT and moreover, the decision of DIT v. Jennifer Bhide 2011 (9) TMI 161 - KARNATAKA HIGH COURT . Under these facts and circumstances, the long term capital gains taxed by the Assessing Officer stands deleted. Levy of short term capital gains - distress sale - AO proposed to adopt the guideline value as sale consideration as per section 50C - HELD THAT - Admittedly, the provision of section 50C(1) of the Act reads as where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government i.e., stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessable shall, for the purpose of section 48 of the Act be deemed to be the full value of the consideration received or accruing as a result of such transfer. In this case, since the assessee has not opted for to refer her case for valuation to the Department Valuation Officer as per section 50C(2) of the Act, we are of the considered opinion that the Assessing Officer has rightly adopted the 50C(1) value as fair market value and determined the short term capital gain. - Decided against assessee

Summary

Issues Involved:
1. Challenge to the order confirming income from long term and short term capital gains.
2. Claim of exemption under section 54 of the Income Tax Act for reinvestment in a new property.
3. Dispute regarding the levy of short term capital gains based on guideline value.

Issue 1: Challenge to the order confirming income from long term and short term capital gains:
The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming income from long term and short term capital gains for the assessment year 2014-15. The Assessing Officer assessed the total income of the assessee at &8377; 40,59,160/- after various additions. The assessee challenged this order, claiming to have fulfilled all conditions under section 54 of the Act for exemption. However, it was noted that the entire sale consideration received from the original asset was gifted to the assessee's husband, who then gifted a significant amount to their son for a new property purchase. The Assessing Officer determined that the assessee did not invest in the new asset as claimed, leading to the confirmation of long term capital gain tax by the Commissioner of Income Tax (Appeals).

Issue 2: Claim of exemption under section 54 for reinvestment in a new property:
The assessee claimed exemption under section 54 of the Act for reinvestment in a new property. It was observed that the entire sale consideration from the original asset was gifted to the assessee's husband, who then contributed towards the purchase of a new property in their son's name. The Assessing Officer disputed the claim, stating that the assessee did not invest in the new asset as required for exemption under section 54. However, the Tribunal referred to relevant case laws and highlighted that section 54 allows for a liberal interpretation, emphasizing that the new residential house need not be purchased exclusively in the assessee's name. Citing decisions from various High Courts, the Tribunal ruled in favor of the assessee, deleting the long term capital gains tax.

Issue 3: Dispute regarding the levy of short term capital gains based on guideline value:
The assessee sold another immovable property for a sale consideration lower than the guideline value. The Assessing Officer adopted the guideline value as the fair market value under section 50C of the Act, leading to the assessment of taxable short term capital gain. The assessee contended that the sale was a distress sale due to various factors, but the Tribunal upheld the Assessing Officer's decision, stating that the fair market value as per section 50C(1) should be deemed the full value of consideration. Since the assessee did not opt for valuation by the Department Valuation Officer, the Tribunal dismissed the ground raised by the assessee regarding the levy of short term capital gains.

In conclusion, the Tribunal partly allowed the appeal filed by the assessee, deleting the long term capital gains tax but upholding the assessment of taxable short term capital gains based on the guideline value.