2020 (5) TMI 487 - AT - Income Tax

Exemption u/s 54F - relevant AY - Long term capital gains on sale of shares by claiming that the capital gain has been spent for acquisition of a residential house and the balance which has not been so utilized was deposited in the bank account - transfer during the PY 2002-03 itself - assessee individual and others held the investment in immovable property belonging to M/s Asrani Inns and Resorts Pvt.Ltd. by way of shares and since the rights in shares were released by way of release deed and supplementary MOU - HELD THAT - The assessee and the other persons shown as owners of the property in the sale deed have signed this release deed and therefore, there is no dispute on the ownership of the property lying solely with the company. Further, in the affidavits filed before Hon ble High Court of AP the Director of the company has mentioned the release deed therein and the dispute was with the Government of A.P. and the Director of Stamps and Registration and not amongst the assessee and others. Further, assessee himself has declared the capital gain in his return of income and has claimed exemption u/s 54F of the Act. Therefore, irrespective of the date when the release deed has been registered, there is a transfer of shares during the PY 2002-03 as far as assessee is concerned. Therefore, I do not find any reason to interfere with the order of the AO and CIT(A) holding that the transfer has taken place during the PY 2002-03 relevant to AY 2003-04. Grounds 2 and 3 are thus rejected. Exemption from long term capital gain u/s.54F - Assessee has claimed that he had invested upto ₹ 45,42,000/- before filing of the return of income. The assessee has filed details of such expenditure before the Tribunal by way of additional evidence. Therefore deem it fit and proper to admit such additional evidence and remand it to the file of AO for verification of the same. After verification, the AO shall recompute the eligible exemption u/s.54F of the Act and the un-utilized capital gain shall be brought to tax as provided under the proviso to Section 54F of the Act.

Summary

Issues Involved:
1. Determination of the transfer of shares and the corresponding capital gains for the Assessment Year (A.Y.) 2003-04.
2. Eligibility for exemption under Section 54F of the Income Tax Act, 1961.

Detailed Analysis:

1. Determination of Transfer of Shares and Corresponding Capital Gains:
The primary issue was whether the transfer of shares occurred during the Previous Year (P.Y.) 2002-03, making the capital gains taxable in A.Y. 2003-04. The assessee claimed that there was no transfer of shares during this period, as the shares were not registered in the transferee's favor, and the property held by Asrani Inns and Resorts was under litigation until 2004. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] disagreed, stating that the release deed and supplementary MOU executed in December 2002 indicated a transfer. The Tribunal upheld the AO and CIT(A)'s decision, noting that the assessee had declared the capital gain in his return and claimed exemption under Section 54F, confirming the transfer during P.Y. 2002-03.

2. Eligibility for Exemption under Section 54F:
The assessee argued that the amount invested in constructing a house till the date of filing the return should be allowed as a deduction under Section 54F, and any uninvested capital gain should only be taxed after three years from the transfer date. The Tribunal acknowledged the legal provisions and case laws supporting this claim. The Tribunal found that the assessee had claimed to invest ?45,42,000 before filing the return and provided additional evidence for this expenditure. The Tribunal admitted this additional evidence and remanded the issue to the AO for verification. The AO was directed to recompute the eligible exemption under Section 54F and tax the unutilized capital gain as per the proviso to Section 54F.

Conclusion:
The Tribunal rejected the assessee's claims regarding the non-transfer of shares during P.Y. 2002-03 and upheld the AO and CIT(A)'s decisions on this matter. However, it partly allowed the appeal concerning the exemption under Section 54F, remanding the issue to the AO for verification of the additional evidence and proper computation of the exemption. The appeal was thus partly allowed, with directions for consequential relief to the assessee.