2021 (1) TMI 787 - HC - Income Tax

Eligibility for deduction under Section 54F - denial of deduction as capital asset transferred was not long term capital asset in view of Section 2(29A) read with Section 2(42A) - whether ITAT erred in treating the asset held by the assessee for less than four months as long term capital gain asset as against stipulation in Section 2(29A) read with Section 2(42A) is holding for more than 36 months? - HELD THAT - CIT(A), who found from the sale deed dated 24.3.1995 that the property owned by the assessee at Secundrabad was indeed a commercial property situated in a complex called 'Diamond Towers'. The relevant clauses in the said sale deed had been referred to by the CIT(A) in paragraph 7 of the order dated 28.3.2018. This issue was also considered by the Tribunal on the appeal filed by the Revenue and noting the factual position, the Tribunal confirmed the finding of the CIT(A). Though this issue, which is argued by Mr.Karthik Ranganathan, learned Standing Counsel appearing for the Revenue, is not raised as a substantial question of law for consideration, yet we have tested the correctness of the finding and we find that the CIT(A) and the Tribunal are right in concluding that the property was a commercial property as could be seen from the conditions contained in the said sale deed dated 24.3.1995. Therefore, there is no ground made out by the Revenue to interfere with the order passed by the Tribunal and we also hold that no substantial question of law arises for consideration in this appeal. - Decided against revenue.

Summary

Issues:
1. Eligibility for deduction under Section 54F
2. Treatment of asset holding period
3. Applicability of Explanation 1(b) of Section 2(42A)

Eligibility for deduction under Section 54F:
The appeal filed by the Revenue challenged the Tribunal's order allowing the assessee's deduction claim under Section 54F of the Income Tax Act, 1961. The primary contention was whether the assessee qualified for the deduction when the transferred asset did not meet the criteria of a long-term capital asset as per Section 2(29A) and Section 2(42A) of the Act. The Assessing Officer considered the asset as a short-term capital asset due to the holding period being less than four months. However, the CIT(A) and the Tribunal examined a settlement deed involving a trademark gift to the assessee, determining it as a voluntary gift without consideration. The Tribunal also referenced similar cases and upheld the decision. Ultimately, the High Court found no substantial question of law in this issue.

Treatment of asset holding period:
Another issue raised was the character of the asset purchased by the assessee, specifically regarding its classification as a commercial or residential property. The Assessing Officer initially deemed it a residential property, but the CIT(A) identified it as a commercial property based on the sale deed's clauses. The Tribunal affirmed this finding after reviewing the factual position. Although not raised as a substantial question of law, the High Court verified the correctness of the finding and concurred with the lower authorities, concluding that the property was indeed commercial as evidenced by the sale deed.

Applicability of Explanation 1(b) of Section 2(42A):
The third issue involved the applicability of Explanation 1(b) of Section 2(42A) concerning the period of asset holding by the previous owner in cases where the assessee did not receive the asset through gift or will but via a settlement deed. The Assessing Officer had disputed the nature of the deed, which was determined as a gift by the CIT(A) and the Tribunal. The High Court, after examining the factual matrix extensively, found no grounds for interference with the Tribunal's decision, emphasizing that no substantial question of law arose for consideration. Consequently, the tax case appeal was dismissed without costs.