2021 (4) TMI 539 - AT - Income Tax

Long Term Capital Gain on sale of Vejalput land - HELD THAT - There is no dispute qua the amount of capital gain earned by the assessee along with other parties. As per the assessee the amount of capital gain was taxable in the assessment year 2007-08 and 2008-09 whereas the revenue had taxed the entire amount of capital gain in the assessment year 2006-07 as contended by the learned AR. At the time of hearing, as pointed out by the learned AR that the assessee has settled his dispute for the assessment year 2006-07 under VSV scheme 2020. For this purpose, the learned AR has filed form 3 issued by the Income Tax Department showing the settlement of the dispute under VSV scheme 2020. As the dispute relating to the year under consideration has been settled under VSV scheme 2020, we hold that no separate adjudication is required. Share of profit from the undisclosed sources of income of the partnership firm - HELD THAT - We note that the ITAT in the identical facts and circumstances in the case of other partners 2018 (5) TMI 852 - ITAT AHMEDABAD has remanded back the matter to the file of Ld. CIT(A) for fresh adjudication in accordance with the provisions of law. Respectfully following the same, we are inclined to remand this matter to the file of Ld. CIT(A) for fresh adjudication in accordance with the provisions of law. Hence, the ground raised by the assessee is allowed for statistical purposes. Exemption under section 54B - alternate contention for allowing the of the Act as the investment in the agricultural land purchased which is more than the capital gain even if the benefit of cost of improvement is ignored - HELD THAT - Admittedly, the assessee in his computation of income has shown investment in the agricultural land which is much more than the capital gain earned by the assessee after ignoring the index cost of improvement. Accordingly, in principle we find force in the contention of the learned AR for the assessee as the investment in the agricultural land exceeds the amount of capital gain. However, this aspect has not been verified by the authorities below. Accordingly we are inclined to set aside the issue to the file of the AO for the limited purpose to verify whether the assessee has made investments in another agricultural land only. If the contention of the assessee is found correct, then the assessee should be allowed the benefit of exemption under section 54B of the Act as discussed above. Hence the ground of appeal of the assessee is allowed for the statistical purposes.

Summary

Issues Involved:
1. Taxability of Long Term Capital Gain (LTCG) on sale of land.
2. Computation of capital contribution in a partnership firm.
3. Addition of share profit from undisclosed profits of the partnership firm.
4. Exemption under section 54B of the Income Tax Act.

Detailed Analysis:

1. Taxability of Long Term Capital Gain (LTCG) on sale of land:
The primary issue addressed was whether the LTCG of ?62,46,790 on the sale of Vejalpur land should be taxed in the assessment year 2006-07 or spread over subsequent years as per section 45(3) of the Income Tax Act. The assessee argued that the capital gain should be taxed in the years when the amount was received (A.Y. 2007-08 and 2008-09). However, the revenue taxed the entire amount in A.Y. 2006-07. The Tribunal noted that the dispute for A.Y. 2006-07 was settled under the Vivad Se Vishwas Scheme 2020, making further adjudication unnecessary. Consequently, the ground of appeal was dismissed as infructuous.

2. Computation of capital contribution in a partnership firm:
The assessee contested the computation of capital contribution, arguing that the amount should be ?17,57,000 instead of ?62,46,790 as determined by the AO. The Tribunal did not provide a detailed analysis of this issue since the primary dispute was settled under the Vivad Se Vishwas Scheme 2020, rendering this ground academic and not requiring separate adjudication.

3. Addition of share profit from undisclosed profits of the partnership firm:
The assessee challenged the addition of ?1,50,000 as their share of profit from undisclosed sources of the partnership firm. The Tribunal noted that similar additions in the hands of other partners were remanded back to the CIT(A) for fresh adjudication. The Tribunal followed the same approach, remanding the issue back to the CIT(A) to determine whether the undisclosed income had already been taxed in the hands of the partnership firm. The Tribunal emphasized that the same income should not be taxed twice.

4. Exemption under section 54B of the Income Tax Act:
The assessee claimed an exemption under section 54B for the investment in new agricultural land amounting to ?1,38,22,000, which exceeded the capital gain. The AO denied this exemption, arguing that the land sold was not used for agricultural purposes and disallowed the indexed cost of improvement due to lack of evidence. The CIT(A) allowed the exemption under section 54B but denied the indexed cost of improvement. The Tribunal found merit in the assessee's contention that the investment in new agricultural land exceeded the capital gain and thus qualified for the exemption. The issue was remanded back to the AO for verification of the investment amount, and if verified, the exemption under section 54B should be allowed.

Conclusion:
The appeals were partly allowed for statistical purposes, with specific issues remanded back to the CIT(A) and AO for fresh adjudication based on the principles laid down by the Tribunal. The Tribunal emphasized the importance of not taxing the same income twice and ensuring that exemptions are granted as per the provisions of the law.