2022 (3) TMI 1349 - AT - Income Tax

Computation of capital gain - non-granting of deduction which the assessee claimed to have paid to other co-owners in connection with the property transferred - HELD THAT - Since the full value of consideration, subject matter of the capital gain under consideration, did not have any relation with Gut No.222/13 in respect of which the assessee along with Sh. Vilas Keshavrao Autade paid a total sum of ₹ 50.00 lakh to the other four co-owners, this transaction of payment in my opinion has rightly been disassociated from the computation of capital gain from transfer to Gut Nos. 222/1 to 222/6. It can be gathered from the impugned order qua the Gut No.222/13 that Sh. Vilas Keshavrao Autade entered into agreement for jointly developing and selling the land which covered Gut No.222/13. Other four co-owners had some right and interest in the said land at Gut No.222/13. To purchase their right, a total sum of ₹ 50.00 lakh was paid by the assessee and Sh. Vilas Keshavrao Autade. On 17-08-2013, Sh. Vilas Keshavrao Autade entered into sale deed for transfer of his land admeasuring 80R out of Gut No.222/13 in favour of two sons of the assessee and no payment was made by the assessee or his sons towards acquiring the share in Gut No.222/13 along with Vilas Keshavrao Autade. This shows that sum of ₹ 25.00 lakh paid by the assessee along with Sh. Vilas Keshavrao Autade to the other co-owners was a consideration for transfer of Gut No. 222/13, inter alia, in the name of two sons of the assessee. Notwithstanding this factual aspect, since the payment of ₹ 25.00 lakh made by the assessee to other co-owners has no relation whatsoever with the property transferred that became subject matter of computation of long term capital gain under consideration, there can be no question of allowing any deduction in respect of this sum. The impugned order is countenanced on this score. Non-granting of exemption u/s.54F - C laim was jettisoned by the AO on the ground that the assessee did not purchase a new residential flat but only an office premises and hence, section 54F could not apply - It is apparent from bare reading of section 54F that the exemption becomes available towards capital gain arising from the transfer of any long term capital asset on purchasing or constructing one residential house in India. Thus, it is patent that in order to qualify for exemption u/s.54F, it is necessary that the new asset must be a residential house . Turning to the facts of the instant case, it is seen that the new asset purchased by the assessee is an office premises and not a residential premises . In that view of the matter, the inescapable conclusion is that the authorities below were justified in repelling the assessee s contention on this issue.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Re-assessment proceedings initiation and approval.
3. Computation of capital gain - exemption u/s.54F and deduction claim.

Analysis:
1. The appeal was time-barred by 31 days, but the assessee filed a condonation application with reasons for the delay, which was accepted by the tribunal. The appeal was admitted for disposal on merits.

2. The ground challenging the initiation of re-assessment proceedings was not pressed by the appellant and was dismissed. The subsequent ground challenging the granting approval for re-assessment was also dismissed.

3. The main issue revolved around the computation of capital gain by the Assessing Officer (AO) and the subsequent appeal by the assessee. The AO rejected various claims made by the assessee regarding exemption u/s.54F, indexed cost of improvement, and other expenses. The assessee also claimed a deduction of ?25.00 lakh paid to other co-owners, which was rejected by the authorities.

4. Regarding the deduction claim of ?25.00 lakh, the tribunal found that the payment made by the assessee to other co-owners had no connection to the property transferred for capital gain computation. The payment was for a different property, and hence, no deduction was allowed.

5. On the issue of exemption u/s.54F, the assessee claimed exemption based on the purchase of a residential house. However, it was found that the property purchased was an office premises, not a residential house as required by the law. Therefore, the claim for exemption u/s.54F was rejected by the authorities.

6. Ultimately, the tribunal dismissed the appeal, upholding the decisions of the lower authorities regarding the computation of capital gain, exemption u/s.54F, and the deduction claim of ?25.00 lakh. The order was pronounced in the Open Court on 29th March 2022.