2022 (10) TMI 481 - AT - Income Tax

Capital gain computation - sale of immovable property and valued by Stamp Valuation Authority - as per assessee land so sold was out of purview of capital asset being an agricultural land and authorities below failed to give benefit of section 54F of the Act in respect of construction of residential house and also acquiring agricultural land - HELD THAT - The objection of the assessee regarding purchase of agricultural land and construction of residential house is not adverted. Even the AO has not given any finding regarding investment of sale consideration for acquiring agricultural land and construction of residential property. Therefore, it would sub-serve the interest of justice if both the issues are restored to the file of the AO for decision afresh after verifying the correctness of the claim and if it is found that the sale consideration was invested out of capital gain then the AO would allow deduction to the assessee as available under the law. However, regarding the objection of the assessee that land in question was not a capital asset. It is seen from the records that the assessee had admitted that the Sale Deed was executed and related to the industrial plot. Therefore, see no merit in the submissions of the assessee that the land in question would not fall within the character of capital asset. Thus, grounds raised by the assessee are partly allowed.

Issues Involved:
1. Sustaining the assessment order without considering the facts and circumstances.
2. Classification of the land sold as a capital asset under section 2(14) of the IT Act, 1961.
3. Date of transfer under section 2(47) of the IT Act, 1961.
4. Use of the land for agricultural purposes until the sale.
5. Deduction under section 54F of the IT Act, 1961 for investment in construction of house property.
6. Condonation of delay in filing the appeal.

Issue-wise Detailed Analysis:

1. Sustaining the Assessment Order:
The appellant argued that the Ld. CIT(A) erred in sustaining the assessment order without considering the facts and circumstances of the case. The Tribunal noted that the appellant had raised multiple grounds of appeal, including the classification of the land and the applicability of deductions under section 54F.

2. Classification of the Land as a Capital Asset:
The appellant contended that the land sold was agricultural and not a capital asset under section 2(14) of the IT Act, 1961. The Tribunal observed that the land use was changed in the revenue record on 05.08.2008, and the sale deed executed on 23.08.2008 declared the land as an industrial plot. The Tribunal upheld the Ld. CIT(A)'s decision that the land qualified as a capital asset at the time of transfer, making it subject to capital gains tax.

3. Date of Transfer under Section 2(47):
The appellant argued that the date of the 'Agreement to Sell' (30.07.2008) should be treated as the date of transfer under section 2(47) of the IT Act, 1961. However, the Tribunal noted that the possession of the land was handed over only when the sale deed was executed on 23.08.2008. Therefore, the transfer was completed on the latter date when the land was already classified as non-agricultural.

4. Use of the Land for Agricultural Purposes:
The appellant claimed that the land was used solely for agricultural purposes until the sale. The Tribunal acknowledged this claim but emphasized that the change in land use before the execution of the sale deed meant that the land was non-agricultural at the time of transfer.

5. Deduction under Section 54F:
The appellant argued that both the AO and Ld. CIT(A) ignored the deduction under section 54F for investment in the construction of a house property. The Tribunal found that neither the AO nor the Ld. CIT(A) had addressed the appellant's claim regarding the investment of the sale consideration in acquiring agricultural land and constructing a residential property. The Tribunal remanded this issue back to the AO for fresh verification and to allow the deduction if the investment was found legitimate.

6. Condonation of Delay:
The appeal was filed with a delay of 844 days. The appellant provided an affidavit explaining the delay due to lack of knowledge of the impugned order and subsequent complications, including the COVID-19 pandemic. The Tribunal, following the Supreme Court judgment in the case of Collector of Land Acquisition vs Mst. Katiji & Ors., condoned the delay, considering the reasonable cause provided by the appellant.

Conclusion:
The Tribunal partly allowed the appeal, upholding the classification of the land as a capital asset but remanding the issue of deduction under section 54F back to the AO for fresh consideration. The Tribunal also condoned the delay in filing the appeal, allowing it to be heard on merits. The decision was pronounced in the open court on 22nd September 2022.

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