2022 (10) TMI 492 - AT - Income Tax

Capital gain computation - transfer of property/sale of property for the purposes of capital gains - sale value consideration - HELD THAT - Hon ble Supreme Court in SH. SANJEEV LAL ETC. 2014 (7) TMI 99 - SUPREME COURT had held that for the purpose of capital gains, an agreement to sell with part payment thereof transfers the ownership in this regard for the purpose of necessary computation in this regard. Though the amendment in Finance Act, 2016 was made from the date referred by the ld. CIT (A) but the decision of Hon ble Supreme Court was prior also wherein it was held that for the purpose of transfer of property/sale of property for the purposes of capital gains, agreement to sell with part payment thereof is sufficient compliance. In this case as already noted, out of consideration of Rs.1.6 crores, assessee had already paid a substantial sum of Rs.1.10 crore at that time. Hence, in our considered opinion, the authorities below action to take circle rate of the year of registration is not sustainable and accordingly set aside the same. Claim of certain expenses relating to registration expenses as cost of improvement - AO had not allowed the same on the ground that no details were furnished before him - HELD THAT - As assessee referred to his letter in the paper book to the AO wherein all the necessary details were furnished, interest of justice will be served if this issue is re-examined by the AO afresh and decide as per law. We order accordingly. Needless to add assessee should be provided an opportunity of being heard.

Summary

Issues involved:
1. Disallowance of carry forward Long Term Capital Loss
2. Addition of sum as Income from Other Sources
3. Interpretation of beneficial Amendment
4. Claim of registration expenses as cost of improvement

Issue 1: Disallowance of carry forward Long Term Capital Loss
The case involved the disallowance of carry forward Long Term Capital Loss by the Revenue due to a difference in circle rates between the date of registration of Agreement to Sell and the date of sale deed registration. The Revenue contended that the Assessing Officer erred in making the disallowance under Section 50C of the Income Tax Act, 1961. The ld. CIT (A) upheld the decision, stating that the Finance Act, 2016 amendment did not act retrospectively, thereby making the provisions of Section 50C applicable. The Appellate Tribunal, however, found in favor of the assessee, citing a Supreme Court decision that an agreement to sell with part payment transfers ownership for capital gains purposes. The Tribunal set aside the decision to take the circle rate of the year of registration, ruling in favor of the assessee.

Issue 2: Addition of sum as Income from Other Sources
The Revenue added a sum as Income from Other Sources, which the assessee disputed. The ld. CIT (A) found that the Assessing Officer had reduced the loss shown from the sale of the property, contrary to the Revenue's claim of adding the sum as income. The Tribunal noted this discrepancy and dismissed the ground, affirming the reduction of the loss by the Assessing Officer.

Issue 3: Interpretation of beneficial Amendment
The dispute also involved the interpretation of a beneficial Amendment (First Proviso to Sec. 50C) to provide statutory recognition to a principle in commercial parlance. The ld. CIT (A) clarified that the amendment was effective from a specific date and did not apply retrospectively to benefit the assessee. The Tribunal upheld this interpretation, stating that the Assessing Officer had correctly valued the property and computed capital gains, as the amendment did not allow the benefit of the agreement fixing the consideration amount in the previous financial year.

Issue 4: Claim of registration expenses as cost of improvement
The assessee claimed registration expenses as a cost of improvement, which the AO disallowed due to lack of proof. The ld. CIT (A) also confirmed this decision, citing insufficient details provided by the assessee. However, the assessee later furnished necessary details to the AO, leading the Tribunal to order a re-examination of the issue by the AO to decide in accordance with the law. The Tribunal partially allowed the appeal, emphasizing the importance of providing the assessee with an opportunity to be heard.

In conclusion, the Appellate Tribunal's judgment addressed multiple issues related to the disallowance of capital loss, addition of income, interpretation of amendments, and the claim of expenses. The decision favored the assessee on the disallowance of capital loss and ordered a re-examination of the claim of registration expenses, ensuring the principles of justice and opportunity to be heard were upheld.