2023 (4) TMI 64 - AT - Income Tax

Revision u/s 263 - CIT considering the date of registration and the date of sale concluded that this cannot be treated as LTCG and has to be taxed as STCG as property is not held for more than three years - claim made by the assessee u/s. 54 needs to be disallowed as deduction u/s. 54 is admissible only on LTCG - HELD THAT - CIT has ignored the date of agreement of sale entered into by the assessee during the year 2009. As decided in S.R. Jeyashankar 2014 (12) TMI 264 - MADRAS HIGH COURT breach of agreement would only give right to the beneficiary for enforcing the right over the property. We find no reason to differ with the said reasoning. Thus we are of the view that the order of the Ld. Pr. CIT needs to be quashed and allow the appeal of the assessee.

Summary

Issues:
The judgment involves the issue of excess deduction claimed under section 10 of the Income Tax Act and the disallowance of deduction claimed under section 54 of the Act.

Excess Deduction Claimed u/s 10:
The appellant, an individual salaried employee, filed a return of income for the AY 2015-16 admitting a total income of Rs. 20,27,160/-. The Assessing Officer (AO) observed an excess claim of Rs. 13,00,147/- u/s 10 of the Act, leading to reopening of the case u/s 148. The appellant responded by filing a revised return, but the AO still found an excess claim of Rs. 6,76,342/-, which was added to the total income. The Principal Commissioner of Income Tax (Pr. CIT) u/s 263 noticed a claim of deduction u/s 54 for Rs. 18,11,240/-, arising from the sale of property. The Pr. CIT concluded that the gain should be taxed as Short Term Capital Gain (STCG) instead of Long Term Capital Gain (LTCG) due to the holding period. Consequently, the claim u/s 54 was disallowed as it is admissible only on LTCG. The Pr. CIT directed the AO to recompute the income. The appellant appealed against this order.

Disallowed Deduction Claimed u/s 54:
The appellant contended that the date of agreement for property purchase in 2009 should be considered for calculating the holding period for capital gains. The Pr. CIT argued that since the property was registered in 2013 and sold in 2015, the gain should be treated as STCG. The appellant relied on the decision of the Madras High Court in CIT vs. S.R. Jeyashankar [2015] 373 ITR 0120, emphasizing the importance of the agreement date. The Tribunal found that the Pr. CIT ignored the agreement date and held that the gain should be treated as LTCG. Citing Circular No.471, the Tribunal supported the appellant's argument, quashed the Pr. CIT's order, and allowed the appeal.

Separate Judgment:
The appellate tribunal, consisting of Hon'ble Judicial Member Shri Duvvuru Rl Reddy and Hon'ble Accountant Member Shri S Balakrishnan, pronounced the judgment on 31st March 2023.