2023 (7) TMI 26 - AT - Income Tax

Deduction u/s 54F - income on the sale of property has been held to be short term capital gain - Part of the property (i.e. 66.92 sq.mtr. outof 302.86 sq.mtr.) held with the assessee less than 36 months as the same was conveyed to the daughter of the appellant on 16.03.2006 and reversed back on 30.07.2015 - reckoning of holding period of asset - HELD THAT - Assessee was in position of the entire plot of land since 01.01.1979 but the Schedule of property mentions therein only in respect of 66.92 sq.mtr. and not 302.86 sq.mtr. and therefore, the title transferred to the daughter is of course in respect to this portion of area of land of measuring about 66.92 sq.mtr. and not the total area 302.86 sq.mtr Legally, the assessee has been conferred with the right of possession of the entire plot of land measuring about 302.86 sq.mtr. only by way of the deed of rectification dated 31.07.2015 but the same relates back to the original date of allotment dated 01.01.1976 when under the University Staff Housing Scheme the assessee was allotted with the same plot of land. Under these facts and circumstances, admittedly, the assessee is entitled to the claim of long term capital gain under Section 54 of the Act in respect of balance of land measuring 235.94 sq.mtr. which was never conveyed by way of deed of sale by the appellant to her daughter. We, therefore, accept the contention made by the Ld. Senior Counsel appearing for the assessee and direct the Ld. AO to calculate the capital gain in respect of the area of land admeasuring to 235.94 sq.mtr. and grant relief to the assessee. Assessee s appeal is partly allowed.

Summary

Issues Involved:
1. Denial of deduction under Section 54F of the Income Tax Act for short term capital gain on sale of property.

Summary:
The appeal was filed against the order denying the deduction under Section 54F of the Income Tax Act for the Assessment Year 2016-17. The appellant had acquired a residential unit from Gujarat State Housing Board and subsequently sold the property to her daughter. The daughter failed to record her name in the City Survey Record due to unclear title of the land. A rectification deed was executed to clarify ownership, and the property was eventually sold to a third party. The authorities denied the claim of long term capital gain based on the holding period. The appellant argued that the rectification deed related back to the original allotment, entitling her to long term capital gain. The Tribunal accepted the appellant's contention, directing the Assessing Officer to calculate the capital gain for the land not conveyed to the daughter, granting relief to the appellant. The appeal was partly allowed.

The judgment highlighted the importance of the rectification deed in determining the holding period for capital gains tax purposes. It clarified that the appellant was entitled to claim long term capital gain for the land not conveyed to the daughter, based on the original allotment date. The Tribunal's decision provided relief to the appellant by allowing the appeal partly and directing the calculation of capital gain for the specific area of land.