2024 (5) TMI 294 - AT - Income Tax

LTCG - denial of a claim of exemption u/s 54 - new residential house property was purchased only after the lapse of two years from the sale of original property - assessee was a co-owner, having 80% of shares, in an immovable property - assessee deposited the consideration from the sale of the original asset in the Capital Gains Scheme Account - HELD THAT - As we find that the original return of income filed by the assessee on 01.10.2013 is within the due date prescribed u/s 139(1) of the Act. Further, since in the present case, it is undisputed that the entire sale consideration was deposited by the assessee in Capital Gains Scheme Account on 26.09.2013, therefore, we are of the considered view that the assessee has duly complied with the provisions of section 54(2) of the Act. Thus, we find no basis in the findings of the learned CIT(A) in concluding that the assessee has not filed his return of income u/s 139(1) of the Act and has not deposited the sale consideration in the Capital Gains Scheme Account before the due date of filing return of income u/s 139(1) of the Act. New house property was not purchased within the period of two years from the date of transfer of the original assetThe process of obtaining the occupation certificate was in process and the developer agreed to procure the occupation certificate at the earliest. Therefore, it needs to be determined whether the residential property purchased by the assessee on 29.09.2014 is a ready-to-move-in flat or an under-construction flat. As evident that this aspect of the matter was neither examined nor any documentary evidence verified in this regard. Since the examination of the aforesaid aspect is necessary for determining the availability of the benefit u/s 54 of the Act to the assessee, we deem it appropriate to restore this issue to the file of the jurisdictional AO for examination and adjudication of the aforesaid aspect as noted by us. We also direct the assessee to furnish all the necessary documents in support of his claim of entitlement to exemption from capital gains u/s 54 of the Act. The assessee is also directed to furnish all the documents as may be required by the AO for complete adjudication of this issue - Assessee appeal allowed for statistical purposes.

Summary

Issues Involved:
1. Taxation of capital gains.
2. Denial of exemption u/s 54.
3. Interpretation of the incentive section liberally for exemption u/s 54.

Summary:

1. Taxation of Capital Gains:
The primary issue pertains to the year in which the capital gains accrued to the assessee are taxable. The assessee argued that since the full consideration was received on 26.09.2013, the capital gain should be taxable in the assessment year 2014-15. However, the Revenue contended that the "transfer" u/s 2(47) of the Act took place on 24.04.2012 when the deed of conveyance was signed, and physical possession was handed over. The Tribunal concluded that the transfer of the original asset took place in the financial year relevant to the assessment year 2013-14, making the capital gains taxable in the assessment year 2013-14.

2. Denial of Exemption u/s 54:
The assessee claimed exemption u/s 54, arguing that the entire sale consideration was deposited in the Capital Gains Scheme Account on 26.09.2013, before filing the return of income u/s 139(1). The Revenue denied the exemption, stating the new residential house was purchased after two years from the sale of the original asset. The Tribunal found that the assessee's original return filed on 01.10.2013 was within the due date prescribed u/s 139(1) and the sale consideration was deposited in the Capital Gains Scheme Account before this due date. Therefore, the assessee complied with the provisions of section 54(2) of the Act.

3. Interpretation of Incentive Section Liberally for Exemption u/s 54:
The assessee argued that the new house property was an under-construction flat, and the occupation certificate was awaited, thus the extended period of three years for construction should apply. The Tribunal noted the need to determine whether the residential property was a ready-to-move-in flat or an under-construction flat and whether the extended period of three years is applicable. This aspect was not examined by the lower authorities. Therefore, the Tribunal restored the issue to the file of the jurisdictional AO for further examination and adjudication, directing the assessee to furnish necessary documents to support the claim.

Conclusion:
The appeal by the assessee was allowed for statistical purposes, with the matter remanded to the AO for further examination and adjudication regarding the nature of the residential property and the applicability of the extended period for exemption u/s 54.