2013 (6) TMI 399 - AT - Income Tax

Capital gain computation - whether assessee has invested sale consideration in NHAI Bonds as required u/s 54E - whether property owned jointly by the assessee and his partner - Held that - CIT(A) has given a categorical finding on this issue stating that the initial investment in the property was made by both the partners equally. The sale proceeded received in the name of the appellant were divided equally by the both partners. Since, it was known that firm was to be dissolved by 31-3-08 hence, they have invested sale consideration in NHAI Bonds as required u/s 54E. Thus the sale proceeds belonged to appellant and other partners, hence, the appellant is entitled to exemption u/s 54E. The sac consideration of the appellant is to be considered at 50% out of total i.e. 55 lakhs. The capital gains before exemption come to Rs.33,34,060/- of which 50% would be at Rs. 17,10,939. Accordingly, the capital gains in the case of the appellant is to be considered at Rs.17,10,939 against which the appellant has invested Rs.16 lakhs in NHAI Bonds. Hence, the chargeable long term capital gains in the case of the appellant would be at Rs.1,10,939 17,10,939- 16,00,000 . AO is directed to consider long term capital gains at Rs.1,10,939 in the case of the appellant as against Rs.17, 43,060 assessed by him. Against revenue. Deduction u/s. 54F in respect of deposits under Capital Gains Accounts Scheme - Held that - AO has allowed part of the claim of deduction u/s. 54F in respect of the purchase of land and part of the cost of construction. Therefore, the AO cannot say that the assessee has not claimed any deduction in the return of income. It is an undisputed fact that the return of income was filed electronically and as per the new provision relating to the filing of return, the assessee is not required to file any document alongwith return of income. Also as all the necessary details were filed during the course of the scrutiny assessment proceedings andCIT(A) has categorically held that the deposit in capital gains account scheme was well within the period of limitation provided u/s. 54F(4) no reason to tamper with the findings of CIT(A). Against revenue.

Summary

Issues Involved:
1. Taxability of capital gain on the sale of tenancy rights in a property.
2. Allowance of deduction under Section 54F for the deposit under Capital Gains Accounts Scheme.

Issue 1: Taxability of Capital Gain on Sale of Tenancy Rights:
The appeal involved a dispute between the Revenue and the assessee regarding the taxability of capital gains on the sale of tenancy rights in a property. The Revenue contended that the entire sale consideration should be assessed in the hands of the assessee, while the assessee claimed that the property was jointly owned by both partners of a dissolved firm. The Assessing Officer (AO) believed that the sale consideration was paid to the assessee, making him the sole owner. However, the Commissioner of Income Tax (Appeals) (CIT(A)) found that the initial investment in the property was made by both partners equally, and an affidavit confirmed equal ownership. The CIT(A) directed the AO to consider only 50% of the sale proceeds in the hands of the assessee for tax purposes. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this issue.

Issue 2: Allowance of Deduction under Section 54F:
The second issue revolved around the allowance of deduction under Section 54F for the deposit of a specific amount under the Capital Gains Accounts Scheme. The AO denied the deduction as the assessee had not disclosed the deposit details or provided proof as required by law. However, the CIT(A) accepted the assessee's submission that the deposit was made within the prescribed time limit and that electronic filing of the return did not necessitate submitting documents with the return. The Tribunal agreed with the CIT(A) that the deposit was in compliance with the law and allowed the deduction. Consequently, the Tribunal dismissed the Revenue's appeal on this issue as well.

In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues, ruling in favor of the assessee regarding the taxability of capital gains on the sale of tenancy rights and the allowance of deduction under Section 54F for the deposit made under the Capital Gains Accounts Scheme. The appeal filed by the Revenue was dismissed, and the cross objection filed by the assessee was allowed.