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2014 (11) TMI 143 - AT - Income Tax


Issues Involved:
1. Validity of the assessment year for Long Term Capital Gain (LTCG).
2. Adoption of Fair Market Value (FMV) for the cost of acquisition.
3. Partial allowance of deduction under Section 54F.
4. Additional compensation and its impact on the capital gain.
5. Non-consideration of decisions cited by the appellant.

Detailed Analysis:

1. Validity of the Assessment Year for Long Term Capital Gain (LTCG):
The primary issue was whether the LTCG should be assessed in AY 2008-09 or AY 2009-10. The assessee argued that the sale deed was executed, possession handed over, and the sale consideration received on 31/03/2008, thus the gain should be taxed in AY 2008-09. The Assessing Officer (AO) and the CIT(A) held that since the conveyance deed was registered on 29/05/2008, the LTCG pertains to AY 2009-10. The Tribunal referred to the Supreme Court judgment in Suraj Lamp and Industries Pvt. Ltd. vs. State of Haryana, which emphasized that transfer of property under the IT Act happens only when the conveyance deed is registered. However, the Tribunal also considered the judgment of the Gujarat High Court in CIT vs. Hormasji Mancharji Vaid, which held that the transfer date is when the sale deed is executed, possession handed over, and consideration paid. The Tribunal concluded that the transaction should be considered for AY 2008-09, not AY 2009-10.

2. Adoption of Fair Market Value (FMV) for Cost of Acquisition:
The assessee claimed the FMV of the property as on 01/04/1981 at Rs. 13,72,000 based on a registered valuer's report. The AO adopted a value of Rs. 41,741, which was disclosed in the assessee's books. The CIT(A) partially allowed the assessee's claim, estimating the FMV at Rs. 8,00,000. The Tribunal found that the AO's reliance on the book value was not supported by law, as the property was acquired by gift, making the cost of acquisition nil. However, the Tribunal noted deficiencies in the valuer's report and upheld the CIT(A)'s estimation of Rs. 8,00,000 as reasonable.

3. Partial Allowance of Deduction under Section 54F:
The assessee claimed a deduction of Rs. 4,39,50,000 under Section 54F, which the AO restricted to Rs. 1,12,40,000. The AO argued that the property transactions were made to claim the deduction and that the property sold by the assessee's HUF and mother was one composite property. The CIT(A) upheld the AO's decision, noting the lack of evidence that the properties were distinct in municipal records. The Tribunal found no error in the CIT(A)'s decision and confirmed the restriction of the deduction.

4. Additional Compensation and Its Impact on Capital Gain:
The assessee received additional compensation of Rs. 10,00,000, which the AO included in the LTCG for AY 2009-10. The Tribunal held that since the transaction should be considered for AY 2008-09, this issue became infructuous.

5. Non-Consideration of Decisions Cited by the Appellant:
The assessee argued that the CIT(A) did not consider decisions cited in their favor. The Tribunal noted that the CIT(A) relied on the Supreme Court's judgment in Suraj Lamp and Industries Pvt. Ltd., which was not directly applicable to the IT Act. The Tribunal found that the decisions cited by the assessee, including the Gujarat High Court's judgment, were more relevant and supported the assessee's position.

Conclusion:
The Tribunal partly allowed the assessee's appeal by holding that the LTCG pertains to AY 2008-09 and not AY 2009-10. It upheld the CIT(A)'s estimation of FMV at Rs. 8,00,000 and confirmed the restriction of the deduction under Section 54F. The Tribunal dismissed the Revenue's appeal, which contested the CIT(A)'s estimation of FMV.

Order:
Assessee's appeal is partly allowed, whereas Revenue's appeal is dismissed.

 

 

 

 

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