2015 (3) TMI 485 - AT - Income Tax

Disallowance of claim of Exemption u/s.54F - LTCG on Transfer of shares - purchase agreement was entered into on 30.12.2006; more than one year before the date of sale of the long term capital asset and was registered on 28.3.2011, which is more than two years after the date of sale of the long term capital asset, the Assessing Officer denied the assessee's claim for exemption - Held that - What has transpired is that an amount of ₹ 67,15,910 has been paid to the builder before one year from the date of sale and after two years from the date of sale of long term capital asset for acquiring a flat in the name of the daughter and this has with the time frame laid down in section 54F. It is incorrect to say that the appellant has obtained a substantial domain over the new residential flat as the flat has been booked in the name of the appellant s daughter. Even what the appellant s daughter had obtained by making such payment is only an enforceable right. This does not tantamount to acquisition of a new residential house as contemplated in 54F. As rightly observed by the learned CIT(A), this is not a case where only the property has not been registered within the time specified under Section 54F of the Act. We also find, from an appreciation of the facts on record, that the assessee's claim that he has obtained a substantial claim over the residential flat, as it has been booked in his daughter s name is not correct, as the assessee does not have even an enforceable right in the matter vis-a-vis Brigade Enterprises Ltd. The provisions of law in this regard are very clear, in that the investment in the purchase / acquisition of a new property should necessarily be in the name of the assessee and not in the name of another person and the subsequent intimation of change of the booking of the flat in the name of the assessee by a mere letter of Brigade Enterprises Ltd., does not fulfill the requirements of the provisions of section 54F of the Act. See Jai Narayan V ITO 2007 (8) TMI 295 - PUNJAB AND HARYANA HIGH COURT - the authorities below have correctly rejected the assessee's claim for exemption of ₹ 88,98,970 under Section 54F of the Act. - Decided against assessee.

Summary

Issues Involved:
1. Disallowance of claim for exemption under Section 54F of the Income Tax Act.
2. Addition of income accrued on investments not offered to tax.

Detailed Analysis:

1. Disallowance of Claim for Exemption under Section 54F:

- Facts and Background:
The assessee filed a return for Assessment Year 2009-10, declaring income from salary, Long Term Capital Gains (LTCG), and other sources. The return was processed, and the case was taken up for scrutiny. The assessment was completed, disallowing the assessee's claim for exemption under Section 54F amounting to Rs. 88,98,970.

- Assessing Officer's Observation:
The assessee claimed an exemption under Section 54F against LTCG on the sale of shares, citing investment in a residential flat in Bangalore. The flat was initially booked in the name of the assessee's daughter, with payments made before and after the sale of shares. The AO disallowed the claim, stating the purchase agreement was entered into more than one year before the sale of shares, and the property was registered more than two years after the sale, thus not meeting the conditions of Section 54F.

- CIT(A) Decision:
On appeal, the assessee argued that substantial payments indicated domain over the flat within the required period. The CIT(A) dismissed the appeal, stating the agreement was in the daughter's name, and the registration was beyond the stipulated period. The CIT(A) emphasized that the property should be in the assessee's name, citing various judicial pronouncements.

- Tribunal's Findings:
The Tribunal upheld the CIT(A)'s decision. It noted that payments made more than one year before the sale did not qualify for exemption. Additionally, the Tribunal found no enforceable right for the assessee in the property, as the agreement was in the daughter's name. The Tribunal concurred with the CIT(A) that the investment should be in the assessee's name, referencing relevant judicial decisions.

2. Addition of Income Accrued on Investments Not Offered to Tax:

- Facts and Background:
The assessment included an addition of Rs. 9,26,284 for income accrued on investments not offered to tax. The assessee did not contest this addition during the appellate proceedings.

- Tribunal's Findings:
The Tribunal did not address this issue in detail, as it was not contested by the assessee in the appeal.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the CIT(A)'s decision to disallow the exemption under Section 54F and confirming the addition for income accrued on investments not offered to tax. The Tribunal emphasized the importance of the investment being in the assessee's name and within the specified time frame to qualify for exemption under Section 54F.