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2016 (11) TMI 67 - AT - Income TaxComputation Long Term Capital Gain - Rs. NIL filed by the assessee - withdrawing exemption of under section 54 claimed by the assessee - cost of indexation reduced - Held that - As in the present case, assessee has sold the property in the next year in AY 2010-11 and withdrew the exemption claimed of ₹ 7,30,538/-in AY 2009-10 and reduced the same from the cost of acquisition claimed in AY 2010-11. Therefore, the impact of the above action of the assessee is that assessee has taxed the amount of ₹ 7,30,538/- as Long term capital gain and therefore disallowance of exemption in AY 2010-11 will leads to double taxation in the hands of the assessee. Therefore, this issue is squarely covered by the judgement of ITAT Mumbai in the case of Nilesh Pravin Vora and Yatin Pravin Vora (2016 (5) TMI 64 - ITAT MUMBAI ) and also the exemption is withdrawn in the subsequent year by the assessee himself exemption claimed by the assessee cannot be disallowed. - Decided in favour of assessee
Issues Involved:
1. Computation of Long Term Capital Gain (LTCG) of ?8,35,564/- versus NIL as filed by the assessee. 2. Withdrawal of exemption of ?7,30,539/- under Section 54. 3. Reduction of cost of indexation by ?72,040/-. Issue-Wise Detailed Analysis: 1. Computation of Long Term Capital Gain (LTCG) of ?8,35,564/- versus NIL as filed by the assessee: The assessee declared an income of ?20,99,070/- for the assessment year 2009-10. The case was scrutinized, and the AO assessed the income at ?30,70,880/-. The primary contention was the computation of LTCG on the sale of a property at AG/270, Shalimar Bagh, Delhi, for ?18,10,000/-. The property was purchased in the financial year 1998-99 for ?3,72,040/-. The assessee claimed an indexed cost of acquisition of ?6,11,022/- and an exemption under Section 54 for investment in residential property amounting to ?12,07,539/-. The AO computed the capital gain at ?8,35,564/- as against NIL computed by the assessee. 2. Withdrawal of exemption of ?7,30,539/- under Section 54: The assessee invested ?12,07,539/- in two residential properties: ?4,77,000/- for a residential house in AG-587, Shalimar Bagh (50% share of his son) and ?7,30,539/- for a residential plot in Omaxe City, Sonepat. The AO restricted the exemption to ?4,77,000/- only, arguing that Section 54 allows exemption for investment in a residential house, not a residential plot. The assessee cited Circular No. 667 dated 18.10.1993, which states that the cost of land is an integral part of the cost of a residential house. The AO disallowed the exemption of ?7,30,539/-. 3. Reduction of cost of indexation by ?72,040/-: The total cost of acquisition claimed by the assessee was ?3,72,040/-, including ?3,00,000/- for purchase, ?60,000/- for renovation and brokerage expenses, and ?12,040/- for professional charges. The AO disallowed ?72,040/- due to the absence of documentary evidence, and this was confirmed by the CIT(A). Tribunal's Observations and Decision: The Tribunal examined the facts and legal precedents. It noted that the property was sold in the subsequent financial year, and the assessee withdrew the exemption claimed under Section 54 by paying tax in the following year. This action by the assessee was intended to avoid double taxation. The Tribunal referred to the judgment of the Delhi High Court in CIT Vs Geeta Duggal (357 ITR 153), which clarified that the term "a residential house" should not be interpreted as a single unit. The judgment emphasized that a residential house could consist of several independent units. The Tribunal also cited the Karnataka High Court's judgment in CIT vs D. Ananda Basappa (309 ITR 329), which supported the interpretation that "a residential house" could include multiple units. The Tribunal further noted that the amendment to Section 54, effective from 1.4.2015, restricted the exemption to one residential house. However, this amendment was not applicable for the assessment year in question. The Tribunal also referred to the ITAT Mumbai's decision in Nilesh Pravin Vora and Yatin Pravin Vora (2016 (5) TMI 64), which held that exemption under Section 54F would be allowed for multiple residential units before the amendment. Conclusion: The Tribunal concluded that the exemption claimed by the assessee could not be disallowed, as the assessee had already withdrawn the exemption in the subsequent year, thus avoiding double taxation. The Tribunal allowed the appeal in favor of the assessee, setting aside the disallowance made by the AO and the CIT(A). Result: The appeal filed by the assessee was allowed.
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