2017 (5) TMI 13 - AT - Income Tax

Income from sale of the agricultural land - year of assessment - claim of deduction on account of cost of improvement.Held that - As per our considered view, since not only sale deed was executed in the A.Y. 2008-09 but also possession was given in the A.Y. 2008-09, capital gain was liable to be taxed in the A.Y. 2008-09 and not in the A.Y. 2009-10, merely because sale deed was got registered in the A.Y. 2009-10. We also found that the same land of ₹ 1,45,00,000/- has also been assessed in AY 2008-09. It is the case of the department that sale of land should be accessed to tax in AY 2008-09. This finding of fact was not contested by the Assessee or the Department during both Assessment proceedings as well as remand proceedings. We also found that the assessee has gone in for Dispute resolution scheme and hence the entire amount in accordance with the scheme was stated to have paid. As per our considered view since, the capital gains on sale of land is liable to be taxed in AY 2008-09 and tax has already been paid in accordance to the Income Declaration Scheme, the said long term capital gain is taxable in AY 2008-09 and not in the current AY 2009-10, If the capital gain on Long term capital gain on sale of land is also taxed in 2009-10, then it shall result in double taxation of the said Capital gains. So far as deduction of ₹ 90 lakhs is to be allowed as the cost of improvement since the same has been paid before 31/03/2008, the same is liable to be allowed while computing the capital gain.

Issues:
1. Delay in filing the appeal by Revenue and Cross Objection by the assessee.
2. Treatment of compensatory expenses and cost of acquisition for capital gains on the sale of land.
3. Dispute regarding the assessment year for taxing capital gains.
4. Deduction of compensatory expenses and cost of improvement.
5. Double taxation concern for long-term capital gains.

Analysis:

1. The judgment addresses the issue of a delay in filing the appeal by the Revenue and the Cross Objection by the assessee. The Tribunal condoned the delay after considering the reasons provided, ensuring that the appeals were heard on merit in the interest of justice.

2. The case involves the treatment of compensatory expenses and the cost of acquisition concerning capital gains from the sale of land. The Assessing Officer disallowed compensatory expenses of &8377; 90,00,000 as pertaining to the preceding assessment year. The contention regarding the cost of acquisition was also disputed.

3. There was a dispute regarding the assessment year for taxing capital gains. The CIT(A) allowed compensatory expenditure but disagreed with the assessee's claim that the gains should have been taxed in the earlier assessment year. The Tribunal found that the sale of land fell within the previous year relevant to the earlier assessment year.

4. The judgment discussed the deduction of compensatory expenses and cost of improvement. The Assessing Officer denied the deduction of &8377; 90,00,000 paid to a party for the reason that it was made in the earlier year towards the cost of improvement. The Tribunal directed the allowance of the deduction of &8377; 90,00,000 as the cost of improvement.

5. Concerns were raised about potential double taxation of long-term capital gains. The Tribunal concluded that the gains should have been taxed in the earlier assessment year and directed the Assessing Officer to assess the capital gain accordingly to avoid double taxation. The deduction of &8377; 90,00,000 was also directed to be allowed.

In conclusion, the judgment resolved the issues by directing the Assessing Officer to assess the capital gain in the correct assessment year, allow the deduction of compensatory expenses, and address concerns to prevent double taxation of long-term capital gains.

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