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2019 (4) TMI 758 - AT - Income TaxDetermination of Long term capital asserts - Deduction u/s 54EC - AO observed that the land was purchased by assessee on 03.05.2008, therefore, the capital gain treated as a short term capital gain - HELD THAT - The acquisition of the land is liable to be considered on the earlier date of execution of agreement i.e.23.07.1996. To arrive at this conclusion, we also find the support of law settled in M/S RAJASTHAN AGENCIES PVT. LTD. VERSUS THE ITO, WARD-3 (2) , JAIPUR 2018 (2) TMI 257 - ITAT JAIPUR . The assessee acquired the property in question by virtue of agreement dated 23.07.1996 and thereafter, sold the same on 23.07.2008 and subsequently invested in the bonds in sum of ₹ 30,00,000/-. The consideration received by the assessee is liable to be assessed as long term capital gain and accordingly the claim of the assessee is also liable to be considered in view of the provision u/s 54EC in connection with the investment in bonds in sum of ₹ 30,00,000/-. - Decided in favour of assessee.
Issues Involved:
1. Validity of the order passed under section 250(6) of the Income Tax Act, 1961. 2. Treatment of Long Term Capital Gain (LTCG) as Short Term Capital Gain (STCG) and denial of exemption under section 54EC. 3. Appreciation of facts by the Commissioner of Income Tax (Appeals) [CIT(A)]. 4. Justification of the order passed by the Assistant Commissioner of Income Tax (ACIT). 5. Determination of the nature of capital gain from the sale of land. 6. Assessment of receipts and disallowance of exemption under section 54EC. Issue-wise Detailed Analysis: 1. Validity of the order passed under section 250(6) of the Income Tax Act, 1961: The assessee contended that the order passed by the CIT(A) under section 250(6) was erroneous and against the principles of fair play, equity, and natural justice. The CIT(A) confirmed the treatment of LTCG as STCG without fully appreciating the facts of the case. The Tribunal examined the procedural aspects and found that the CIT(A) did not violate the principles of natural justice. 2. Treatment of Long Term Capital Gain (LTCG) as Short Term Capital Gain (STCG) and denial of exemption under section 54EC: The core issue was whether the capital gain from the sale of land should be treated as LTCG or STCG. The assessee claimed that the land was acquired by an agreement dated 23.07.1996, registered on 30.07.1996, and sold on 21.07.2008. The AO treated the gain as STCG based on a subsequent agreement dated 03.05.2008. The Tribunal held that the assessee acquired the property by virtue of the 1996 agreement, making the gain LTCG. Consequently, the assessee was entitled to exemption under section 54EC for the investment in bonds amounting to ?30,00,000. 3. Appreciation of facts by the Commissioner of Income Tax (Appeals) [CIT(A)]: The assessee argued that the CIT(A) failed to appreciate the facts properly, particularly the acquisition date of the property. The Tribunal reviewed the evidence, including the original agreement and subsequent payments, and concluded that the CIT(A) did not fully consider the factual matrix, leading to an incorrect classification of the capital gain. 4. Justification of the order passed by the Assistant Commissioner of Income Tax (ACIT): The CIT(A) upheld the ACIT's order, which treated the gain as STCG and denied the section 54EC exemption. The Tribunal found that the ACIT's reliance on the 2008 agreement was misplaced, as the original acquisition occurred in 1996. The Tribunal set aside the CIT(A)'s finding, thereby overturning the ACIT's order. 5. Determination of the nature of capital gain from the sale of land: The Tribunal focused on the acquisition date of the property to determine the nature of the capital gain. It was established that the assessee acquired the land in 1996, making the gain from its sale in 2008 a long-term capital gain. This finding was supported by the continuous possession and payments made by the assessee over the years. 6. Assessment of receipts and disallowance of exemption under section 54EC: The AO assessed the receipts from the sale of land as STCG and disallowed the exemption under section 54EC. The Tribunal, however, held that the assessee's investment in bonds qualified for the exemption, as the gain was LTCG. The Tribunal directed that the assessee's claim under section 54EC be allowed. Conclusion: The Tribunal concluded that the assessee acquired the property in 1996, resulting in a long-term capital gain upon its sale in 2008. The assessee's investment in bonds qualified for exemption under section 54EC. The Tribunal set aside the findings of the CIT(A) and allowed the appeal in favor of the assessee. The order pronounced on 13.03.2019 reflected a comprehensive consideration of the legal and factual aspects, ensuring a fair outcome.
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