2019 (4) TMI 1510 - AT - Income Tax

Capital gain computation - determine the year from which indexation benefit would be available to the assessee - computing the Indexed cost of Acquisition by taking the F.Y. 2000-01 instead of F.Y. 1980-81 as the base year of indexation - property was inherited from his father who had purchased the same prior to 01/04/1981 - HELD THAT - This issue is squarely covered by the judgment of Hon ble Bombay High Court rendered in CIT Vs. Manjula J.Shah 2011 (10) TMI 406 - BOMBAY HIGH COURT and 2018 (10) TMI 590 - SUPREME COURT - Benefit of indexation would be available to the assessee from FY 1981-82 on fair market value as on 01/04/1981. The first ground of appeal stands allowed. Deduction u/s 54/54F - acquisition of tenancy right - Tenancy rights v/s ownership rights - HELD THAT - We find that the assessee has not acquired the ownership rights in the new property but merely acquired tenancy right which could not be equated with ownership rights. The conditions of Section 54 as well as Section 54F is that the assessee must purchase or construct the new property within the specified time. The acquisition of tenancy right, in our opinion, do not tantamount to purchase or construction of a new property, in any manner. Therefore, the assessee would not be eligible to claim the aforesaid deduction either u/s 54 or u/s 54F.

Summary

Issues:
1. Computation of Indexed Cost of Acquisition
2. Disallowance of exemption u/s. 54

Computation of Indexed Cost of Acquisition:
The appeal contested the order of the Ld. Commissioner of Income-Tax (Appeals) regarding the computation of Indexed Cost of Acquisition for Assessment Year 2009-10. The dispute arose from the sale of inherited agricultural land by the assessee. The assessee claimed indexation of the cost from financial year 1980-81, while the Ld. AO insisted on granting the benefit from financial year 2000-01, the first year the asset was held by the assessee. The first appellate authority upheld the AO's decision. The Tribunal referred to the judgment of the Hon’ble Bombay High Court in CIT Vs. Manjula J.Shah, emphasizing that the indexed cost of acquisition should be determined based on the year the asset was 'held by the assessee.' The Tribunal concluded that the benefit of indexation should be available to the assessee from FY 1981-82. The first ground of appeal was allowed based on this analysis.

Disallowance of exemption u/s. 54:
Regarding the disallowance of exemption u/s. 54, the assessee had claimed a deduction for acquiring tenancy rights in a property, following the sale of the agricultural land. However, the Ld. AO and the Tribunal held that acquiring tenancy rights did not fulfill the conditions of Section 54 or Section 54F, which require the purchase or construction of a new property within a specified time. The Tribunal concluded that the acquisition of tenancy rights did not equate to the purchase or construction of a new property, rendering the assessee ineligible for the deduction u/s. 54 or u/s. 54F. As a result, ground No. 2 was dismissed, and the appeal was partly allowed.

In conclusion, the Tribunal's judgment addressed the computation of the Indexed Cost of Acquisition and the disallowance of exemption u/s. 54 in a detailed and legally sound manner, providing clarity on the applicable provisions and judicial precedents.