2022 (3) TMI 962 - AT - Income Tax

LTCG computation - Exemption u/s. 54 - AO has rejected the revised statement of total income filed by the assessee to compute long term capital gains from transfer of property on the basis of consideration received as per sale agreement, only on the ground that the claim of the assessee cannot be entertained unless a claim is made by filing revised return - HELD THAT - We are of the considered view that when the assessee has filed a revised statement of total income considering full value of consideration as per sale agreement, the Ld. CIT(A) ought to have entertained the fresh claim of the assessee towards computation of long term capital gains and exemption claimed u/s. 54 of the Act. Hence, we direct the AO to consider the revised statement of total income filed by the assessee, enhancing the computation of long term capital gains from sale of property on the basis of sale consideration received as per sale agreement. Exemption u/s. 54 - We are of the considered view that once, the source of money is not disputed and which has come from sale of property, then any surplus money including additional consideration would also partake character of income generated from that source. This principle is supported by the decision of ITO v. Abraham Varghese Charuvil 2017 (4) TMI 1148 - ITAT COCHIN . In this case, the source of additional money is not disputed by the AO, because the AO has made additions towards difference in sale consideration on the basis of Sale Deed and sale agreement - once the source of income is not disputed, then the AO ought to have considered the additional income, if any, from that source as a part of income generated from the source itself - direct the AO to consider the revised long term capital gains computed by the assessee on the basis of sale consideration as per sale agreement and allow the benefit of exemption u/s. 54 of the Act as per revised computation, because, the investment made by the assessee for purchase of house property at Bangalore, is more than the amount of long term capital gains derived from sale of house property. Appeal of assessee allowed.

Summary

Issues:
1. Addition of income from other sources based on difference in sale consideration.
2. Denial of exemption u/s. 54 of the Income Tax Act.
3. Interpretation of source of income from sale of property.

Analysis:
1. The appeal involved a dispute regarding the addition of ?16,85,000 as income from other sources by the Commissioner of Income Tax (Appeals). The assessee argued that the difference in sale consideration should not be treated as income from other sources as it was part of the sale consideration. The ITAT Chennai, after considering the facts, directed the Assessing Officer to consider the revised statement of total income filed by the assessee, enhancing the computation of long term capital gains based on the sale consideration received as per the sale agreement.

2. The denial of exemption u/s. 54 of the Income Tax Act was another key issue in the appeal. The assessee claimed exemption for the purchase of another residential property at Bangalore. The Commissioner of Income Tax (Appeals) sustained the addition made towards the difference in sale consideration under the head 'income from other sources', citing deliberate concealment of sale receipts by the assessee. However, the ITAT Chennai allowed the claim of exemption u/s. 54 of the Act, as the source of income from the sale of property was not disputed, and any surplus money arising from the sale was considered part of the sale consideration itself.

3. The interpretation of the source of income from the sale of property was crucial in this case. The ITAT Chennai emphasized that any surplus money arising from the sale of property, including additional consideration, would partake the character of income generated from that source. The tribunal directed the Assessing Officer to consider the revised long term capital gains computed by the assessee based on the sale consideration as per the sale agreement and allow the benefit of exemption u/s. 54 of the Act, as the investment made for the purchase of the house property at Bangalore exceeded the amount of long term capital gains derived from the sale of the property.

In conclusion, the ITAT Chennai allowed the appeal filed by the assessee, directing the Assessing Officer to consider the revised statement of total income, enhance the computation of long term capital gains, and allow the exemption u/s. 54 of the Income Tax Act based on the revised computation.