2024 (7) TMI 897 - AT - Income Tax

Addition of Long term capital gain - Determination of indexed cost of acquisition claimed by the assessee - HELD THAT - As on the date of the conveyance deed, the value of the property is more than Rs. 45 lakhs. Moreover, there is direct evidence on record, which indicates that the assessee, in fact, had paid the consideration of Rs. 45 lakhs to Mr. Rajan Chanana through cheques for purchasing the property. Therefore, the cost of acquisition, insofar as the assessee is concerned, has to be taken at Rs. 45 lakhs and indexation benefit has to be given to the assessee based on the cost of acquisition of Rs. 45 lakhs. We direct the AO to delete the addition of Rs. 33,73,120/- made towards long term capital gain and accept the computation of income of the assessee. This ground is allowed. Denial of benefit of carry forward of capital loss - assessee had claimed long term capital loss for both properties sold, but the AO did not allow set off and carry forward of the long term capital loss - As per DRP direction though AO set off the long term capital gain computed on sale of commercial property against long term capital loss on sale of residential property, however, he did not allow carry forward of the long term capital loss remaining after set off - HELD THAT - We are of the view that the assessee is entitled to avail the benefit of carry forward of long term capital loss. Accordingly, the Assessing Officer is directed to verify the issue factually and allow carry forward of long term capital loss claimed by the assessee. This ground is allowed.

Summary

Issues:
1. Challenge to addition of long term capital gain
2. Denial of benefit of carry forward of capital loss

Analysis:

Issue 1: Challenge to addition of long term capital gain

The appeal was against the final assessment order for the assessment year 2020-21, where the assessee challenged the addition of long term capital gain of Rs. 33,73,120. The assessee, a non-resident individual, had sold two properties - a residential property and a commercial property. The Assessing Officer rejected the indexed cost of acquisition claimed by the assessee for the commercial property and re-computed the capital gain, resulting in a net long term capital gain of Rs. 33,73,120. The assessee contended that the cost of acquisition should be considered as Rs. 45 lakhs, the amount paid to the original owner, rather than the lower amount considered by the Assessing Officer. The tribunal, after considering the submissions and evidence, directed the Assessing Officer to delete the addition of long term capital gain and accept the computation of income by considering the cost of acquisition at Rs. 45 lakhs.

Issue 2: Denial of benefit of carry forward of capital loss

The second ground of appeal was the denial of the benefit of carry forward of capital loss. The assessee had claimed long term capital loss on the sale of both properties but the Assessing Officer did not allow set off and carry forward of the long term capital loss in the final assessment order. The tribunal noted that the assessee was entitled to avail the benefit of carry forward of long term capital loss and directed the Assessing Officer to verify the issue factually and allow the carry forward of the claimed capital loss. Consequently, this ground of appeal was allowed, and the overall appeal was allowed by the tribunal.

In conclusion, the tribunal ruled in favor of the assessee, directing the Assessing Officer to delete the addition of long term capital gain and allow the benefit of carry forward of capital loss. The detailed analysis of the facts and legal arguments presented by both parties led to a favorable outcome for the assessee in this case.