2024 (10) TMI 862 - AT - Income Tax

Computation of capital gain - exemption u/s 54F - appellant has transferred immovable property in pursuant to JDA - assessee claims that he is entitled for 54F exemption in respect of 3 flats received from the builder for surrendering 65% undivided share in land - AO denied the exemption u/s 54F on the ground that the assessee has not made any claim in respect of 54F exemption in the original return of income filed u/s 139 HELD THAT - If an assessee transfers any property other than residential house property, then exemption is available u/s 54F of the Act, in respect of reinvestment of sale consideration received as a result of transfer of original asset, but said exemption u/s 54F of the Act, is available subject to fulfilment of conditions prescribed therein. In the present case, the appellant derived Long-Term Capital Gain and Short-Term Capital Gain for surrendering 65% undivided land. The appellant received 3 flats from the builder. There is no details as to whether all 3 flats are accrued or received by the appellant in respect of transfer of capital asset which is held for more than 36 months or it also pertains to a capital asset which was transferred within 3 years from the date of purchase. There is no discussion as to fulfilment of various other conditions prescribed u/s 54F including re-investment of sale consideration within the prescribed time limit. These facts needs to be verified. There is no dispute with regard to the fact that the appellant is eligible for exemption in respect of one flat received from the builder in pursuant to JDA, provided all other conditions are satisfied. These facts are not forthcoming from the assessment order. Therefore, to verify the facts in its entirety on eligibility of the assessee for claiming exemption u/s 54F the issue needs to be set aside to the file of the AO - Thus, restore the issue back to the file of the Assessing Officer and also direct the AO to reconsider the issue of exemption claimed u/s 54F - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Delay in filing the appeal by the assessee.
2. Reopening of assessment due to under assessment of capital gain.
3. Dispute regarding exemption claimed under section 54F of the Income Tax Act, 1961.

Detailed Analysis:
1. The appeal was filed against the order of the learned CIT (A)-NFAC Delhi related to the assessment year 2014-15, with a delay of 5 days. The delay was explained by the assessee, and after discussion with the learned DR, the delay was condoned, and the appeal was admitted for adjudication.

2. The case involved the reassessment of the assessee's income for the assessment year 2014-15 due to under assessment of capital gain arising from a Joint Development Agreement (JDA) related to the transfer of property. The Assessing Officer computed the full value of consideration accrued from the transfer and calculated Long-Term Capital Gain and Short-Term Capital Gain. The Assessing Officer rejected the claim of exemption under section 54F of the Income Tax Act, 1961.

3. The dispute centered around the rejection of the exemption claimed under section 54F of the Act. The assessee contended that they were eligible for the exemption in respect of flats received from the builder as part of the JDA. The Assessing Officer did not address the issue of exemption under section 54F in the assessment order. The Tribunal noted that the conditions for claiming exemption under section 54F needed to be verified, including reinvestment of sale consideration and fulfillment of other prescribed conditions.

4. The Tribunal observed that the appellant had indeed transferred the property as per the JDA and received flats and parking space in return. While the computation of capital gains was not disputed, the denial of exemption under section 54F was a point of contention. The Tribunal emphasized the importance of verifying whether the conditions for claiming the exemption were met, such as reinvestment within the specified time limit and other criteria under section 54F. As the Assessing Officer did not address these aspects, the Tribunal set aside the order of the CIT (A) and directed the Assessing Officer to reconsider the exemption claim after verifying all relevant facts and providing the assessee with a hearing opportunity.

5. Ultimately, the appeal filed by the assessee was allowed for statistical purposes, and the matter was remanded back to the Assessing Officer for a fresh consideration of the exemption claimed under section 54F of the Income Tax Act, 1961.