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TMI Blog2024 (9) TMI 1621X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of capital assets. That it provides exemption also on investment in capital assets. He further pointed out that the PCIT has given no basis whatsoever, nor any reasoning to arrive at the finding that even assets not qualifying as capital assets and being in the nature of stock in trade are to be considered for purposes of said section. We are in complete agreement with the ld. Counsel for the assessee on this account. PCIT has given no reasoning or basis for holding the Flat No. A/1.B1 located at Vastu Luxuria at Surat, admittedly held as stock in trade by the assessee, as being residential house for the purposes of section 54F - assessee has on the contrary demonstrated that, as per law applicable in the impugned year, assets held as stock in trade do not qualify as residential houses in terms of section 54F of the Act. There is, therefore, we hold, absence of a valid basis with the ld. PCIT for finding the property at Vastu Luxuria qualifying as residential house for the purpose of Section 54F of the Act. As for the agricultural land purchased by the assessee, the assessee s contention was that the houses constructed thereon were of very small sizes and for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Principal Commissioner of Income-Tax-4, Ahmedabad [hereinafter referred to as PCIT ] dated 03.03.2020, in exercise of his revisionary powers under Section 263 of the Income-tax Act, 1961 [hereinafter referred to as the Act ], for the Assessment Year (AY) 2015-16. 2. The Registry has noted the present appeal to be barred by limitation by 1355 days. The ld. Counsel for the assessee explained that there was, in fact, no delay in filing the appeal before the Tribunal for the reason that the assessee had inadvertently filed the appeal against the order of the ld. PCIT before the Surat Bench of the ITAT which, when the appeal came up for hearing before it, passed a judicial order dated 21.11.2023 dismissing the appeal as withdrawn, noting the fact that the correct jurisdiction lay with the ITAT, Ahmedabad Benches. The assessee was given the liberty to file a fresh appeal on the same cause of action before the Bench of the Tribunal having jurisdiction. He pointed out that the ITAT allowed liberty to the assessee to avail the benefit of Section 14 of the Limitation Act for exclusion of time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial house on the date of sale of original asset, making the assessee, as per the Ld.PCIT, ineligible to exemption/deduction u/s 54F of the Act and also rental income from the same being liable to tax. 4.3 Having perused the order of the Ld.PCIT and after considering the arguments made by both the parties before us, we hold the impugned order to be not sustainable in law. The Ld.PCIT, we find, has miserably failed in arriving at a conclusive finding of the properties being in the nature of residential houses, while directing the AO to deny exemption u/s 54F of the Act and also directing him to tax income from the same under section 23 of the Act. There is, we find, no valid basis in the order of the Ld.PCIT for holding the properties to qualify as residential house in terms of section 54F of the Act. We shall elaborate the same hereunder. 5. The assessee had claimed exemption u/s 54F of the Act to the tune of Rs. 3,86,86,482/- from capital gains earned of Rs. 5,73,71,398/-. The computation of the same is reproduced at para 4(f) of the order as under:- Sale consideration received as per sale deed Rs. 6,71,05,250/- Indexed cost of acquisition Rs. 55,815/- Indexed cost of improvement R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in respect of 80% share held by the assessee in A.Y 2006-07 Rs. 5,53,180/- Indexed cost of acquisition in respect of 20% share held by Ritaben J. Shah but purchased by the assessee in A.Y.2010-11 Rs. 90,85,933/- Indexed cost of improvement Rs. 95,93,113/- Rs. 95.93.113/- Long term capital gain before deductions claimed Rs. 5,74,66,137/- Less: Deduction allowable u/s 541 of the Act Rs. Nil Taxable long term capital gain Rs. 5,74,66,137/- 7. Thus, in effect, the Ld. PCIT has, on merits, given a finding that two properties as noted above qualified as residential houses in terms of Section 54F of the Act, disentitling the claim of exemption/deduction of the assessee u/s 54F of the Act. Having said so, we find that there is no basis in the above findings of the ld. PCIT at all. 8. With regard to the residential house property identified as Flat No.B1, 1st Floor of the building No.A1 known as Vastu Luxuria , the assessee had stated that the said flat to be in the nature of stock-in-trade. Copy of the financial statements of the assessee forming part of the return of income filed by the assessee, which were part of the assessment records and filed before the ld. PCIT, placed before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fying for exemption should be a residential house income from which is chargeable under the head Income from House Property . He drew our attention to section 54F(1) of the Act in this regard as under:- 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date [constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncorporated in the chapter dealing with the computation of income under the head income from capital gains and it deals primarily with gains on sale of transfer of capital assets. That it provides exemption also on investment in capital assets. He further pointed out that the ld. PCIT has given no basis whatsoever, nor any reasoning to arrive at the finding that even assets not qualifying as capital assets and being in the nature of stock in trade are to be considered for purposes of said section. 16. We are in complete agreement with the ld. Counsel for the assessee on this account. The Ld.PCIT has given no reasoning or basis for holding the Flat No. A/1.B1 located at Vastu Luxuria at Surat, admittedly held as stock in trade by the assessee, as being residential house for the purposes of section 54F of the Act. Ld. Counsel for the assessee has on the contrary demonstrated that, as per law applicable in the impugned year, assets held as stock in trade do not qualify as residential houses in terms of section 54F of the Act. There is, therefore, we hold, absence of a valid basis with the ld. PCIT for finding the property at Vastu Luxuria qualifying as residential house for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to deny the assessee any claim of deduction under Chapter VI A of the Act. In this regard, Ld. Counsel for the assessee drew our attention to the computation of income for the impugned year filed at page No. 1-5 of the paper-book and pointed out therefrom that the assessee in first place had not claimed any deduction under Chapter VI A of the Act. He stated, therefore, that there was no occasion for denying any deduction to the assessee under Chapter VI A of the Act. The ld. DR was unable to controvert the above contention of the ld. Counsel for the assessee. In view of the same this direction of the ld. PCIT to the Assessing Officer to deny the assessee the benefit of deduction under Chapter VI A is also found to be without any substance and merit, and is set aside. 21. In view of the above, the order of the ld. PCIT passed under Section 263 of the Act is held to be not sustainable in the absence of a concrete finding of error in the order passed by the Assessing Officer on all issues raised by the Ld. PCIT. The grounds raised by the assessee are allowed. 22. In effect, the appeal of the assessee is allowed. Order pronounced in the open Court on 24/09 /2024 at A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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