2009 (11) TMI 910 - AT - Income Tax

Tribunal confirms CIT(A)'s order on capital gain exemption under Section 54EC

INCOME TAX OFFICER Versus VIKASH BEHAL

The Tribunal upheld the order of the CIT(A), treating the receipt of Rs. 15,25,000 as long-term capital gain and allowing the exemption under Section 54EC ... - Issues Involved:1. Condonation of delay in filing the appeal.2. Classification of the receipt of Rs. 15,25,000 as long-term capital gain or short-term capital gain.3. Eligibility for exemption under Section 54EC of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Condonation of Delay in Filing the AppealThe appeal was delayed by four days, and the Revenue filed a condonation petition dated 11th June 2008. Both parties were heard on this petition. After considering the arguments, the delay was condoned, and the appeal was admitted for hearing.Issue 2: Classification of the Receipt of Rs. 15,25,000 as Long-Term Capital Gain or Short-Term Capital GainThe primary contention was whether the receipt of Rs. 15,25,000 by the assessee should be treated as long-term capital gain, thus eligible for exemption under Section 54EC, or as short-term capital gain, as treated by the Assessing Officer (AO).- Revenue's Argument: The Revenue argued that the assessee received Rs. 15,25,000 from the sale of a flat received under a development agreement. The flat was received on or after 2nd June 2004, and since the assessee held the flat for less than a year, the gain should be treated as short-term capital gain. They relied on the decision of the Tribunal, Kolkata, in the case of Asstt. CIT vs. Sekhar Gupta and the Hon'ble Madras High Court in CIT vs. Dr. D.L. Ramachandra Rao.- Assessee's Argument: The assessee contended that the property was held since 1990 and entered into a development agreement on 31st Oct 2000. The agreement resulted in the transfer of 67.5% of the land to the developer in exchange for 32.5% of the constructed area. The construction was completed, and the occupation certificate was issued on 2nd June 2004. The assessee argued that the transfer took place on the date of the development agreement, and hence, the capital gain should be treated as long-term. The assessee supported their argument with various judicial pronouncements and Board's circulars.- Tribunal's Observation: The Tribunal noted that the development agreement dated 31st Oct 2000 resulted in the transfer of ownership rights of 67.5% of the land to the developer. The developer was granted rights to sell and dispose of the property, which constituted a 'transfer' under Section 2(47) of the Act. The Tribunal referred to several judicial pronouncements, including the case of Jasbir Singh Sarkaria and Chaturbhuj Dwarkadas Kapadia vs. CIT, which supported the view that such agreements result in the transfer of property rights. The Tribunal concluded that the transfer took place on the date of the development agreement, making the gain long-term.Issue 3: Eligibility for Exemption under Section 54EC of the Income Tax Act, 1961The assessee invested Rs. 17,50,000 in bonds eligible for exemption under Section 54EC. Since the Tribunal concluded that the capital gain was long-term, the assessee was entitled to the exemption claimed under Section 54EC.Conclusion:The Tribunal upheld the order of the CIT(A), treating the receipt of Rs. 15,25,000 as long-term capital gain and allowing the exemption under Section 54EC of the Act. The appeal of the Revenue was dismissed.