2013 (11) TMI 416 - AT - Income Tax

Tribunal grants exemption under section 54EC for property transfer in AY 2006-07. Upholds addition under section 41(1).

Shri Azad Zabarchand Bhandari Versus Assistant Commissioner of Income-tax, Circle - 19(3)

Shri Azad Zabarchand Bhandari Versus Assistant Commissioner of Income-tax, Circle - 19(3) - TMI Issues Involved:1. Determination of the date of transfer for capital gains tax purposes.2. Eligibility for exemption under section 54EC of the Income Tax Act.3. Addition under section 41(1) of the Income Tax Act.4. Charging of interest under sections 234B and 234C of the Income Tax Act.5. Initiation of penalty under section 271(1)(c) of the Income Tax Act.Issue-Wise Detailed Analysis:1. Determination of the date of transfer for capital gains tax purposes:The primary issue revolves around whether the transfer of property occurred on 16.03.2005 (date of agreement) or 20.09.2005 (date of possession). The assessee argued that transfer, as per section 2(47) of the Income Tax Act read with section 53A of the Transfer of Property Act, occurred when possession was handed over, i.e., 20.09.2005. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] contended that the transfer took place on 16.03.2005, the date of the agreement, thus making the assessee ineligible for the exemption under section 54EC. The Tribunal noted the dichotomy in the tax authorities' approach, as the AO taxed the income in Assessment Year (A.Y.) 2006-07, implying the transfer took place in that year. The Tribunal concluded that the transfer occurred in the financial year relevant to A.Y. 2006-07, as possession was handed over on 20.09.2005.2. Eligibility for exemption under section 54EC of the Income Tax Act:The assessee claimed exemption under section 54EC, having invested Rs. 25 lakhs in December 2005. The AO and CIT(A) denied the exemption, arguing that the investment was made beyond six months from the deemed date of transfer (16.03.2005). The Tribunal, however, held that since the transfer occurred on 20.09.2005, the investment was within the permissible six-month period. Consequently, the assessee was entitled to the exemption under section 54EC.3. Addition under section 41(1) of the Income Tax Act:The assessee challenged the addition of Rs. 49,000 under section 41(1) made by the AO and confirmed by the CIT(A). The Tribunal noted that no material was presented to contradict the CIT(A)'s findings, and the assessee's counsel did not advance any argument on this issue. Therefore, the Tribunal rejected this ground of appeal.4. Charging of interest under sections 234B and 234C of the Income Tax Act:Both parties admitted that the charging of interest under sections 234B and 234C is consequential in nature. The Tribunal directed the AO to take necessary action accordingly.5. Initiation of penalty under section 271(1)(c) of the Income Tax Act:The assessee did not press the ground challenging the initiation of penalty under section 271(1)(c). Consequently, the Tribunal rejected this ground.Conclusion:The Tribunal partly allowed the appeal, holding that the transfer of property took place in A.Y. 2006-07, making the assessee eligible for the exemption under section 54EC. The addition under section 41(1) was upheld, and the charging of interest under sections 234B and 234C was deemed consequential. The ground related to the initiation of penalty under section 271(1)(c) was not pressed and thus rejected. General grounds did not require independent consideration.