2014 (6) TMI 399 - AT - Income Tax

ITAT affirms lower sale consideration for capital gains, upholds exemption under S.54F despite construction timing.

Income Tax Officer Ward 11(3), Hyderabad Versus Smt. D. Aruna Reddy, Hyderabad

The ITAT affirmed the CIT(A)'s decision to adopt a lower sale consideration amount for computing capital gains and upheld the allowance of exemption under ... Computation of capital gain – Sale of land - Relief u/s 54F of the Act – Held that:- Shri G.Sudhakar Rao has also submitted details of the payments made on various dates and also copies of the relevant extracts of bank statements - the CIT(A) directed the AO to adopt a sum as the sale consideration while computing the capital gains from the sale of the land by the assessee - In the absence of any material to the contrary brought on record by the Revenue, to contradict the above finding of the CIT(A), there was no justification to interfere with the order of the CIT(A). Any precondition cannot be suggested that construction of the new residential house must commence after sale of the original asset - The only condition imposed is that it is to be completed within three years from the date of sale of original asset – Relying upon Commissioner Of Income-Tax Versus JR. Subramanya Bhat [1986 (6) TMI 7 - KARNATAKA High Court] - the date of commencement of construction of the new property has preceded the date of sale of the asset giving rise to capital gains computed – there was no justification to interfere with the order of the CIT(A) on this aspect also – Decided against Revenue. Issues: Computation of capital gains assessable, claim for relief under S.54F of the Act.Analysis:1. The appeal by the Revenue concerns the computation of capital gains assessable and the claim of the assessee for relief under S.54F of the Act for the assessment year 2009-10.2. The Revenue contested the direction to adopt the sale consideration at Rs.71,00,000 instead of Rs.1,01,00,000 and the allowance of exemption under S.54F, despite the construction of the new asset preceding the sale of the capital asset.3. Despite adjournment, the assessee did not appear, leading to an ex-parte disposal of the appeal.4. The Assessing Officer computed capital gains at Rs.1,01,00,000 based on the bank statement, rejecting the assessee's explanation regarding the additional amount received. The CIT(A) relied on the purchaser's statement and directed the adoption of Rs.71,00,000 as the sale consideration.5. The Revenue challenged this decision, but the ITAT upheld the CIT(A)'s order, emphasizing the purchaser's statement and lack of contradictory evidence.6. Regarding the deduction under S.54F, the Assessing Officer disallowed it as the asset was purchased before the sale. The CIT(A) allowed the deduction, noting that the construction completion date is the relevant factor, not the commencement date.7. The ITAT concurred with the CIT(A), citing the absence of a requirement for construction commencement post-sale in S.54F and upheld the deduction eligibility, dismissing the Revenue's appeal.8. The ITAT pronounced the order on 28.5.2014, affirming the dismissal of the Revenue's appeal.