2016 (12) TMI 954 - AT - Income Tax

Tribunal grants exemption under Section 54, upholds CIT(A)'s decisions on disallowance deletion

The Tribunal allowed the Assessee's appeal, granting exemption under Section 54 and upheld the Ld. CIT(A)'s decisions on the deletion of disallowance and ... Allowance of exemption u/s. 54 - disallowance of claim in respect of flat purchased by the assessee from her daughter on the ground that the house was not registered in the name of the assessee - Held that:- Section 54 of the Act requires that the house should be purchased. It is also a settled law that it is not necessary that the house should be registered in the name of the assessee. In our view everybody is entitled to arrange his affairs within the parameters of law, even if it results into the reduction of total tax liability. Our aforesaid view is fully supported by the Hon’ble Supreme Court decision in the case of Union of India vs. Azadi Bachao Andolan (2003 (10) TMI 5 - SUPREME Court ). In view of the above, we allow the claim of the assessee under section 54 - Decided in favour of assessee Disallowance on account of setting off of long term capital loss against long term capital gain on sale of property at Hauz Khas on its transfer - Held that:- We find that Ld. CIT(A) has given factual finding that husband of the assessee has purchased 60% share in Hauz Khas property and got the deed registered and that such transaction was legal transaction as per the Transfer of Property Act, and the payment of ₹ 1.20 crores was made as per the circle rate and stamp duty has been paid and that though assessee and her husband are staying together but they are not on good terms. Therefore, Ld. CIT(A) has rightly observed that AO cannot deny the legality of the transaction between the assessee and her husband Dr. Charanjit Chanana, whereby, the assessee has sold 60% of her share in her Hauz Khas property to her husband and accordingly, the AO has no option but to allow the resultant Long Term Capital Loss to the assessee. We also allowed the claim of the assessee under section 54 in assessee’s appeal, as aforesaid. In view of the above, the Ld. CIT(A)’s action of allowing the set off loss against long term capital gain does not need any interference on my part, hence, we uphold the same and dismiss the ground no. 1 raised by the Revenue. Allowing cost of additions /improvements - Held that:- We find that the complete details of the expenses incurred was provided to the AO in the receipt issued by the contractor. The expenses were incurred around twenty years back in F.Y. 1992-93. Under these facts and circumstances and in the light of the fact that the Completion Certificate was issued by Noida Authority on 21.05.1994, Ld. CIT(A) was of the opinion that the AO should not have restricted the cost of additions/improvements to ₹ 10 lacs on estimate basis as he was not technically competent to do so and he had done this by giving a vague argument saying that “It would not be feasible to allow such a huge expense on the basis of such casual receipts. In view of above, Ld. CIT(A) has rightly directed the AO to allow indexation on full amount of ₹ 17,40,000/- which does not need any interference on my part, hence, we uphold the same and dismiss the ground raised by the revenue. Issues Involved:1. Denial of exemption under Section 54 of the Income Tax Act, 1961.2. Deletion of disallowance of Rs. 61,97,460 on account of setting off long-term capital loss against long-term capital gain.3. Allowing cost of additions/improvements amounting to Rs. 17,40,000.Comprehensive, Issue-Wise Detailed Analysis:1. Denial of Exemption under Section 54 of the Income Tax Act, 1961:The Assessee's appeal contested the denial of exemption under Section 54 for a flat purchased for Rs. 1.20 crores from her daughter, which was not registered in her name. The Assessee argued that the law does not necessitate registration for claiming exemption under Section 54, citing the Supreme Court decision in UOI vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC). The Tribunal agreed, stating that it is a settled law that the house need not be registered in the assessee's name to claim the exemption. The Tribunal allowed the Assessee's claim under Section 54, thereby allowing the appeal.2. Deletion of Disallowance of Rs. 61,97,460 on Account of Setting Off Long-Term Capital Loss Against Long-Term Capital Gain:The Revenue's appeal challenged the deletion of disallowance of Rs. 61,97,460, arguing that the transaction of purchase of property from the Assessee’s husband was a sham. The Tribunal noted that the Ld. CIT(A) had found the transaction genuine, as the husband had purchased 60% share in the Hauz Khas property, registered the deed, paid the circle rate, and stamp duty. Despite the Assessee and her husband living together, they were not on good terms, which supported the transaction's legitimacy. The Tribunal upheld the Ld. CIT(A)'s decision, allowing the set-off of the loss against long-term capital gain and dismissed the Revenue's ground.3. Allowing Cost of Additions/Improvements Amounting to Rs. 17,40,000:The Revenue also contested the allowance of Rs. 17,40,000 as the cost of additions/improvements. The Tribunal reviewed the Ld. CIT(A)'s findings that the Assessee had provided complete details of expenses incurred for construction and improvements, supported by receipts from the contractor and an occupancy certificate issued by the Noida Authority. The AO had restricted the amount to Rs. 10 lacs based on a general estimate without referring the matter to a Valuation Officer. The Tribunal found the Ld. CIT(A)'s direction to allow indexation on the full amount of Rs. 17,40,000 justified and dismissed the Revenue's ground.Conclusion:The Tribunal allowed the Assessee's appeal, granting the exemption under Section 54 and upheld the Ld. CIT(A)'s decisions on the deletion of disallowance and allowance of cost of improvements. The Revenue's appeal was dismissed. The order was pronounced in the Open Court on 16/12/2016.