2021 (8) TMI 470 - AT - Income Tax

Tribunal allows exemption under section 54F for capital gain

Amit B. Chaudhari “Shushanti” Versus ITO, Ward 4 (5), Pune

The Tribunal ruled in favor of the assessee, allowing the appeal against the denial of exemption under section 54F of the Income-tax Act. It was ... Denial of exemption u/s 54F - property in question was in the name of assessee’s father and the assessee was staying along with his family on the first floor of the building for the last more than 10 years - HELD THAT:- Here is a case in which the assessee correctly showed a sum of ₹ 60 lakhs as full value consideration for the transfer of capital asset and deposited the said amount in Capital gain account scheme for exemption of claim u/s 54F. Considering the totality of the facts and circumstances of the case, it is evident that the amount of ₹ 60 lakhs was received by the assessee as consideration for transfer of his right to occupy the property. As such, we are unable to give any other colour to the transaction, which has been accepted by the Department as such in the hands of the assessee’s father. Even if for a moment, it is accepted that the sum of ₹ 60 lakhs was received by the assessee from his father not towards consideration for transfer of right to occupy the property, at the most, it would amount to a gift in his hands, which is again not chargeable to tax. The authorities below have characterized ₹ 60 lakhs as income chargeable to tax under the head ‘Income from other sources’. However, no specific clause of section 56 of the Act has been brought to our notice encompassing the prevailing situation within its purview. We, therefore, overturn the impugned order and hold that the assessee rightly computed long term capital gain of ₹ 60 lakhs and then claimed exemption u/s 54F of the equal amount. - Decided in favour of assessee. Issues:Denial of exemption u/s 54F of the Income-tax Act, 1961.Analysis:The appeal was against the denial of exemption u/s 54F. The assessee entered into a development agreement regarding a property with M/s. Srishti Developers. The AO denied the exemption as the assessee was not the legal owner of the property. The CIT(A) upheld this decision.Upon hearing both sides, it was noted that the property was in the name of the assessee's father, and the assessee had been residing there for over 10 years. The assessee agreed to vacate the premises in exchange for a sum of Rs. 60 lakhs from the developer. The MoU confirmed this payment. The Tribunal questioned the justification of treating the Rs. 60 lakhs as 'Income from other sources' and denying the exemption u/s 54F.During a previous hearing, it was revealed that the assessee's father had accounted for the transaction of Rs. 60 lakhs. The total consideration of Rs. 2.70 crores was divided between the father and the assessee. The Tribunal concluded that the Rs. 60 lakhs received by the assessee was for transferring his right to occupy the property, constituting a capital asset. The AO's acceptance of the transaction in the father's assessment precluded disputing it in the assessee's case. The Tribunal held that the assessee correctly treated the amount as long term capital gain and was eligible for exemption u/s 54F.The Tribunal overturned the lower authorities' decision, stating that even if the amount was not for the transfer of the right to occupy the property, it would be considered a gift, not taxable. The authorities failed to cite a specific clause of section 56 of the Act to support their characterization of the amount as income from other sources. The Tribunal ruled in favor of the assessee, allowing the appeal.The assessee had offered capital gain for the unutilized amount from the capital gain account scheme for the subsequent assessment year. Consequently, the appeal was allowed, and the judgment was pronounced on August 11, 2021.